New Indiana law: Drug savings passed along to consumers

If you have never heard of PBMs, you are probably not alone. However, starting next month, Hoosiers are expected to quickly learn all about pharmacy benefit managers and how their practices are driving up the price of some prescription medicine. It is important to understand what happens during the time your medicine is manufactured and before it is dispensed.

Antonio Ciaccia, president of 3 Axis Advisors and a leading health policy expert, said we have a highly dysfunctional drug distribution system which spits out increasingly inflated medicine prices.

“Drug manufacturers sell drugs to wholesalers,” he said. “Wholesalers sell drugs to pharmacies. They are ultimately compensated by PBMs on behalf of insurance companies whose fiduciary obligation is to shareholders and to make more and more money.”

Under the new legislation, PBMs must give at least 85% of rebates and discounts to consumers. Ciaccia contended the savings should add up to about $250 billion a year but a “good amount” of it is kept for profit by PBMs and insurance companies. Opponents argue the new law could cause premiums to rise.

The only way for the system to properly operate is for competition to regulate the market, Ciaccia said.

“When PBMs make more money, when list prices go up, we lose that necessary balance that the system is supposed to have,” he explained. “And so, by realigning the incentives of PBMs, we hopefully put them in a place to actually lower prices rather than encourage them to be higher.”

The new law goes into effect July 1 and mainly impacts prices for name brand drugs.