PharmExec Blog

PBMs to Super Committee: Take $100 Billion From Pharma

A trade group representing the largest pharmacy benefits managers (PBMs) has proposed a way to trim $100 billion in government costs for prescription drugs over 10 years. To the pharmaceutical industry, that trim might look more like a beheading.

In a letter to the Joint Select Committee on Deficit Reduction – otherwise known as the Super Committee, a bipartisan body tasked with cutting $1.5 trillion from the federal budget over the next 10 years – the Pharmaceutical Care Management Association (PCMA) talked up PBMs’ use of pharmacy networks, home delivery, utilization management and formularies to bring down costs. The letter goes on to describe seven ways to save:

  • Medicaid: the program’s pharmacy benefit should use more generic drugs, and pay drugstores less, in keeping with the prices that Medicare and private insurers pay.
  • Medicare Part D: maximize generic and therapeutic interchange, by “shifting spending from the most expensive single source drugs to equally effective lower cost options.”
  • Reduce biologic exclusivity periods.
  • Allow Part D health plans to negotiate prices on all drugs.
  • Remove the DTC advertising tax credit.
  • Remove Medicare’s restrictions on home delivery, and encourage the use of mail order for maintenance medications.
  • Ban pay-for-delay drug settlements, to provide quicker access to low-cost generics

Mark Merritt, President and CEO at PCMA (and a former PhRMA strategist), said in a statement that “Everyone in the pharmacy community: drugstores, pharmacy benefit managers, drug companies, drug wholesalers, and others have a responsibility to offer cost-saving solutions to this committee.” Merritt was honored by the Generic Pharmaceutical Association (GPhA) earlier this year, in recognition of his “aggressive advocacy for lower cost prescription medications,” according to the PCMA website.

Many of the PCMA’s recommendations to the Super Committee fly in the face of PhRMA’s efforts to protect things like biologic exclusivity, price negotiations in Part D, rebates for Medicaid/Medicare dual eligibles and the DTC tax credit. All of those are viewed as necessary revenue streams that facilitate the development of innovative new treatments.

A spokesperson for PhRMA declined to comment on the specific proposals laid out by the PCMA. “Regarding the Super Committee, PhRMA’s focus is on communicating the success of the Part D program, and any proposal that would weaken the program should not be considered,” the spokesperson said.

But the idea that innovation requires a big budget is being increasingly challenged, particularly in light of the political debate around the deficit and government’s budgetary capacity for so-called entitlement spending. While the PCMA letter is surely one of many letters hoping to bend the Super Committee’s ear – PBMs stand to gain financially from an increased use of mail-ordered drugs and generic utilization, or course – it remains unclear where the biggest cuts will come.

In early August, Gene Sperling, Director of the National Economic Council and Assistant to the President for Economic Policy, wrote in the White House blog that “Everything is on the table, as it should be,” with respect to the Super Committee’s mandate. If the pharmaceutical industry hopes to convince the Super Committee, and the American public, that innovative drug prices are justified, it will need to speed up efforts to align positive health outcomes with expensive new products.

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  1. Bill Cooney
    Posted September 9, 2011 at 9:47 am | Permalink

    Nothing new here, just the same old ideas on limited access, reduced patent protection and dictated pricing, which if enacted would devastate the incentive to develop innovative drugs. By coincidence every recommendation directly benefits the PCMA and their friends at the Generic Pharmaceutical Association. Could this self-serving agenda be more blatant?

  2. ted barden
    Posted September 9, 2011 at 11:48 am | Permalink

    In reference to Mark Meritt’s comments on behalf of PCMA or PBM interests, all this listed recc to reduce costs all fatten the bottom line for PBM’s. Remove middle men like PBM’s and insurance companies, go back to fee for service and let’s keep the pharma companies investing in new molecules that they can sell reasonably to cover risks and costs vs taking away incentive to invent new drugs.

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