Delinking PBM Compensation From Drug List Prices Could Unleash Major Savings
USC Schaeffer Center
Reforming payments to PBMs and other pharmacy middlemen could lower annual U.S. drug spending by nearly $100 billion, analysis finds
Breaking the link between prescription drug list prices and compensation to middlemen like pharmacy benefit managers (PBMs) could cut a significant portion of the nation’s annual drug tab, finds a new analysis from the USC Schaeffer Center for Health Policy & Economics.
PBMs, who negotiate drug benefits on behalf of insurers and employers, are typically paid based on a percentage of a drug’s list price before rebates and other discounts are applied. Federal and state policymakers have proposed delinking PBM compensation from list prices in response to evidence that PBMs often steer patients toward higher-priced drugs — even when cheaper alternatives are available — to boost their own profits.
Shifting instead to a transparent, fixed payment model for PBMs and other intermediaries in the prescription drug supply chain would reduce annual net drug spending by $95.4 billion (or nearly 15%) without undermining pharmaceutical innovation, according to research from Schaeffer Center Director of Health Policy Geoffrey Joyce published July 24 in Health Affairs Scholar.