ICYMI: Government watchdog report finds patients in Medicare Part D paid billions more for medicines than insurers and PBMs

Medicare Part D beneficiaries paid four times more than insurance companies and their pharmacy benefit managers (PBMs) for 79 of the top 100 highly rebated medicines, according to a report by the nonpartisan Government Accountability Office (GAO). This shocking revelation sheds new light on how PBMs’ and insurers’ failure to share rebate savings directly with patients can lead to higher out-of-pocket costs at the pharmacy counter and why strong PBM reforms are needed.

Why are Part D patients paying more for medicines than insurance companies? Because insurers and their PBMs decide what medicines patients can get, and how much people pay out of pocket. They can also charge patients more for filing prescriptions at their local community pharmacies.

As the GAO report notes, Part D insurers and their PBMs base what people pay at the pharmacy “on the gross cost of the drug before accounting for rebates.” In other words, rebates and other savings in the system don’t go directly to the patients taking those medicines.

From the report:

• In 2021, biopharmaceutical companies paid $48.6 billion in rebates and discounts to insurers that administer the Medicare Part D prescription drug benefit program. These rebates and discounts lowered overall spending in the Part D program by 23%, up from 18% just a few years ago.
  
  
• But, as the GAO found, these massive discounts aren’t getting directly to patients. In fact, patients paid more than insurers for 79 of the 100 highly rebated drugs GAO reviewed. For these 79 drugs, Medicare Part D beneficiaries paid $16 billion more than their insurers, $7 billion of which was subsidized by the government on behalf of low-income patients.
  
  
• PBMs and insurers can prefer medicines with “higher costs to beneficiaries” which can “result in certain beneficiaries not having access to lower cost alternatives.”
  
  
• GAO recommended that CMS should monitor the effect of rebates on formulary design and patient out-of-pocket spending to make sure insurers aren’t using rebates to discourage enrollment of certain beneficiaries. However, CMS declined to accept GAO’s recommendation. 

This is not how insurance is supposed to work. Unfortunately, these challenges extend beyond the Medicare program and into the commercial insurance system, which covers tens of millions of workers and families. 

Fortunately, there are steps Congress can take this year that would help. That’s why pharmacists, physicians, seniors, employers and other advocates are all urging Congress to reform the abusive PBM system. 

Those reforms include making sure rebates and other savings are shared directly with patients so they don’t pay more than their insurer pays. Also, there should be more accountability for PBM tactics that can drive up costs for patients, taxpayers and the broader health care system. 

As Congress tackles several important priorities before the end of the year, passing strong PBM reforms that help make medicines more affordable for patients should be one of them.

To learn more about the role of PBMs, visit PhRMA.org/Middlemen.