CONCORD — An eclectic group of mayors, union and business leaders launched a new transparency project aimed at influencing decision-makers in the government and private sectors to force pharmacy benefit managers to pass on lower drug costs to their customers and taxpayers.
Based on a successful 2017 model in New Jersey that saved more than $1 billion, organizers of the PBM Accountability Project of New Hampshire claim the same reform here could save between $30 million and $40 million annually.
Concord Mayor Jim Bouley, a Democrat, and Franklin Mayor Tony Giunta, a Republican, said the program could start with the state government, as it did in New Jersey, or grow organically from town and city governments or businesses, building critical mass for potential systemic change.
“This is not a partisan issue,” Bouley said at a Legislative Office Building news conference Thursday.
“The escalating costs of prescription drugs driven too often by PBMs place municipalities in an unsustainable position and something needs to be done about it now.”
Giunta said prescription drug costs have made municipal labor negotiations across the state even more difficult.
“Our employees have had to choose between health benefits and earned salary increases and that’s not right,” Giunta said. “We can do better; we should be able to do both, and this project could provide the solution.”
Glenn Brackett, president of the AFL-CIO in New Hampshire, said this is an issue that can bring labor and management together.
“We have to fix this problem and if we don’t we are in serious trouble because this is an unsustainable model,” Brackett said.
The free-market solution is a reverse auction in which the buyer of prescription drugs spells out to the bidding PBMs the drug choices or formularies it wants and the maximum cost it is willing to pay.
The bidders are then called upon to sharpen their pencils and offer less than the maximum in order to win the contract.
On eBay, sellers put items up for sale seeking the highest bid. But in a reverse auction, the goal is to seek a lower, cheaper contract.
In New Jersey the bidding war saved the state 18 percent in the first year on two contracts covering 800,000 state workers. The savings reached 25 percent in the second year.
Mike Kapsa is chief economist with America’s Agenda that worked with New Jersey officials on devising their program.
“You see the prices and you bid it down,” said Mike Kapsa, chief economist with America’s Agenda who worked with New Jersey officials on devising their program. “In the reverse auction you are pressing the whole balloon, not just one end, and letting the PBM get its savings through ‘black box transfers.’ “
“You are looking at the total cost of the package and getting the terms that you dictated. It can work in any market, for a large employer, small employer, public sector, private sector. Of course, the larger volume of business, the more leverage that buyer has.”
Robert Stoker, a director of the New England chapter of the Asthma and Allergy Foundation, said drug companies should not be denied profits but the PBMs don’t contribute to medical advancement.
“I’m not one that thinks profits are bad; that money can go to research and innovation,” Stoker said.
“When I found out PBMs control 80 percent of the market, I say what research and innovation do they provide us? What do they really do other than take their profit out of every single transaction? Answer: not much.”
The PBM industry and its trade organization maintain it is the drug companies that have limited competition and forced consumers to pay higher prices.
The solution, industry backers say, is to allow pharmacists to inform consumers about the lowest prices available to them.
A study by the Pharmaceutical Care Management Association concluded payers and patients save 40–50 percent on their annual prescription drug and related medical costs compared to what they would have spent without PBMs, an average of $941 per person per year
Kapsa said these claimed savings numbers are illusory.
PBM profits continue to rise, which is why CVS Caremark, Express Scripts and Optum RX are three of the largest companies in America.
In 2018, New Hampshire signed a three-year, $212 million contract with Express Scripts to serve as the state’s PBM through 2021.
Organizers at Thursday’s event did not know if or how the state could reopen that contractual agreement with Express Scripts to force additional savings.
Even in New Jersey, the third year of its first reverse auction was temporarily short-circuited when a losing bidder convinced a judge to rule the original process was flawed.
State officials in New Jersey are redoing the contract and are expected to adopt a plan that would extend the pact out several more years.