On the face of it, both the Pharmaceutical Care Management Association (PCMA) and the National Community Pharmacists Association (NCPA) "strongly support" the principle of transparency within the pharmaceutical industry. Scratch the surface, however, and the two associations have very different ideas about what the concept of transparency means and how it should be enacted. Both claim their viewpoint is best for the bottom line.

 

PCMA represents the nation's pharmacy benefit managers (PBMs) and those who pay for drug benefits. Mark Merritt, president and CEO of the association, explained the organization's PBM membership develop formularies, create retail drugstore networks and mail order pharmacy programs, and negotiates with pharmaceutical manufacturers and distributors to "bring costs down" on behalf of clients including large employers, health insurers and Medicare Part D.

 

"Typically, we save our clients about 25 percent on their drug cost," noted Merritt. "We use economies of scale. We negotiate on behalf of over 200 million Americans."

 

However, he continued, those negotiations could be endangered if Congress enacts current legislation that is part of the overall healthcare reform package. "We are very supportive of transparency as long as it is transparency that supports lower drug costs," Merritt said, adding appropriate transparency measures should empower payers and allow them to make informed purchasing decisions.

 

"We're not big fans of the so-called transparency being debated right now in the House and Senate," he continued. "This kind of transparency would likely lead to leaks of sensitive negotiating information that could lead to drugstores and drug companies raising their prices."

 

He added that PBMs have been successful in securing lower drug prices by forcing drug companies and pharmacies to compete against each other. If, he maintained, pricing was made public, it could create a price floor. "All of a sudden, drug companies don't feel the need to offer big discounts to be on our formularies," he added.

 

Sparking this latest round of commentary was the adoption of a PBM disclosure amendment by the Senate Finance Committee at the end of September. The amendment, which was sponsored by Senator Maria Cantwell (D-Wash.), calls on PBMs to report drug pricing, competition and the amount of savings that are being passed along to consumers.

 

In a statement released immediately after passage of the amendment, Merritt called the move a "step backward" and said, "The Cantwell amendment would force PBMs to disclose information that would give manufacturers and drugstores more leverage in drug-price negotiations."

 

Although the Congressional Budget Office deemed the amendment budget neutral, CBO scoring on an earlier Cantwell amendment pertaining to Medicare showed a potential increase in drug costs to the tune of nearly $10 billion. "PCMA categorically rejects the notion that PBM disclosure is budget neutral. Indeed, it will raise costs for both taxpayers and consumers," Merritt stated.

 

"For its part," he continued, "the Federal Trade Commission has warned that PBM disclosure of such information would undermine the ability of consumers to find affordable coverage options. For reasons such as these, 30 states have considered and rejected legislation similar to the Cantwell amendment."

 

In fact, various letters from FTC officials to state and U.S. representatives have stated, "There is no theoretical or empirical reason to assume that consumers require sellers' underlying cost information for markets to achieve competitive outcomes. In the overwhelming majority of markets … consumers have limited or no information about the cost structure of those with whom they do business. More importantly, in general, consumers do not need such information to make efficient purchasing decisions." Furthermore, the letters state, "If pharmaceutical manufacturers learn the exact amount of rebates offered by their competitors … then tacit collusion among manufacturers is more feasible … Whenever competitors know the actual prices charged by other firms, tacit collusion — and thus higher prices — may be more likely."

 

On the flip side, John M. Coster, senior vice president of government affairs for the National Community Pharmacists Association (NCPA) categorically challenged most of Merritt's assertions.

 

"Mark Merritt likes to say transparency is like playing poker with your hand exposed," Coster said. "There's a crescendo building in this country because the PBMs have well overplayed their hand."

 

He added that PBMs have grown from what was originally a claims processing function to "very complex, very secretive organizations where a lot of money flows, but no one knows how it all comes out in the wash."

 

Coster continued, "The PBMs negotiate, in theory, lower drug prices with pharmaceutical manufacturers. No one knows for sure whether, or how much of these, rebates (are passed along). They've created this wall of secrecy that no one can see through."

 

The independent pharmacists' organization applauded the Cantwell amendment and similar measures in the House spearheaded by Anthony Weiner (D-NY) and called for even stricter oversight.

 

"We think the language is a good start. Ultimately, PBMs should have some level of fiduciary responsibility to the plans," said Coster. He added, "It's a foothold, but we think over time Congress will see it needs to be strengthened."

 

He pointed out a different Congressional committee is currently looking into what he called "the egregious practices of CVS Caremark and others in terms of whether or not they are passing the rebates on to the federal government and federal employees."

 

Merritt reasserted PCMA supports what they deem as the right kind of transparency and would like to see more competition in the marketplace. "That's what drives prices down … not exposing our negotiating strategies to the world."