When the Trump administration outlined its drug pricing blue print last summer, pharmacy benefit managers seemed to be squarely in the cross hairs for reform.
This week, as the administration unveiled new proposals for shaping drug coverage for Medicare Part D pharmacy plans, it became clear that benefits managers are now not so much targets but rather key players, who will carry the ball on drug price negotiations for the government.
“These are actually all the solutions we put in our response to the blue print. We actually said ‘let’s look at international benchmarking … let’s look at Medicare Part B and make it more competitive.’ When you look at what they’re actually proposing it’s what the PBMs do,” Dr. Steve Miller, Express Scripts chief medical officer told CNBC at the Forbes Health Care conference in New York.
Pharmacy benefit managers are companies that control which drugs are covered and negotiate discounts on branded drugs with manufacturers.
Dr. Miller has been an outspoken advocate for the role of PBMs in strong-arming drug makers to lower their prices. Two years ago, Express Scripts very publicly pushed back at drug maker Gilead by excluding its $85,000 Hepatitis C drug Sovaldi in its plans, when the pharmaceutical giant refused to provide a discount on the treatment.
This week the Trump administration proposed allowing Medicare Part D pharmacy drug plans to be more selective on branded drugs from what are known as the six special therapeutic classes, which include cancer treatments and H-I-V antiviral drugs. Right now, Medicare is required to pay for all drugs in those special classes, with only a minor discount.
Executives at rival PBMs have also welcomed the new proposed rules, many expressing relief that the administration has heard what they had to say and reinforced their role in the system.
“I do believe the tone and the rhetoric has changed … there is more in there that broadens the role of PBMs and expands on the tools that are available today,” CVS Health president and CEO Larry Merlo told investors this week.
“I think there is more openness to figure out how we leverage those tools that we’ve done so successfully in commercial market and (bring it) to the government space,” said OptumRx John Prince during UnitedHealth Group’s investor meeting earlier this week.
Dr. Miller sees a potential watershed moment in the year ahead when it comes to drug pricing in Washington. He thinks the administration could find allies on both sides of the aisle in the incoming Congress to move even further with reforms which seemed unthinkable just a couple of years ago.
“I never would have thought I’d have a Republican president in Donald Trump who’s advocating for international price controls, that I would have the former head of Lilly, Alex Azar HHS, advocating for low prices and low rebates, and Scott Gottlieb who’s been spectacular at the FDA accelerating approvals of generics, accelerating approvals of the 2nd and 3rd in class per drug. It’s really an incredible moment,” Dr. Miller said.
While the administration has embraced PBMs, the middlemen in the drug supply chain remain its sights. Officials are also proposing forcing the firms to be more transparent in about the confidential rebates they use in their negotiations with drug makers. The pharmaceutical industry has charged that those discounts contribute to higher list prices, which ultimately result in higher out-of-pocket costs for consumers on high deductible plans.
Express Scripts recently announced that it will now offer employers the option of plans which provide clear cut drug prices, without a rebate structure.
It may be easier for the firm to operate in a post-rebate environment, once its acquisition by Cigna is completed. The two firms recently extended their merger agreement, and expect to secure necessary state approval to close the deal by year’s end.