HHS Must Face the PBM Reality

On Capitol Hill and in the media, discussion of Alex Azar, the new Secretary of HHS, has focused on his tenure at Eli Lilly. Azar’s opponents specifically point to drug price hikes during the 5 years he led the company’s US unit. However, while Azar’s track record as a pharmaceutical executive is significant, it is not his only troubling credential. The new head of our government’s largest domestic agency has publicly praised pharmacy benefit managers (PBMs), yet another indicator that he will not be the patient advocate Americans desperately need.

The growing size and power of PBMs is a major reason why drug costs, particularly for biologics, have skyrocketed in recent years. As a rheumatologist in private practice, I see firsthand how PBM practices like clawbacks, step therapy, and non-disclosure agreements (NDAs) make rheumatology treatments outrageously expensive and, in many cases, inaccessible. Sadly, PBMs are only getting bigger, more powerful, and more emboldened. We need advocates within the executive branch to stand up to PBMs and enact policies that remove barriers to treatment.

PBMs make billions on discounts, rebates, and fees from specialty drugs. List price, discount percentage, rebates, fees, and market share determine formulary placement—the holy grail of the pharmaceutical industry. The more money a drug makes for the PBM, the more prominent a spot it gets on its formulary. Therefore, the PBM system perversely incentivizes higher list prices. And the savings PBMs boast so much about negotiating with drugmakers? They are increasingly pocketing the money, passing little on to patients while reporting profits in the hundreds of billions. The PBM equation never factors in what is best for patients. Often, it would be cheaper to not use insurance at all.

The next HHS Secretary must acknowledge the PBM problem and advocate for policies that rein in their destructive, unfair practices. The influence of the 3 largest PBMs—Express Scripts, CVS Caremark, and Optum Rx—continues to grow and become a more powerful influence on Capitol Hill, at pharmacy counters, and doctors’ offices across the country. Without greater regulation and transparency in the drug pricing system, PBMs are going to continue raising costs for consumers and interfering with medical treatment.

During Azar’s Senate confirmation hearing earlier this month, he praised PBMs and argued that they should be expanded to negotiate for physician-administered drugs in Medicare Part B. Any doctor who prescribes biologics knows that this is simply not reality. PBMs enrich themselves while patients suffer the consequences of an opaque, convoluted drug pricing system. From the opioid epidemic to the fight over the Affordable Care Act, the country’s healthcare system faces deep, complicated challenges. The leader of HHS should be willing to speak truth to power and confront PBMs.