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PBMs are changing; drug prices aren't

Adapted from a Pew report; Chart: Axios Visuals

As part of its plan to lower prescription drug prices, the Trump administration wants to restructure pharmacy benefit managers' business models. It wants them to profit from flat fees, rather than the complex rebates they rely on now.

Context: The administration and the pharmaceutical industry argue that because rebates are tied to drugs' list prices, making those rebates less lucrative for PBMs will help bring down prices overall.

Yes, but: This transition to a new business model is already happening on its own, my colleagues Caitlin Owens and Bob Herman note. And drugs' list prices are not coming down.

  • PBMs are keeping a smaller share of rebates and passing more along to their clients.
  • Instead, PBMs are collecting more revenue through various fees — the same shift the Trump administration envisions — and through a practice called "spread pricing," according to a Pew analysis.
  • Express Scripts, one of the largest PBMs, explicitly told investors last year it would find "an alternate funding / pricing structure" to offset lost rebate dollars.

The bottom line: "One can call something a rebate, a flat fee or an elephant. It still represents a lucrative flow of money, and the influence that goes along with it,” said Robin Feldman, a UC Hastings law school professor who recently wrote a book exploring these deals.

Go deeper: PBMs are feeling the financial squeeze of back-end drug rebates