Drug Kickback Schemes Information
While manufacturers set a drug’s prices, known as the list price, other players in the prescription drug supply chain also have an impact on drug prices. Middlemen in the industry, known as Pharmacy Benefit Managers (“PBMs”), are supposed to manage lists of covered drugs and pricing tiers (called fomularies)) for health plans and make sure prices are controlled.
They also negotiate with drug companies about rebates and other fees when buying drugs in bulk for their clients–insurers, self-insured employers and union health plans.
However, while PBMs claim they lower drug prices, they have used their role as gatekeeper to extract larger and larger rebates and other fees for themselves. In the process, they have driven drug prices up. Drug makers raise their list prices to accommodate PBMs’ demands for rebates and other fees in order to make sure their drugs secure positions on drug formularies, and they also raise their list prices to line their own pockets. Under this pricing scheme, the more expensive a drug, the fatter the “rebates” and other “fees” the PBM can extract.
So if the PBMs are supposed to be negotiating rebates and fees when buying drugs in bulk for their clients, shouldn’t those savings be passed on to the consumer and their health plans and not be kept by the PBM—an insurance industry middleman that most people have never even heard of? Is anyone doing anything about this problem?
Manufacturers of high priced drugs have been pressured by public outcry and lawmakers to offer discounts on their drugs and improve price transparency. So far, these efforts have not helped the consumers as much as they could, because the focus has not been on the relationship between manufacturers and PBMs, who both share responsibility for price inflation.
Under the current scheme, when list prices for drugs rise, health plans and consumers pay more because the drug manufacturers’ rebates and other fees are not passed through. So consumers often wind up paying the full list price for drugs—high costs that are based on inflated list prices. This includes the people who do not have health insurance, as well as consumers who pay any amount of their drug cost based on inflated list prices.
Keller Rohrback has filed numerous lawsuits against drug manufacturers and PBMs seeking to hold both players accountable. Here is a list of our cases and current investigations. Please contact us if you are interested in receiving more information about this issue and how you can help us in our efforts to hold PBMs and drug manufacturers accountable for high drug prices.
Credit: Francis Ying, Julie Appleby, Stephanie Stapleton, National Public Radio