CVS Caremark says it slowed drug cost growth, but critics question claims
Clients of the pharmacy benefit management company Caremark saw their prescription drug costs rise only 5% last year a drop from an almost 12% increase in 2014, Caremark's parent company CVS Health said this week.
That, CVS Health said, was proof of the efficiency of pharmacy benefit management companies (PBMs), but those claims are being doubted by health care analysts and some members of Congress who say the managers hide the details of their contracts and make determining actual savings virtually impossible.
Major insurers and employers use PBMs — which also include Express Scripts and Optum — to negotiate with drug companies and handle the drug benefit portion of their insurance plans for them. In theory, the more the PBM keeps drug costs down, the less employees' insurance costs should go up.
The deals the pharmaceutical middlemen cut with drugmakers are so secret even the companies don't know if they are saving money, said Susan Hayes, a principal in Pharmacy Outcomes Specialists who audits PBM contracts.
Employers, unions and others offering drug benefits hire Hayes and others to audit PBMs to ensure they are getting discounts off average wholesale prices and that co pays, prior authorizations and other features are processed correctly.
Deals that include rebates are particularly complicated and secretive, Hayes said.
CVS passes along 100% of the rebates it negotiates with drugmakers, said Troyen Brennan, a physician and CVS Health's chief medical officer.
However, auditors aren't allowed to copy or take pictures of documents when they audit a PBM's rebate contracts, Hayes said.
In recent proposals from Caremark that she reviewed for clients, Caremark provided a flat amount for a rebate and not 100% of rebate savings.
Walgreen's deal likely to raise consumer costs
Clients, Brennan said, want transparency, and "this is the direction the (PBM) industry is going."
The company, CVS spokeswoman Christine Cramer said, passes along the rebate savings.
For a client with more than 100,000 employees or customers, CVS says it saves them an average of $20 million or about $200 a person.
That's not very impressive, Hayes said, adding that "with the cost of drugs, if your PBM can't save you $200 a member, then you have a really bad PBM. But when you say they save $20 million," that sounds like a lot of money.
Do drug benefit managers reduce health costs?
CVS slowed the increase in costs mostly because it dropped drugs from clients' lists of approved drugs, known as formularies.
CVS uses "evidence-based guidelines" to decide what drugs to keep and drop, says Brennan, adding that this assures "only the right people are on expensive medications."
"We’re basically reviewing the existing medical literature (and) what the experts recommended," says Brennan. "We’re not necessarily mining our own data."
Mark Merritt, CEO of the PBM trade group Pharmaceutical Care Management Association, joined embattled former Turing CEO Martin Shkreli and Valeant executive Howard Schiller at a House hearing earlier this month. Merritt got little attention, given Shkreli's refusal to testify and the presence of another company representative. But Congress' only pharmacist, Rep. Buddy Carter, R-Ga., peppered Merritt with questions and comments about what he called unfairly low reimbursements for independent pharmacies, which hurts competition.
PBMs have "shut out independent pharmacies at the expense of the American public," Carter said. "When competition decreases, prices are going to increase."
The solution, Carter said, is "we have to have transparency in the PBM world."
Rep. Doug Collins, also a Georgia Republican, reintroduced legislation last month that would require more public disclosure in how PBMs determine their reimbursements, especially with government drug benefit programs including Medicare Part D.
PBMs often use one price list to reimburse smaller pharmacies and another to sell drugs to clients of plan sponsors, Collins said last month when he introduced the bill.
From 2016 to 2025, Merritt testified that PBMs will lower costs by up to 30% by negotiating rebates and discounts from drugmakers and drugstores, encouraging the use of generics and lower-cost brand options, and offering affordable pharmacy choices.
Merritt urged Congress to resist "the urge to unduly regulate PBMs and prescription drug benefits" and help constrain drugmakers' price increases.
And Brennan argued CVS' announcement shows it's working: "Most people were thinking we were going to continue to see double-digit increase going forward."