Escalating Fight Between Pharma and Pharmacy Benefit Managers
A re-intensified conflict between pharmaceutical companies and pharmacy benefit managers (PBMs) is emerging in Washington, D.C. President Trump's administration's policy priorities include prioritizing patient needs over PBM profits and holding PBMs accountable for limiting patient drug access.
CVS Caremark (CVS) has defended its role in the healthcare system, emphasizing its efforts to reduce prescription drug costs. However, scrutiny over PBM practices and their rebate strategies has increased. Research suggests higher rebates lead to inflated list prices and out-of-pocket expenses for patients.
PBMs aim to drive down costs by promoting generic medications. CVS Health's president, Prem Shah, highlights that generic prescriptions constitute over 90% of usage in the US, saving clients money.
Despite PBMs' efforts, new models like GoodRx (GDRX), Mark Cuban's Cost Plus Drugs, and CVS's CostVantage offer low-cost prescription access. Additionally, telehealth companies and online platforms such as Hims & Hers (HIMS) and Amazon Pharmacy (AMZN) provide affordable drug options.
However, Shah believes PBMs remain essential for health insurance companies. In 2024, the PBM business accounted for $178 billion in revenue for CVS.
This battle highlights the evolving dynamics of the drug distribution system, with PBMs facing pressure to balance cost control with patient access and affordability.