We Can’t Have Lower Insurance Premiums and Drug Costs Without Reforming PBMs

DC Journal

Author: Mark Merritt

If Americans want to pay less for prescription drugs, there is no way to do it without reforming the Pharmacy Benefit Manager industry. Congress should do so by the end of this year.

The PBMs, once known for reducing drug costs, no longer exist. Literally, they are no longer independent companies. They sit inside the insurance giants that own them. Cash machines to help health conglomerates hit quarterly numbers.

For 15 years, I led the trade association representing PBMs when they were independent firms competing to lower costs. PBMs helped build Medicare Part D— one of the most successful and popular public-private partnerships in modern health policy.

Back then, the model reduced patients’ drug costs. Today, out-of-pocket drug costs are rising seven times faster than the underlying cost of the drugs. Brand-name drug prices rose only 2 percent to 5 percent over the past year. Yet, out-of-pocket spending climbed faster — about 35 percent faster than the net price of the drugs.

That gap is no accident. It reflects how PBMs and their affiliates decide which drugs patients can access, how cost-sharing is designed, and how much of a manufacturer’s discount actually reaches the consumer. Spoiler: Very little does.

The modern PBM bears little resemblance to the cost-lowering intermediaries of the past. Today, a single insurer-owned PBM can act as wholesaler, mail-order pharmacy, specialty pharmacy, benefit designer and even a drug manufacturer.

Vertical integration has given insurers end-to-end control — and end-to-end profit — over the pharmaceutical supply chain long before a medication ever reaches a patient... Continue Reading