It’s Sensational – And That’s The Point

From the earliest tabloid newspapers to today’s X (formerly Twitter), grabbing attention has always been the goal. But in the 2010s, the rise of social media supercharged sensationalism. “Clickbait” journalism — with its outrage-inducing, emotion-provoking headlines — became the norm, spilling into mainstream reporting.

Consider last week’s buzzworthy headlines about pharmacy benefit managers (PBMs) following the Federal Trade Commission’s (FTC) latest report:

“US FTC Finds Major Pharmacy Benefit Managers Inflated Drug Prices for $7.3 Billion Gain”

“PBMs Made Billions Marking Up Specialty Drugs by More Than 1,000 Percent”

Social media lit up with anger and anecdotes. People shared stories of struggling to afford prescriptions, placing blame squarely on PBMs. While the outrage is understandable, these attention-grabbing headlines don’t tell the full story.

The Convenient Villain

PBMs are often the face of frustration for patients dealing with high drug costs. Their names are on insurance cards, and when something goes wrong at the pharmacy, PBMs are frequently blamed. But pointing fingers solely at PBMs is like yelling at a gate agent for a flight delay caused by mechanical issues or the wait staff for an overcooked steak.

For employees with health insurance through work, costs like copays, coinsurance, and deductibles are typically determined by the employer or union trust fund — often referred to as the “plan sponsor.” Plan sponsors set cost-sharing provisions such as copays, coinsurance and deductibles, decide whether generic drugs or mail-order services are required, and implement clinical programs to control costs and ensure evidence-based care. PBMs operate within these frameworks, managing prescription benefits as directed by the plan sponsor.

Beyond the Headline

The FTC report found that the three largest PBMs — CVS Caremark, Express Scripts, and Optum Rx — generated $7.3 billion in revenue from specialty generic drugs between 2017 and 2022. On the surface, this figure looks staggering. However, context matters:

• The timeline spans five years and three companies.
• Specialty generics make up less than 1.5% of total drug spending for most PBM clients.
• The report states that it doesn’t account for the cost-saving guarantees PBMs provide to plan sponsors across all drug categories.

Still, the FTC’s findings raise eyebrows, particularly the discovery of price markups exceeding 1,000% for some specialty generics. These pricing practices, tied to the traditional “spread pricing” model, can lead to situations where a drug’s cost— especially for workers with high-deductible health plans or coinsurance — may be far higher than the typical retail price.

The Changing Landscape of PBM Pricing

In response to growing criticism from legislators, plan sponsors, and the public, the three major PBMs are moving away from traditional spread pricing models and shifting toward more transparent pricing strategies.

For instance, CVS Caremark has introduced TrueCost, a pricing model that focuses on the net cost of individual drugs, coupled with multi-year guarantees. Express Scripts has launched models such as ClearNetwork, a pricing structure that eliminates the disparities seen with spread pricing by offering cost-based pricing. Meanwhile, Optum Rx has expanded its pass-through pricing options, ensuring that rebates and savings are directly passed through to plan sponsors.

While these changes are viewed as a positive step forward, they do not fully address the deeper issues contributing to the rising cost of prescription drugs.

The 800 Pound Gorilla

PBM reform alone won’t fix the broken U.S. healthcare system. The root of the issue lies with drug manufacturers, whose exorbitant prices, monopoly power, and patent protections set the stage for spiraling costs. These companies often deflect blame onto PBMs while fiercely opposing policies like Medicare price negotiation, which could ease financial burdens for plan sponsors and patients.

Adding to this is the lack of universal healthcare coverage and persistent health inequities, which make the challenges even more daunting. The American healthcare system is riddled with cracks, leaving millions struggling to access affordable care.

Moving Forward

Sensational headlines may capture attention, but they only scratch the surface of the issues at hand. True progress requires looking beyond the outrage to address the root causes, from unchecked drug prices to systemic inequities in access and coverage.

While the road to reform may be difficult and long, it’s not insurmountable. As Martin Luther King Jr. so aptly reminded us, “We must walk on in the days ahead with an audacious faith in the future.”

Let that faith guide our actions as we push for a system that leaves no one behind.

Happy reading,

Enjoy the weekend!

Best,
Suzanne
Suzanne Daniels, Ph.D.
AEPC President
P.O. Box 1416
Birmingham, MI 48012
Office: (248) 792-2187
Email: [email protected]