Pharmacy benefit managers are picking patients' pockets
Pharmacy benefit managers are in the congressional hot seat. Last Thursday, the Senate Finance Committee held a hearing examining the middlemen's impact on patients. Earlier in March, the House Committee on Oversight and Accountability launched an investigation into PBM tactics that are "harming patient care and increasing costs for consumers."
The focus on pharmacy benefit managers is warranted. They game the healthcare system to line their own pockets at the expense of patients.
PBMs manage prescription drug benefits on behalf of insurers. In theory, they're supposed to keep patients' drug costs down by negotiating lower prices with pharmaceutical companies.
But that's not what happens in practice.
PBMs do negotiate sizable discounts on medications — to the tune of 40% or more off a drug's list price. They share some of those savings with insurers, who can use them to lower premiums. They also keep a chunk for themselves.
But PBMs keep the prices they're able to secure secret. Patient copays and coinsurance are based on the higher list price, not the PBMs' discounted price. So patients can end up spending hundreds of dollars more out of pocket each year than they would if they had access to the discounted price at the pharmacy counter.
The opaque nature of this market is good for PBMs. And it perversely encourages higher and higher list prices so that PBMs can claim ever-greater rebates from drug companies. Patients pay higher coinsurance on the increasing list prices. And PBMs continue padding their bottom lines.
All told, PBMs and other industry middlemen collected more than half of every dollar spent on brand medications in 2020.
PBMs have created a convoluted drug pricing system devoid of the sort of transparency that could lower patient costs. Their actions deserve strict congressional oversight — as lawmakers have thankfully begun to realize.
About the Author: Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in Health Care Policy at the Pacific Research Institute.