It’s not a secret that our prescription drug pricing system is broken. To address the root of the problem, the Biden administration recently convened a listening session seeking insights from experts on substantive solutions to improve patient access and affordability.
Rightly so, the session focused primarily on the adverse effects of restrictive policies implemented by health insurance and pharmacy benefit managers (PBMs). Patients and consumers still grapple with the issue. These policies limit access to crucial medicines and treatments, resulting in delayed wellness and increased financial burdens.
It was good to see the administration convene this listening session, including the Federal Trade Commission, which has been investigating harmful PBM practices. It is hoped the discussion keeps the focus on finding solutions that end the perverse incentives that have PBMs reaping greater profits when drug costs are higher.
After months of debating reform measures to hold PBMs accountable, Congress has the opportunity to get to the heart of how these health insurance middlemen drive drug costs skyward. It can’t come at a more critical time as PBM profits continue to skyrocket to astronomical levels — numbers truly remarkable when you realize these middlemen are merely moving information and money.
You know this legislation is hitting the unregulated middlemen where it hurts because their lobbyists are using misdirection and scare tactics to prevent the legislation from advancing.
This bill, the Delinking Revenue from Unfair Gouging (DRUG) Act, would do is demolish a system in which PBMs are pushing drug manufacturers to set higher list prices for pharmaceuticals. Linking PBM revenues to the manufacturers’ original “list” price is one of the most egregiously anti-consumer practices in healthcare. By holding formulary placement over their heads, the PBMs can successfully demand large rebates and other fees from manufacturers. Adding insult to injury for consumers, out-of-pocket cost-sharing requirements are usually based on the original list price rather than the discounted price that the PBMs pay.
Consumers are losing in two ways: First, they see their prescription drug costs increase as PBM profits continue to soar. Second, they are being victimized by formularies that are populated by drugs that generate more revenues for the PBMs and are being denied access to cheaper generics and biosimilars.
The bipartisan DRUG Act would de-link PBM revenues from drug prices in the private marketplace and Medicare, and it would have PBMs paid a flat fee that is based on a fair-market value for the services they provide. It’s a fair approach that would yield a more conventional, functional marketplace for prescription medications. Not surprisingly, the PBMs are strenuously objecting.
The Pharmaceutical Care Management Association, the lobbyists for the PBM industry — an “industry” dominated by three giant corporations (CVS Caremark, Optum and Express Scripts) that determine the pricing of 85 percent of all pharmaceuticals sold in the United States — have paid for and published a study showing that de-linking PBM revenues from drug prices would raise health insurance premiums by $26 billion and provide a financial windfall for drug companies.
This is nonsense, of course. Health insurance premiums are based on the totality of healthcare costs. Retail prescription drug purchases account for just 9 percent of healthcare spending, half devoted to physician and hospital charges.
The notion that subtracting excessive PBM profits from drug pricing will elevate health insurance premiums doesn’t pass a laugh test. The PBM lobby argues that de-linking will remove the incentives PBMs have to negotiate lower drug prices. Yet, when PBMs were first created, negotiating lower prices was precisely what they did before mergers and acquisitions created a three-corporation oligopoly, and they used their leverage to drive prices and profits higher.
It is unconscionable that this broken system has persisted for so long. The White House and Congress have the opportunity to fix this mess, reduce prescription drug costs, and give more Americans affordable access to the healthcare they need.
David Balto is a former policy director of the Federal Trade Commission and a public interest antitrust attorney. He wrote this for InsideSources.com.
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
After what happened with Covid, we can see not just the drug delivery system is messed up but the whole system is… When an ambulance ride of 10 miles costs 3000 dollars and an emergency visit is 7000, yes, something is wrong with the whole enchilada…
For the past 5 years, I have coordinated a Medicare Guidance Ministry for senior adults at my church and for other family and friends, and will typically assist 150-175 individuals per year to find the best Medicare health and drug plan for them at the lowest cost. The cost of prescription drugs is often the #1 factor in determining which health plan I recommend to them. The majority of these senior adults are on limited income from Social Security. As needed, I also spend extra time searching for sources in addition to their Medicare drug plan when the cost of drugs is too high. GoodRx, SingleCare.com, needymeds.org and Canadian online sources have helped reveal lower-cost options, bypassing the Medicare drug plan in which they are enrolled. My goal, however, is to find their prescribed medications at the lowest cost for them. In the past two years, it has also come to my attention that NOT ALL prescribed drugs are included on the formularies of Medicare drug plans, i.e., Armour Thyroid and Levothyroxine sodium. Why is this occurring? It definitely is not advantageous to senior adults who depend on Medicare and have limited resources.
My wife’s employer uses Express Scripts. Our prescription prices have steadily been on the rise since day one. We recently switched all of the meds we could to Cost Plus and we are saving in excess of 60%. It is time to cut these middle men off at the knees!
“The middle man” in every business is nothing more than an administrative position created between manufactures and product retailers to allow the manufacturers to focus on production while the “middle man” works on manufacturer’s behalf to promote product, bargain pricing, expansion of sales, shipping and storage of product.
What has happened in some productions is the middle men have turned their position into a business for self benefit. In a business whose product is an absolute necessity for human health and life, the middle man is demanding more for what they do. Since they’ve built up the clientele, they, so far, call the shots. And with big pharma’s huge $$Billions in profits, they’re not taking any action to change things. It’s the higher prices and insurance companies making customers pay more out-of-pocket that’s keeping it going. At some point it will be unsustainable and it seems we are at that crossroads now, or will be soon.
My opinion, for what it’s worth….
I don’t know enough to validate or invalidate the content of this article… but, I DO know, after having managed capital facilty projects in pharmaceutical manufacturing and research plants for 20(+) years, that our FDA is what needlessly made pharmaceutical products so expensive.
The FDA has been brutally punishing pharmaceutical companies with unnecessary project capital and expense costs for decades, all in the name of FDA inspectors wanting to look like they are “managing something” by imposing needless modifications.
>My personal “favorite” was having to stop everything in mid-renovation phase on a uniquely urgent sterile product filling room project, just to replace wood scaffolding with metal – in a location OUTSIDE of sterility, that operated at a much lower static pressure (meaning there was no way the dirty “cooties” could swim upstream like salmon into a clean (sterile) parenteral drug filling room.
Costly interferences like this were why drug companies moved many of their plants overseas, starting in the 90’s. Now, some have come back, due to formulation recipies having been stolen while abroad…. and so it goes….