Get the Facts
How different kinds of “transparency” impacts
prescription drug costs

Fact: Employers, unions, and public programs – not pharmacy benefit managers (PBMs) – determine what level of “transparency” they want in their drug benefits.

Transparency means different things to different clients. To some, it means a PBM passing through 100% of the rebates and discounts they negotiate.

How do prescription drug
rebates reduce costs?

What is drug price

How does drug
pricing work?

What is a Pharmacy Benefit
Manager (PBM)?

Who hires a Pharmacy
Benefit Manager (PBM)?

Employers, unions, and public programs – not PBMs – determine what level of “transparency” they want in their drug benefits. Transparency means different things to different clients. To some, it means a PBM passing through 100% of the rebates and discounts they negotiate to the plan sponsor.

Others view hiring a PBM like buying a car – they want to know the total cost, not the input costs of each tire or muffler. Either way, it’s up to the plan sponsor to choose what level of transparency it wants and which PBM can deliver on that goal.

  • According to the Federal Trade Commission, there is a type of transparency that would increase costs for consumers:  any mandate that makes PBMs and clients publicly disclose the terms of their agreements.  This would reveal to drug makers and drugstores the negotiating and pricing strategies of their competitors, enabling them to collude against plans and PBMs and keep costs artificially high.

  • PBMs are highly competitive. If one PBM doesn’t give an employer, union, or government program what they want, another one will.
  • Employers’ top concern is reducing drug costs, not contracting issues, such as “transparency” of payments to drugstores (9%) or rebates to pharmacy benefit managers (4%).

Pharmacy Benefit Managers (PBMs): Generating Savings for Plan Sponsors and Consumers.

PBMs now implement prescription drug benefits for some 266 million Americans who have health insurance, and will save $654 billion over 10 years.

Survey: Employers Prefer Private Sector Solutions

By more than a two-to-one margin, employers think private companies are better able than the federal government to manage prescription drug benefits. Seventy percent think the private sector is better equipped than government to manage pharmacy benefits.

CBO: Disclosure of Drug Pricing Information Could Increase Medicare Costs 

Public disclosure of drug-pricing information could potentially increase the cost of the Medicare prescription drug benefit by billions of dollars and facilitate “tacit collusion” among drug manufacturers.

Cornell Law Review: Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market .

Despite the growing number of mandatory disclosure regulations, there is no theoretical or empirical reason to believe they are essential to ensure that health plan sponsors pay a competitive price for PBM services. 

FTC: PBM Marketplace is Competitive 

Vigorous competition in the marketplace for PBMs is more likely to arrive at an optimal level of transparency than regulation of those terms

FTC: PBMs’ Ownership of Mail-Order Pharmacies Does Not Disadvantage Plan Sponsors. 

Plan sponsors generally have audit rights that allow them to verify whether they receive the payments for which they contract.

FTC: Mandatory PBM Disclosure Requirements Unnecessary and Costly

FTC staff has examined proposed state regulations imposing PBM disclosure requirements and raised concerns that such mandates may prevent plan sponsors from negotiating the level of disclosure that they deem useful and raise plan sponsors’ costs of providing pharmacy benefits.

FTC Weighs in on New York Legislation to Mandate PBM Transparency 

There is no theoretical or empirical reason to assume that consumers require sellers’ underlying cost information for markets to achieve competitive outcomes.

FTC Analysis: Any Willing Pharmacy Mandate to Raise Prescription Drug Costs  

Any willing pharmacy provisions threaten the effectiveness of selective contracting with pharmacies as a tool for lowering costs.