DLC Brief: Increase Transparency and Accountability to Reduce Patient Out-of-Pocket Costs

Reduce Prescription Drug Costs

Affordable access to prescription drugs continues to be a top priority for people with diabetes and otherserious chronic conditions. We are hopeful that it is more likely to be a question of when, not if,Congress and the administration will inject much-needed transparency and accountability into theprescription drug pricing system. However, any reforms will fall flat if policymakers prioritize federalsavings without also reducing patient costs at the pharmacy counter.

Manufacturers, insurers, pharmacy benefit managers (PBMs), and private and public health plan sponsorsshare responsibility for the misaligned incentives in the current rebate-based, pay-to-play drug pricingsystem. Rebates are a percentage of a drug’s list price paid by a manufacturer to a PBM for the purpose ofensuring the manufacturer’s products are favorably positioned on a health plan’s list of covered drugs.Rebates have skyrocketed over the past decade, reducing drug costs for insurers and PBMs, but driving uplist prices and patient out-of-pocket costs.

Patient cost-sharing is typically based on list price, not the much lower net price their insurer pays. Whenpatients don’t directly benefit from rebates or discounts negotiated on their behalf, they’re stuckshouldering higher costs for fewer covered drugs. Lower cost generic and biosimilar medicines are keptoff formularies in favor of products with bigger rebates. In some cases, patients are forced to pay more fortheir prescriptions with insurance than without it.

According to a 2024 GAO report1, all 50 states enacted at least one PBM-related law between 2017 and2023. Now a stronger national effort is needed to confront the effects of perverse financial incentives inthe current system as health insurers, PBMs, pharmacies, and provider systems merge and verticallyintegrate to form multi-billion-dollar for-profit enterprises. Congress needs to act to:

  • Delink patients’ cost sharing from drug list prices by requiring rebate and discount pass-throughat the pharmacy counter.
  • Base coinsurance on net cost rather than inflated list prices.• Ensure lower cost generics and biosimilars are covered on formularies.
  • Reduce and eventually eliminate spread between net and list prices for prescription drugs.
  • Secure more affordable prescription costs for all patients and payers.

About the Diabetes Leadership Council: DLC is a 501(c)(3) patient advocacy organization committedto reducing barriers to effective, accessible and equitable care by informing policymakers about thepriorities and lived experiences of the diabetes community. Our members – all former leaders of nationaldiabetes organizations – share a singular focus on patient-centered policy advocacy to improve the lives ofall people impacted by diabetes.

Contacts:

Erin Callahan, Chief Operating Officer, ecallahan@diabetespac.org

April Gutmann, Sr. Manager Government Affairs & Policy, agutmann@diabetespac.org

“Prescription Drugs: Selected States’ Regulation of Pharmacy Benefit Managers,” GAO-24-106898, published March 18, 2024;publicly released April 15, 2024. https://www.gao.gov/products/gao-24-106898

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Reduce Prescription Drug Costs

Affordable access to prescription drugs continues to be a top priority for people with diabetes and otherserious chronic conditions. We are hopeful that it is more likely to be a question of when, not if,Congress and the administration will inject much-needed transparency and accountability into theprescription drug pricing system. However, any reforms will fall flat if policymakers prioritize federalsavings without also reducing patient costs at the pharmacy counter.

Manufacturers, insurers, pharmacy benefit managers (PBMs), and private and public health plan sponsorsshare responsibility for the misaligned incentives in the current rebate-based, pay-to-play drug pricingsystem. Rebates are a percentage of a drug’s list price paid by a manufacturer to a PBM for the purpose ofensuring the manufacturer’s products are favorably positioned on a health plan’s list of covered drugs.Rebates have skyrocketed over the past decade, reducing drug costs for insurers and PBMs, but driving uplist prices and patient out-of-pocket costs.

Patient cost-sharing is typically based on list price, not the much lower net price their insurer pays. Whenpatients don’t directly benefit from rebates or discounts negotiated on their behalf, they’re stuckshouldering higher costs for fewer covered drugs. Lower cost generic and biosimilar medicines are keptoff formularies in favor of products with bigger rebates. In some cases, patients are forced to pay more fortheir prescriptions with insurance than without it.

According to a 2024 GAO report1, all 50 states enacted at least one PBM-related law between 2017 and2023. Now a stronger national effort is needed to confront the effects of perverse financial incentives inthe current system as health insurers, PBMs, pharmacies, and provider systems merge and verticallyintegrate to form multi-billion-dollar for-profit enterprises. Congress needs to act to:

  • Delink patients’ cost sharing from drug list prices by requiring rebate and discount pass-throughat the pharmacy counter.
  • Base coinsurance on net cost rather than inflated list prices.• Ensure lower cost generics and biosimilars are covered on formularies.
  • Reduce and eventually eliminate spread between net and list prices for prescription drugs.
  • Secure more affordable prescription costs for all patients and payers.

About the Diabetes Leadership Council: DLC is a 501(c)(3) patient advocacy organization committedto reducing barriers to effective, accessible and equitable care by informing policymakers about thepriorities and lived experiences of the diabetes community. Our members – all former leaders of nationaldiabetes organizations – share a singular focus on patient-centered policy advocacy to improve the lives ofall people impacted by diabetes.

Contacts:

Erin Callahan, Chief Operating Officer, ecallahan@diabetespac.org

April Gutmann, Sr. Manager Government Affairs & Policy, agutmann@diabetespac.org

“Prescription Drugs: Selected States’ Regulation of Pharmacy Benefit Managers,” GAO-24-106898, published March 18, 2024;publicly released April 15, 2024. https://www.gao.gov/products/gao-24-106898