Health care’s huge hidden cost: Sherrill to take aim at PBMs

Included in Gov. Mikie Sherrill’s Budget Address list of potential spending cuts and reforms around health care costs, including how large companies should pick up the cost of Medicaid, was a promise that caught the ear of the state’s incredibly important life sciences sector: PBM reform.

Sherrill called PBMs — officially ‘Pharmacy Benefit Managers’ — a “type of shadowy middleman” who “sits between insurers, drugmakers, and pharmacies.”

Sherrill said they are behind the rise of prescription drug costs.

“They drive up the cost of medications as much as 10 times, while padding their profits with secret manufacturer rebates and insider tricks,” she said.

Sherrill said the state’s Medicaid program could save 20 million dollars if PBMs weren’t allowed to inflate the prices it’s forced to pay. And that PBMs harm independent pharmacists, too — dictating copays and pocketing reimbursements.

“All New Jerseyans pay the price,” she said.

Sherrill did not offer any specifics on how she plans to address the issue only a promise to work with the Legislature to “pass a comprehensive and historic PBM reform bill.”

That was enough for life science group leaders.

HealthCare Institute of New Jersey CEO Chrissy Buteas applauded the announcement.

“Common-sense PBM reform is one of the most effective and immediate ways to lower health care costs, and we commend Governor Sherrill for her continued focus on New Jersey patients and affordability,” she said. “From her Congressional tenure to her campaign proposals, the Governor has advocated for PBM reform as a thoughtful and balanced approach to lowering costs, and she’s working with a true sense of urgency to deliver real savings for patients.”

Buteas spelled out the issue.

“Less than half of the money spent on prescription medicines actually goes to the company that makes the medicine — the rest goes to middlemen within the supply chain, like insurers and PBMs,” she said. “Whether enforcing current or enacting new legislation and regulations, bringing more transparency and reducing profiteering incentives within the PBM structures will bring real and immediate relief to patients. We will work with the Governor and the Legislature to enact these proposals as quickly as possible.”

BioNJ CEO Debbie Hart felt the same way.

“We are encouraged by the governor’s commitment to work with the Legislature on meaningful pharmacy benefit manager reform, given the significant role PBM practices play in driving higher drug costs for patients,” she said. “Increasing transparency and accountability in the PBM system is essential to ensuring that savings reach patients and that the prescription drug market functions fairly and equitably.”

Health Care Quality Institute CEO Linda Schwimmer said Sherrill set forth principles the Quality Institute has long called for: Bringing about affordability through responsibility and accountability, she said.

“We applaud the governor’s approach to bringing stakeholders together to address critical elements of the State Health Benefit Programs; her proposed investment in modern Medicaid technology; and her proposal to tackle pharmacy costs,” she said. “We absolutely agree with the governor that we must invest in the health professional licensing systems and staffing to increase access to care, and significantly, and we support her pledge to allow agencies to hire the staff they need to perform critical functions to ensure the health and wellness of everyone in New Jersey.”

New Jersey Hospital Association CEO Cathy Bennett was thrilled Sherrill not only mentioned PBM reform but additional supports for behavioral health needs.

“The New Jersey Hospital Association applauds Governor Sherrill’s investments in youth mental health through SPARK and the Social Media Resource Center, while taking on pharmacy benefit managers, whose opaque, rebate‑driven business models favor high‑priced drugs, inflate list prices, and add marked‑up fees that drive up health care costs for patients and plans,” she said.

“We share the governor’s goal of ensuring public resources are used effectively. NJHA thanks Gov. Sherrill for recognizing the impact that federal funding cuts will have on patients and providers. We look forward to reviewing the details of the budget proposal and working closely with the administration to ensure any changes support hospitals’ ability to provide timely, high-quality care to every New Jersey resident.”