Legislative Hearing Focuses on Pharmacy Benefit Management Practices

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Legislative Hearing Focuses on Pharmacy Benefit Management Practices

February 2024

Legislative Hearing Focuses on Pharmacy Benefit Management Practices

The Assembly Select Committee on Biotechnology recently convened a hearing to overview the history and role of Pharmacy Benefit Managers (PBM); the way they intersect with the healthcare system; the interplay with drug manufacturers; and the impact on prescription drug access and pricing for patients.

 Speakers at the hearing included Antonio Ciaccia from 3 Axis Advisors and Erin Trish, Ph.D. from the University of Southern California Schaeffer Center. They highlighted the following points:

  • PBMs operate in the middle of the U.S. pharmaceutical supply chain and play an important role in the price patients pay for their medicines. PBMs manage drug benefits on behalf of health insurers and employers, establish drug formularies and pharmacy networks, process drug claims, and leverage their bargaining power to negotiate rebates with drug manufacturers giving status to the companies that give them the best deals.
  • Historically, PBMs were independent from health plans and added value by reducing prices, encouraging uptake of generics, and expanding mail-order services. More recently, they have begun merging with major health insurers, creating large, publicly traded Fortune 15 companies with the power to determine where and how billions of dollars are spent within the U.S. health system and at the pharmacy counter.
  • PBMs generally make money in one of two ways: Either they earn a percentage of the rebates they negotiate with drug companies on health plans’ behalf, or earn on a per-prescription fee basis paid by the insurer.
  • Unfortunately, evidence indicates that PBMs are leveraging their position to extract profits in ways that are detrimental to patients, payers, and drug innovation. Rebates, spread pricing, clawbacks, vertical integration, and other practices allow PBMs to keep cost savings from patients and payers.
  • Pharmacy reimbursement by the PBMs is not necessarily aligned with the costs of those medicines from drug manufacturers who offered the PBMs deep discounts in order to be on a preferred formulary. Oftentimes a pharmacy may have paid more to the PBM to get the drug than they’re ultimately reimbursed for. Patients are often stuck making up the difference at the pharmacy counter.

Panel Recommendations Included:

  • Structural reforms to address the complex and influential role that intermediaries—especially PBMs—play in the pharmaceutical distribution system.
  • Greater transparency in this marketplace.
  • PBMs should be required to share savings with consumers and plans.

CBF Celebrates Trailblazing Scientific Leaders During Black History Month

As Black History Month concludes, CBF would like to provide a snapshot of remarkable scientific trailblazers who are making important contributions to the life science industry.

Karen Akinsanya is the President of Research and Development, Therapeutics at Schrödinger in San Diego – where she leads therapeutics research and drug discovery aimed at improving human health and quality of life.

Troy Barring is the Founder of Santa Clarita-based TAB Diagnostics, a company developing the first portable diabetes detection and monitoring saliva test.

Abraham Ceesay is the Chief Executive Officer for San Diego-based Rapport Therapeutics has extensive leadership experience in the biopharmaceutical industry and built a company that led to the investigational new drug enablement for a rare neuroendocrine tumor.

Kizzmekia Corbett, Ph.D. is an assistant professor of infectious diseases and immunology at Harvard T.H. Chan School of Public Health. While at the @NIH she worked to develop the mRNA vaccine used to combat COVID-19.

Howard E. Davis, Ph.D. is the CEO at AkamisBio, a clinical-stage oncology company whose mission is to positively impact the lives of those with cancer.

Kenneth Frazier is the former CEO of Merck which has worldwide facilities including in South San Francisco. Kenneth was the first black CEO to run a major pharmaceutical company and a trailblazer in the  pharmaceutical industry.

Leeno Karumanchery, Ph.D. is the Co-founder and Head of Behavioral Sciences at MESH Diversity. Dr. Leeno helped create the world’s first diversity, equity and inclusion (DEI) operating system.

Stay informed on the latest news and trends on the economic and health benefits of this industry by visiting CABiotech.org

If you have any questions about hosting informational briefings for your colleagues serving in the legislature, contact California Biotechnology Foundation Executive Director Patty Cooper at (916)764-2434 or [email protected].