AMA Analysis Finds Variations in PBM Competition
The AMA recently released an analysis of market shares and PBM competition in the United States which found variations at the state and metropolitan levels.
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- In a recent analysis written by José R. Guardado, PhD, for the AMA, he analyzed the competition against drug intermediaries, referred to as pharmacy benefit managers (PBMs). In the report, Guardado defines PBMs as those who manage drug insurance benefits and connect drug manufacturers with insurers or employees. The analysis found variations in PBM competition and market shares at the state and metropolitan levels.
“The American Medical Association already has serious concerns about PBM business practices that can have a detrimental impact on patients’ access to and cost of prescription drugs,” said AMA President Jack Resneck Jr, MD, in the press release. “PBM markets require careful scrutiny as less competition and more vertical integration can embolden anti-competitive business practices to the detriment of patients. The novel data presented by the AMA analysis is intended to help regulators, lawmakers, researchers, and policymakers better evaluate merger proposals in the future that may harm patients by raising prices, lowering quality, reducing choice, and stifling innovation.”
Using data collected in 2020, the analysis looked at rebate negotiations, retail network management, claim adjudication, formulary management, and benefit design at the national and local levels. According to the investigation, instead of using a PBM, nearly 37% of the national markets were coordinated in-house by health insurers for formulary management and benefit design. The most significant areas of use for PBMs were rebate negotiation, retail network management, and claim adjudication.
In addition, the study compared national-level competition with local competition. Researchers found that the ten largest PBMs controlled 97% of the national market. On the other hand, only 78% of the state and metropolitan areas analyzed had concentrated PBM markets.
Finally, the study looked at the vertical integration of PBMs. The AMA press release states, “an insurer is vertically integrated with a PBM when a PBM service is performed in-house or supplied by a PBM that shares ownership with the insurer.”
With that definition in mind, only 69% of people had health insurance that was vertically integrated with a PBM. There was a significant variation among states, with South Dakota having the lowest vertical integration rate at 6%. Conversely, vertical integration in North Carolina was up to 97%.
In the report, Guardado notes, “even though the largest health insurers and PBMs are vertically integrated, there is still a significant portion of the market that remains not vertically integrated, particularly at the local level.”
As drug costs rise, understanding all members and aspects of the pharmaceutical supply chain will be essential to providers and payers. The AMA and other health organizations will continue to analyze the role of PBMs in healthcare.
