What is a pharmacy benefit manager, and why do they need further transparency?

Very simply, pharmacy benefit managers (PBMs) are the middlemen in the pharmaceutical supply chain. They work with insurers, pharmacies, and drug manufacturers to negotiate prices, reimbursements, fees, rebates, and other costs for prescription drugs.

Maribeth Guarino

Former High Value Health Care, Advocate, PIRG

There are many different entities in the pharmaceutical supply chain that play various roles in producing, distributing, and selling prescription drugs. Pharmacy benefit managers are one of these entities. Very simply, pharmacy benefit managers (PBMs) are the middlemen in the pharmaceutical supply chain. They work with insurers, pharmacies, and drug manufacturers to negotiate prices, reimbursements, fees, rebates, and other costs for prescription drugs. They play a large role in the creation of drug formularies, which determine which prescription drugs are covered by insurance and at what cost to the insurer and the consumer. PBMs maximize profits for themselves and other entities in the supply chain like manufacturers through negotiated rebates and discounts in return for placing drugs – often brand-name and more expensive drugs – at preferred tiers on the formulary which have higher cost-sharing for consumers.

What is Oregon doing about PBMs?

There is very little effective regulation or transparency in Oregon over PBMs and the payments they collect, including rebates from manufacturers that are paid in return for preferential treatment of certain drugs. Representative Nancy Nathanson (House District 13) has brought forward a series of bills to the House Committee on Behavioral Health and Health Care, including HB 3012, a bill that would require PBMs to report such information to the state. OSPIRG health care advocate Maribeth Guarino testified in support of HB 3012, noting that consolidation and a lack of transparency increases the risk of predatory behavior such as inflating prices or giving preferential treatment to certain drugs based on profits rather than medical efficacy.

Further transparency in the pharmaceutical supply chain will demonstrate where more regulation and enforcement is needed, as well as where the opportunities are to lower prescription drug costs. Oregon should continue building on our transparency laws so we have the tools and information we need to bring accountability to special interests in the pharmaceutical industry, including PBMs.

You can see the full hearing on the state legislative website here, and download OSPIRG’s full comments on the bill here.

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Maribeth Guarino

Former High Value Health Care, Advocate, PIRG

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