Experts tell Assembly panel PBM structure can raise drug prices, call for transparency and incentive reform

Two university professors told the New Jersey General Assembly Health Committee that pharmacy benefit managers, or PBMs, are an important but opaque intermediary in the U.S. prescription drug market and that current incentives can raise costs for patients and payers.

PBMs bundle purchasing power and negotiate discounts with drug manufacturers, but ‘‘the more obscure’’ their contracts are, the more likely consumers pay too much, Rutgers law professor Michael Carrier told the committee. Carrier added that PBMs can favor brand or higher-priced formulations when manufacturers give larger rebates, and that consolidation among PBMs gives three large firms overwhelming market power.

The question of how PBMs affect prices matters because the apparent retail price of a drug often differs sharply from the amount manufacturers and patients actually pay. ‘‘The formulary is the list of drugs that the patient is able to take. That should be based on determinations of what is the best drug, what is the most cost effective treatment. It should not be given to a brand firm that happens to give a lot of money to the PBM,’’ Carrier said. He cited examples where a slightly…