PBMs Must Leverage Power to Manage Costs, Improve Access

Steve Miller, MD, chief medical officer at Express Scripts, discussed the negative trends in drug pricing that will require pharmacy benefit managers to leverage their power in order to stabilize health care costs, during a presentation at the PBMI 2017 Drug Benefit Conference.

“Right now pharmaceutical spending is the fastest growing spending in all of health care,” Dr Miller said at the start of his presentation. “And while the pharmaceutical companies have this line that drug spending has always been 10% of the health care spend, it’ll always be 10% of the health care spend—most of you know that is absolutely not true.”

Dr Miller cited evidence showing that for most employers, prescription drug spending is actually 19%. He also noted that Express Scripts has clients with prescription spending that makes up 30% of all their health care spending. 

In terms of growth, Dr Miller showed that between 2013 and 2015, while health care spending grew by 11%, net prescription drug spending grew by 20% over the same period. 

“The other reason I know that it is not 10%—that god forbid it is 10%—is that as we expand to $400 to $500 billion a year on drugs, if it only stayed 10% that means total health care spending in the United States would have to be $5 trillion—and we can’t afford $5 trillion in health care.”

Dr Miller noted that when consumers think of health care they often think of pharmacy first, because it is the aspect of health care that the average patient touches most frequently. He explained that unlike the other more rarely used sectors of health care, pharmacy has the greatest potential to educate patients during interactions in order to reduce overuse. He further noted that the sensitivity regarding drug pricing and negative attitudes toward the health care system stems from the fact that patients most often use pharmacy, meaning that if they have a negative health care experience, it is more likely to be related to pharmacy. 

“Unconscionable” Increase in Drug Spending

Dr Miller presented data showing that specialty drug spending made up 30% of total drug spending in 2015, and will grow to 50% by 2018. He explained that this increase in spending will be driven by new specialty drug development. 

“The drug pipeline is extraordinary,” Dr Miller said. “We now how 7000 drugs in human testing in the United States, in my career, we have never had that may drugs in human testing.”

Dr Miller sounded optimistic about the implications of these innovative new drugs. He noted that the robust pipeline is full of specialty drugs that address currently unmet medical needs. However, he noted that in 2010, the pharmaceutical industry shifted towards development of more niche specialty drugs because they realize that they could make more money by charging vast sums of money for drugs that only treat small patient populations. 

“What is happening with the drug prices is actually somewhat unconscionable,” Dr Miller said.  “If you look at the price increases that have occurred for existing branded products, they are up 208% over [an] 8-year period. I challenge you to think of any other consumer product in the United States which has been able to take a 208% price increase—when people call that inflation, that’s not inflation, that’s just straight forward price gouging.”

He explained that this pricing inflation is unsustainable within the current health care spending environment. In order to illustrate why this pricing strategy is not advantageous for patient treatment, he highlighted four conditions: cancer, Alzheimer’s, high cholesterol, and hepatitis C. Dr Miller showed that in order to treat all of the patients with these conditions for 1 year, it would cost 3 times the yearly spend pharmacy spend. 

The PBM Toolbox

Dr Miller noted that in order to combat the runaway pricing of drugs, PBMs must utilize all of the tools at their disposal. Among these strategies, Dr Miller highlighted value-based contracting, home delivery, omnichannel member interfacing, therapeutic resource centers, and retail network and formulary management.

Among these tools, he stressed the need to leverage the power PBMs have as middleman to the plans, in order to combat pricing directly with the pharmaceutical companies. Dr Miller noted that despite claims that the list prices for drugs are not a serious reflection of how drugs are priced, the list price is actually the single factor leading to price inflation within the pharmacy sector. 

“The new claim in the last year has been this: ‘we, the pharmaceutical companies aren’t the cause of high drug prices, it’s everyone else,’” Dr Miller said. “Let me make this very clear, only one person sets the pharmaceutical drug prices, and that is pharmaceutical companies. Pharmacies don’t get to tell them how much to charge, PBMs don’t get to tell them how much to charge, consultants don’t get to tell them how much to charge, wholesalers don’t get to... They set their own prices. And when they say rebates are the cause of high drug prices, that is also not accurate.”

Dr Miller pointed to the introduction of curative hepatitis C drugs as a “bellwether” of this shift toward drug companies stretching the boundaries of how high a drug could be priced. In order to combat these high prices, Dr Miller highlighted how Express Scripts leveraged the power of the PBM through value-based contracting to reduce the price of hepatitis C drugs throughout the entire US market.

He explained that when Sovaldi hit the market, as a once a day pill, plans were nervous that sticking with Viekira Pak, a much more involved pill regimen, would hurt adherence rates. Through value-based contracting, Express Scripts was able to guarantee adherence, and thus was able to save clients over $1 billion in hepatitis C treatment costs in 2015.

“We saved our plans and our patients a billion dollars in that first year alone,” Dr Miller said. “It caused a price war in hepatitis—it saved the country $4 billion dollars in hepatitis treatment and it was also the first time in US history were we had a specialty drug cheaper in America than what they had in Europe.” —David Costill