CVS-Aetna merger endangers fair competition and threatens efforts to lower drug costs
Continued consolidation in the drug supply market is likely to hurt consumers by concentrating power in the hands of just a few major players. This has the potential to further hinder consumer access to pharmacies of their choice, lower fair competition and price transparency, and possibly undermine state efforts to lower drug prices.
Below is a reprint of an article on the subject written on Healio webpage. Follow the link to the original publication.
ACR: CVS-Aetna merger threatens efforts to lower drug costs
September 6, 2019
The American College of Rheumatology issued a warning on Friday that a U.S. District Court judge’s decision to allow CVS Health Corp to merge with Aetna could threaten recent progress made in forcing pharmacy benefit managers to be more transparent, and hinder efforts to reduce drug costs.
“As policy makers and health care professionals continue to work together on ways to lower drug costs for patients, the ACR has worked to educate leaders in Congress about the lack of transparency from pharmacy benefits managers (PBMs) on the savings they are negotiating and whether those are being passed to patients,” Angus Worthing, MD, chair of the ACR Government Affairs Committee, said in a statement. “Though PBMs claim to use their position to negotiate lower drug prices, there has been no proof that rebates have been used to reduce the burden on patients and the health care system at large.”
The ruling, handed down this week by U.S. District Court Judge Richard Leon, had been partially contingent on Aetna selling its Medicare prescription drug plan and WellCare Health Plans. According to media reports, both deals have already occurred.
In a previous press release, CVS claimed the merger would “make the patient and caregiver experience simpler and more affordable.”
However, the ACR argued that the decision would make it easier for cost savings related to manufacturer rebates to remain secret, and thus increase costs for patients.
“In recent years, several states have enacted legislation to hold PBMs accountable and crack down on secretive practices that drive up costs for consumers,” Worthing said in the statement.
“State legislation has included gag clause bans, restrictions on claw-back provisions in PBM-insurer contracts, licensure of PBMs in states where they operate and provisions that protect community pharmacies from unfair PBM auditing practices,” he added. “These are positive developments, but without the full disclosure of rebates and discounts it is not possible to determine how the rebate system impacts drug prices and patient costs.”
According to Robert. W. Levin, MD, president of the Alliance for Transparent and Affordable Prescriptions, speaking at the 2019 Rheumatology Nurses Society Annual Conference in Orlando, CVS and United Health together capture more than 75% to 85% of the PBM market share, with Express Scripts’ revenue totaling $101.85 billion in 2015. In addition to the CVS-Aetna merger, he added that recent consolidation and vertical integration has seen Express Scripts purchased by Cigna and United Healthcare owning Optum Rx.
“These three largest PBMs are in the top 25 of the Fortune 500, and they are larger than any pharmaceutical company,” Levin said. “When you think about how gargantuan they are, the top pharmaceutical companies are below the revenues and profits some of these PBM companies make.”
He added that PBMs “exploit” the lack of transparency around drug formularies and manufacturer rebates to reclassify said rebates in the manufacturer contract as “fees,” or as “payment for services.”
“This allows PBMs to keep a large part of the rebate as profit,” he said. “A lot of the problems with all of this could be alleviated if we got rid of this secrecy and create transparency. If the amount of money paid by the manufacturer to the PBM was disclosed, we could have a better system. We could actually have our patients paying based on what the real price is, which was negotiated by the PBM, and actually take advantage of that for our patients.” – by Jason Laday
Disclosure: Levin reports speaking fees from AbbVie, Bristol-Myers Squibb, Exagen, Regeneron and Sanofi, as well as consulting fees from Crescendo.