Q&A: PCMA on the Role of PBMs and Drug Pricing Transparency

September 20, 2024

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Johnny Garcia, Senior Director of Policy at the Pharmaceutical Care Management Association, discussed the common misconceptions surrounding PBMs and their role within the supply chain.

In part 2 of his interview with Drug Topics, Johnny Garcia, Senior Director of Policy at the PCMA, went into further detail regarding PBMs and how his organization is available to assist them. He also delved into the hot topic of PBM scrutiny, addressing some of the common arguments PBM opposers have gravitated toward in the past few years and why the larger PBMs have been under such attacks.

“I think the PBMs are under attack just because we're the only entity that's working with all parts of the drug supply chain. So, we're working with drug manufacturers to put that downward pressure on drug pricing. We work with pharmacies to also make sure that they're offering high-quality products at a lower rate as well,” said Garcia.

This interview is part of a larger ongoing series covering PBMs and how they impact independent pharmacies. Throughout this series, we have explored how PBMs affect the pharmaceutical supply chain from the perspective of legal experts, pharmacists, and various advocacy groups.

Johnny Garcia, Senior Director of Policy at the Pharmaceutical Care Management Association | image credit: Johnny Garcia

Drug Topics: Can you explain what kind of role PBMs play within the pharmaceutical supply chain?

Johnny Garcia: The biggest thing for PBMs is that we leverage competition to contain drug benefits. PBMs do that with 4 main things. They administer the insurance claims for prescription drugs in real time. So often times, when you go to a pharmacy, you present your insurance card, they enter that insurance card into the system, and then they process the claim through the PBM to determine what the price is for the patient in the end. We administer the insurance claim portion of that with our claim systems. From the PBM, outside of the pharmacy side, we do negotiate savings for brand name drugs directly with drug manufacturers. So that's to help us contain some of the costs.

We negotiate with pharmacies or their PSAOs, which is a representative of a pharmacy, to help reduce the pharmacy costs, especially for prescription drugs. And then we also provide some clinical tools and programs to help support patients and clinicians, things like our utilization management tools, which are quality and safety checks based on clinical recommendations. We have real-time benefit tools that we use to help provide that information over to providers. And then we have other clinical services to help patients’ adherence, access to drugs, and patient support. Our primary mission is to make sure that we're putting downward pressure on the drug supply chain to reduce drug costs.

Drug Topics: What are some specific things that PBMs do to help patients receive high-value pharmaceutical services?

Johnny Garcia: We provide clinical value and advanced health outcomes through things like our drug interactions and reducing medication error checks. Things like multiple prescribers, controlled substance monitoring, duplication of therapies—so if a patient's on 2 medications that may be doing the same thing or can cause a problem—we look for those things through our claims systems. We help patients understand how and when to take their medications. We have pharmacists that are available through our mail-order pharmacies, available 24/7. We provide a lot of leaflets [and] mailers. We have a lot of programs to help educate patients on the medications, especially the specialty medications, which are more complicated. We help provide coordination through home-delivery or home-infusion services. That's the ability for a patient to get their medications directly to their home if they're not able to make it to a pharmacy, or if it's just more of a convenience thing. For some of the specialty medications that need to be infused directly into a patient, we offer home-infusion services and help coordinate that for the patients.

We partner with pharmacists out in the community to make sure that there's access to care. There's a lot of pharmacy deserts out there right now, and so we monitor those very closely in our pharmacy networks to help make sure the patients have access to medications. When we're looking at these pharmacies, we're looking for pharmacies that are affordable and can offer high quality, so we do monitor the pharmacies’ services that way. We make sure that we have a right mix of brick-and-mortar pharmacies, as well as our mail-order specialty pharmacies, just to provide additional ways for patients to get their medication. We drive the competition amongst retailers. Not all retail pharmacies can provide the services that maybe our patients need, so we look at that.

And then just 2 other things, we have formulary design. We look at the drugs that are available on the market and we use P&T committees that are made up of clinicians; third-party companies that look at most recent drug data to determine whether the drugs are safe and if there's anything that can be provided in the formulary to get the same benefits from a clinical perspective. And then we also are now starting to look at some value-based contracts for high-cost medications. Some of these medications could cost upwards of $1.8 million, some are in the $6 million range. We want to make sure that patients and employers who are paying for these medications and these services are getting the drugs that will actually work for them and making sure that if they don't work for them, that the patient has a way of not paying the full cost.

Drug Topics: When discussing the role of PBMs within the supply chain, it would be difficult not to mention the ongoing spotlight being shined on them, especially the “Big 3,” OptumRx, Express Scripts, and CVS Caremark. What do you think are the main reasons these PBMs are receiving so much attention and scrutiny right now?

Johnny Garcia: I wanted to find a little bit about what the “Big 3” means. It's kind of something that's taken off. Drug manufacturers have done a really good job of pointing to the Big 3, and that data comes from claims data. There was an article that was published a few years ago that said that 3 PBMs process 76% of the claims in the industry. And it makes sense, because you've got the government who has employees of the largest employer. You have Medicare, Medicaid; so, a lot of those go through [these PBMs]. These 3 PBMs that you mentioned have been around for a while and so they've got great infrastructure and systems in place to help process these claims. Even some of the smaller PBMs use their claims processing to process those prescriptions. It adds to that 76% number. That's where the Big 3 came from.

But I think the PBMs are under attack just because we're the only entity that's working with all parts of the drug supply chain. So, we're working with drug manufacturers to put that downward pressure on drug pricing. We work with pharmacies to also make sure that they're offering high-quality products at a lower rate as well. We think that drug manufacturers may be focusing the attention on us so that they can deflect from the high-rising costs of drugs, and we're seeing a little bit of that with the IRA, the Inflation Reduction Act, that's out now. As I mentioned before, those launch prices we're $2000 in 2008 and now they're upwards of $180,000.

I think the other thing that we're facing scrutiny on is not being transparent. That's absolutely not true. We have to be transparent in our contracts. It's things that are negotiated with the employer or the plans and anything that they want to see, we can be audited at any time, so they have that ability in the contracting to do that. And in terms of transparency to the government, we have to do a lot of reporting to different agencies within the federal government. In 2022, [the] Department of Treasury, HHS, and Departments of Labor all required that we report on the 50 most frequent and dispensed brand drugs, the 50 costliest prescription drugs, the prescription drugs with the greatest increase in expenditures, rebates, fees, and payments by the manufacturer. So, there's a lot of reporting that already goes to the federal government. We are being transparent when we feel that it's actionable or to the agencies to help them understand the drug market.

Drug Topics: Are there misconceptions surrounding PBMs and how they operate?

Johnny Garcia: We do more than just negotiating on drugs. I think that's where the focus is right now, because it seems to be the push by drug manufacturers on increased drug pricing. But we offer other things. We have the clinical programs that I've mentioned. We provide the mail-order services to provide access to the patients who may not be able to go to a pharmacy to get their medications. We saw that during COVID times where our mail-order pharmacy business increased because people were afraid to go out into the public. So, offering those services are one good thing.

With the specialty drug products, our [pharmacists] are highly trained individuals. They're the pharmacists and clinicians that all understand the therapies very well. They're focused on just those specific therapies. They're able to help patients find support programs that are out there. In a time when medical information is doubling every 73 days, it's hard for physicians to stay up to date, so that's where our formularies and P&T committees come in too. That's our job. Our job is to make sure that we're staying up to date with the changes in medical data and provide that back through some of our formularies.

And then the rebates, those are obviously a hot topic right now [of] how rebates are handled. That's really employer choice of how they want those rebates passed back through. If the drug manufacturer’s able to discount their high-list price to get their drug onto a formulary, then the employer should choose what they want to do with that rebate, whether it's pay for it, pass it back at the point of sale—which is an offering that some employers do—or allow the PBM to keep just a small percentage to pay for their services. I think those are kind of some of the big things.

Drug Topics: Is there one thing about PBMs or your organization that you think the general public should understand?

Johnny Garcia: We rely on promoting competition in the marketplace. So, if I can say there's one thing that makes a PBM successful in helping keep costs down, it's leveraging competition—whether it's competition between pharmacies, competition between each other, or competition between drug products. And it's been successful. For the last 5 years, we've been able to keep patient out-of-pocket costs to a growth of only 2.1%, while drug costs have gone up significantly more than that. I think we're very successful at what we do. On average, we save employers and plan sponsors about $1000 per person per year. So, I think we're very successful at what we do as long as we have those tools.

From the perspective of legal experts, independent pharmacy owners, and leaders of advocacy groups, be sure to catch up on our ongoing coverage of the industry’s pharmaceutical middlemen and the animosity that surrounds them:

Also, stay tuned for the full-length podcast from Drug Topics’ conversation with Johnny Garcia, Senior Director of Policy at the PCMA.

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