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Biden administration's limit on drug industry middlemen backfires, pharmacists say

Arthur Allen, KFF Health News on

Published in News & Features

The Biden administration’s first major step toward imposing limits on the pharmacy benefit managers who act as the drug industry’s price negotiators is backfiring, pharmacists say. Instead, it’s adding to the woes of the independent drugstores it was partly designed to help.

The so-called PBMs have long clawed back a fee from pharmacies weeks or months after they dispense a drug. A new rule, which governs Medicare’s drug program, is set to take effect Jan. 1 and requires PBMs to take most of their “performance fees” at the time prescriptions are filled.

The clawbacks have ballooned from about $9 million in 2010 to $12.6 billion in 2021, according to the Medicare Payment Advisory Commission, an agency created to advise Congress on the program for people who are 65 and older or have disabilities.

Performance fees have also boosted Medicare patients’ prescription costs at the pharmacy counter by hundreds of millions of dollars, although insurers assert that the fees enable them to charge lower premiums.

Pharmacist groups supported the Medicare rule change, but they didn’t anticipate the PBMs’ response, which has been to demand they accept new contracts with draconian cuts to their payments for dispensing medicines, said Ronna Hauser, vice president of the National Community Pharmacists Association, which represents independent drugstores. If pharmacies refuse the contracts, they risk losing Medicare customers — likely to the same giant PBM conglomerates, which have absorbed a growing share of the pharmacy business in recent years.

PBMs sit at the center of the U.S. supply chain for drugs, where they say they negotiate lower prices for insurers — including Medicare — and for employers and their workers. But the organizations are loathed by independent drugstores, drugmakers, and patients alike, who accuse them of siphoning money from what is already the world’s most expensive health care system without providing additional value.


PBM practices even put the squeeze on national chains like Rite Aid, Kroger, and Walgreens, which aren’t part of the conglomerates. Even CVS Health, which owns one of the three leading PBMs, has closed stores or trimmed staff as it pushes consumers to mail-order pharmacy services.

The pressure on in-store pharmacists and technicians has led to a series of walkouts this fall by CVS and Walgreens employees who say tight staffing has caused burnout and threatened patients’ safety.

Misery for small pharmacies

Under the current system, when a pharmacy fills a prescription, the PBM tells it what the patient owes and what the PBM will pay the pharmacy. The PBM aggregates these payments and sends a check later. Often, however, the PBM will deduct a performance fee from the pharmacy, said Doug Hoey, CEO of the National Community Pharmacists Association.


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©2023 KFF Health News. Distributed by Tribune Content Agency, LLC.


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