Las Vegas Sun

May 21, 2019

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Legislature should regulate drug middlemen

The cost of prescription medicines is a hot topic and one that has consumed much time in the Nevada Legislature. And while drug manufacturers are easy targets, there is another player in the health care industry that is making billions — yes, billions — through several little-known tactics that are costing patients in a big way. 

And patients have no idea this is taking place because this group has gone largely unchecked.

They are called pharmacy benefit managers, or PBMs. They were created to help lower health care costs, but because of a lack of regulation, they have amassed an enormous amount of power, and patients are left paying the price.

PBMs are the middlemen between drug manufacturers and insurers, and they are now starting to come under increased scrutiny for their role in the rising prices of prescription drugs. They negotiate lower drug prices with manufacturers in the form of rebates. They then charge insurers for the drugs and instruct insurers as to which drugs to put on their formularies and on which tier. 

Throughout this process, the insurer is unaware of how much the PBM paid for the drug. The reality is, drug manufacturers rebate or discount 35-55 percent of the cost of drugs to the PBMs.

Pharmacy benefit managers have a powerful hold on pharmacies as well. In many cases, patients are paying more for their medications than if they had no insurance.

Pharmacists know this but are not allowed to divulge this due to nondisclosure agreements that PBMs require them to sign.

Some pharmacy owners and employers are now sounding the alarm, causing some state lawmakers to take steps toward a solution. Additionally, Health and Human Services Secretary Alex Azar and Inspector General Daniel Levinson recently proposed cost-reducing rules that would address many of these concerns for Medicare and Medicaid. It would be beneficial for Nevada and other states to emulate this proposal so patients with private or employee-sponsored insurance plans — and even those uninsured — could pay less for their medications.

In a time when many are calling for transparency within the drug industry, state regulators need to require insurers and PBMs to fully disclose their pricing structure as well. The only path to complete transparency in pricing is to require all involved parties to reveal their piece of the proverbial pie.

Peter Guzman is president of the Latin Chamber of Commerce.