The PBM Accountability Project of Colorado is working to help ensure that Coloradans aren’t paying more than they should for their prescription medicines. We want to improve understanding of the drug pricing process and highlight the role Pharmacy Benefit Managers — or “PBMs” — play in driving up patient out-of-pocket costs.
PBMs are meant to give patients and purchasers leverage when they negotiate prescription medicine prices. But, in reality, PBMs are profiting while Colorado patients, taxpayers, working families, and employers struggle. We must work to encourage a more dynamic, competitive PBM marketplace to work for Coloradans.
Together, we will find solutions to return savings to Coloradans. Our mission is to ensure that Coloradans can afford their prescription medicines and hold PBMs accountable to the promises they’ve made.
WHY COLORADANS ARE PAYING TOO MUCH FOR PRESCRIPTIONS
Prescription Drug Pricing: Across the country and right here in Colorado, people are concerned about prescription drug costs. The true costs of prescription medicines for patients and purchasers are, for the most part, a mystery. The drug pricing process is murky and confusing – though many Coloradans may not know it, PBMs are a major player in this process.
The Role of PBMs: Pharmacy benefit managers (PBMs) are companies that manage the prescription drug benefit for public and private health insurers.
PBMs & Manufacturers: PBMs act as middlemen between prescription drug manufacturers and patients’ health plans, negotiating savings on prescription medicines. However,
PBMs fail to pass a very large portion of those savings to the patients, employee health plans,
and the public insurance programs that pay the final price.
PBMs & Insurance Companies:
PBMs set reimbursement rates and determine which drugs will be covered by insurance plans by creating lists called “formularies.”
PBMs & Pharmacies:
PBMs also set reimbursement rates paid to pharmacies for filling prescriptions. Too often, PBMs profit by reimbursing pharmacies at lower rates than pharmacies costs to acquire drug programs.
PBMs & Patients:
PBMs often set patient
out-of-pocket costs based on the initial list price of a medicine rather than the discounted cost negotiated with the pharmaceutical manufacturer. In some cases, the copay for a prescription is more than the full retail price for the same medication.
Because of this flawed process, Coloradans are paying more despite the fact that the PBM system was originally meant to lower the prices of medicines and ensure patient access to needed medications through their insurance plans.
Instead, a large portion of the negotiated savings never get to the patient; they go back to the PBM.
The PBM Accountability Project of Colorado is working to fix this broken system.
REVERSE AUCTION SOLUTION
One of the most promising and successful solutions to date is the “PBM Reverse Auction,” which would transform the opaque and uncompetitive process for setting prescription drug prices into a transparent, dynamically competitive marketplace. This process would allow PBMs to compete with one another, online to offer the State of Colorado the formulary of prescription medicines Colorado wants to buy at the lowest price.
Employing 21st century data analytics technology will simplify the complex prescription drug pricing algorithms, making “apples to apples” comparisons of PBM bids on the basis of their value possible. This creates a marketplace in which PBMs compete actively to underbid one another in a dynamic and fully visible, online competition to lower their costs and win award of a state PBM contact.
According to initial estimates, this process would save the state between $6.7 million - $10.2 million annually.