Since 2014, the three largest pharmacy benefit managers (PBMs) have excluded 1,584% more medicines from commercial formularies, according to a new report from Cencora. Formularies are the lists of medicines covered in commercial health plans, often organized into tiers. The report highlights a concerning trend: the average annual increase in medications being excluded from formularies was 27%. What is most alarming is that PBMs are excluding more generic and biosimilar medicines than ever before.
These exclusions block coverage of affordable treatments that offer lower out-of-pocket costs for patients.
Why it’s happening: Misaligned incentives
PBMs, insurers and pharmacies are increasingly part of the same health care conglomerates. These vertically integrated structures are often compensated based on the list price of medicines, which may encourage them to reward medicines with higher list prices and larger rebates, while discouraging coverage of lower-cost alternatives. Patients pay the price, often literally, through high deductibles and coinsurance that is based on the non-discounted list price of medicines.
The U.S. IP system works—when access follows
Our IP framework fuels innovation. It gives companies the confidence to invest the time and resources needed to develop new medicines by ensuring a period of market exclusivity—averaging 13 years—if successful. After that, generics enter, delivering long-term value for patients and savings for the health care system.
But if PBMs block access to those generics and biosimilars by excluding them from their formularies, that balance breaks.
What’s next: A looming patent cliff
Analysts estimate more than $200 billion in brand-name drug sales are expected to lose exclusivity in the next 10 years, paving the way for generic and biosimilar competition. That should be a win for patients, but without PBM reform, those savings may never reach them at the pharmacy counter.
Policymakers should:
- Preserve the U.S. IP system that fuels medical breakthroughs.
- Tackle the anticompetitive practices of PBMs.
- Ensure patients can access and benefit from lower-cost generics and biosimilars once they’re available.
The bottom line: If policymakers don’t act, PBMs—not patents—will keep standing between patients and the lower-cost medicines that our IP system has incentivized and delivered.
Lindsey Seidlitz
is a Deputy Vice President, Policy and Research at the Pharmaceutical Research and Manufacturers of America. At PhRMA, Lindsey focuses on policy analysis and developing research on a range of issues aimed towards supporting an environment for innovation. Her work seeks to further policymakers and the public’s understanding of the value that new medicines provide to patients and society, the role that medicines play in making our health care system more sustainable, and the dynamics influencing the way medicines compete in certain markets and therapeutic areas. Lindsey holds a BA in Political Science from the University of Southern California and a Masters of Public Policy from Georgetown University.
Lindsey Seidlitz