When I worked as a family physician in Vermont, I wrote countless prescriptions to help patients manage their health. If I were still practicing, I’d undoubtedly be worried sick about my patients’ ability to pay for their medicines. Too often, patients today fail to fill scripts because of high out-of-pocket costs.
Lawmakers have worked hard to expand access to medicines over the years, most recently in last year’s Inflation Reduction Act. However, price-based access problems remain. One big reason is the predatory practices of middlemen in the drug supply chain–pharmacy benefit managers (PBMs). It’s high time for our lawmakers to bring their profiteering to heel.
In theory, PBMs negotiate rebates and manage prescription drug benefits for insurers, securing the lowest possible prices from drug manufacturers, which is supposed to make medications more accessible and affordable.
In reality, PBMs have crafted a system that leads to higher drug prices because their revenues are based in part on a drug’s list price. Drug companies raise sticker prices in the knowledge that they will also be offering large discounts. Because of the link between list prices and PBM compensation, PBMs tend to favor higher-priced drugs with bigger discounts when selecting which drugs get preferential treatment on insurer formularies.
That’s fine with insurers, for two reasons. First, PBMs and insurers are one and the same. The three biggest insurance companies either own or are owned by PBMs, and they control 80% of the market. It’s an oligopoly.
Second, insurers collect co-insurance from their customers based on list prices, not the actual prices PBMs negotiate. Thus, insurance companies similarly have a positive incentive to keep list prices high. Since there are no federal rules in place to require discounts from list prices to be passed on directly to the patients taking the medication, so they aren’t.
It gets worse still. Many drug makers offer patients assistance with their co-insurance through coupons for the medication they produce. Outrageously, PBMs/insurers don’t have to count those coupons toward the patient’s deductible or out-of-pocket cap. They can claw patient savings right back that way.
The unscrupulous practices don’t end there. In an effort to pad their bottom lines, insurers and PBMs increasingly employ “utilization management” strategies that make it more difficult for patients to access the medicines…