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PBMs: Impact on Employer-Provided Coverage Transparency


Health insurance providers and pharmacy benefit managers are Americans’ bargaining power, negotiating savings for millions of patients every day.

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Published on May 9, 2024

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Health insurance providers have demonstrated their commitments to providing Americans with actionable health care information and market competition through increased price transparency. Health insurance providers and pharmacy benefit managers (PBMs) are Americans’ bargaining power, negotiating savings for millions of patients every day. Employers rely on PBMs to limit their drug spending, with 86% of employers directly contracting with a PBM for pharmacy benefits. The market for managing pharmacy benefit services is robust and competitive for employers: a recent survey found that 36% of employers have changed their PBM in the last five years, and 48% of employers yielded greater than 5% cost savings during their last PBM negotiation. 76% of employers consider their PBM to be moderately, very, or extremely transparent. To promote even greater competition in the employer PBM market, AHIP supports additional transparency measures to ensure that employers have further information to make the right coverage decision for their employees.

Drug Price Transparency that Provides Meaningful Information to Employers

Market-based solutions are essential to reducing the cost of health care, including the cost of prescription drugs. Providing employers with consistent, standardized information on their prescription drug costs promotes competition across issuers and PBMs, reducing prescription drug spending. While PBMs and issuers typically report much of this data to their members and plan sponsors through existing requirements and contractual arrangements, AHIP supports standardized reporting to plan sponsors on the following:

  • Gross spending on prescription drugs
  • Net spending on prescription drugs after manufacturer rebates
  • Total drug utilization
  • Fees and compensation paid to brokers and consultants

With this level of drug spending transparency, employers will be empowered to compare benefit packages simply and easily across PBMs and insurers, negotiating lower overall prescription drug spending.

Mandating Anti-Competitive Price Disclosures to Competing Drug Manufacturers Would Enable Collusion

AHIP is deeply concerned that Congress is considering requiring the public disclosure of all confidential net drug prices to competing drug manufacturers via machine-readable files. These disclosures would allow drug manufacturers to collusively raise their prices, engage in “shadow pricing,” and limit negotiation. The Congressional Budget Office (CBO) has repeatedly found that disclosing these prices would “set in place conditions for tacit collusion” and that even disclosure of average net prices at the therapeutic class level “could result in tacit collusion among competing manufacturers.”

The Grassley-Wyden Insulin Investigation shed light on drug manufacturers’ use of shadow pricing to take lockstep list price increases: publicly revealing net prices would allow manufacturers to use this same shadow pricing approach to raise their net prices. Mandating this disclosure of confidential discounts to competing drug manufacturers would lead to higher costs for patients and employers, counteracting the value of confidentially providing this information to plan sponsors to aid in their evaluation of prescription benefit options. Disclosing confidential pricing information to competing drug manufacturers is the wrong path for hardworking Americans because it would enable collusion and higher drug prices.