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Articles Tagged with PBM

The rising prices of existing and new brand prescription drugs could have serious consequences for tax payers and the 44 million seniors who rely on Medicare.  In order to rein in those costs, it’s vital for the Administration to encourage the use of generic drugs and biosimilars.

While Congress has been grabbing the headlines by holding numerous hearings and introducing various legislative proposals aimed at lowering drug prices, the Trump Administration has introduced some consumer-friendly changes to Medicare that should change the way drugs are priced for seniors and encourage the use of generics and biosimilars.  First, the Centers for Medicare & Medicaid Services (“CMS”) proposes to change how insurance plans and PBMs conduct drug utilization management and structure drug formularies.  Second, the U.S. Department of Health and Human Services (“HHS”) proposes to eliminate the rebates that pharmacy benefit managers (“PBMs”) receive from drug manufacturers and to encourage that any rebates go directly to seniors at the point of sale.

These significant reforms are necessary as the stakes are high.  Since 2006, Medicare Part D spending has more than doubled to roughly $100 billion per year in 2017, and it is expected to climb as a growing and aging population of baby boomers becomes Medicare eligible.  Today, despite making up a modest proportion of Part D prescriptions, brand drugs account for some 84% of total Part D spending.  Generics, meanwhile, which make up most of the Part D prescriptions, account for only 16% of the total spending and saved the Part D program approximately $82 billion in 2017.

While there is much discussion about controlling prescription drug prices, the undeniable trend in the generic drug industry is that prices have been trending down for the past several years.

Generic Prices are Down, But Is that a Good Thing?

The short term effects appear good for the consumer, but the longer term effects could result in higher prices and drug shortages.  Today, 90% of U.S. prescriptions are for generic drugs not branded drugs, but in 2017, generics made up only 13% of all prescription spending.  Over the past several years, branded drug prices have been going up while generic drug prices have been going down.  Prices are so low that some generics are deciding to exit, stop producing and marketing certain drugs that are no longer profitable. If they exit, where will consumers get basic antibiotics and drugs that are no longer sold by the branded firms?