Understanding the Impact of PBMs on Medicaid Costs

Uncovering the Role of Pharmacy Benefit Managers in Overpricing Generic Specialty Drugs

Introduction

Pharmacy Benefit Managers (PBMs) play a significant role in healthcare, negotiating drug prices and managing prescription drug benefits for insurance companies and Medicaid programs. However, a recent report by 46 Brooklyn has raised concerns about PBMs’ pricing practices, particularly in Medicaid managed care programs.

Spread Pricing and its Implications

The report analyzes data from Ohio’s managed Medicaid program, where PBMs are essentially in charge of running the program. It reveals that PBMs have engaged in “spread pricing” for generic specialty drugs, a practice where they mark up drug prices to profit.

Spread Pricing in Ohio’s Medicaid Program

The 46 Brooklyn report found that PBMs in Ohio’s Medicaid program overcharged for generic specialty drugs by nearly $11 million in just one quarter. This overcharging resulted from PBMs controlling the specialty pharmacy market and leveraging their position to inflate prices.

Broader Impact and Implications

If PBMs are engaging in spread pricing in Ohio’s Medicaid program, it is likely happening elsewhere as well. The report concludes that lack of transparency in healthcare, especially in drug pricing, creates a fertile ground for these practices.

Call for Transparency and Competition

The 46 Brooklyn report emphasizes the need for increased transparency in drug pricing. This would allow for competition and shed light on the secretive practices that PBMs employ to inflate drug costs.

PBM Defense and Response

The Pharmaceutical Care Management Association (PCMA), an organization representing PBMs, has responded to the 46 Brooklyn report. PCMA claims that the data is unreliable, the report does not account for rebates and discounts, and that spread pricing is a legitimate business practice.

Conclusion

The 46 Brooklyn report raises serious concerns about the role of PBMs in Medicaid managed care programs. Spread pricing practices have the potential to inflate drug costs, leading to higher expenses for taxpayers and individuals covered by Medicaid. To address this issue, increased transparency and competition in drug pricing are crucial.