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  • AIPC Rx

Sunlight Is The Cure For High Drug Prices

The Economic Standard

Congress is considering legislation to rein in runaway drug prices. But any new law would be just political theater unless it shines a light on how pharmaceutical benefit managers (PBMs) manipulate drug pricing.

We soothe ourselves with slogans about America’s free-market health care. The reality is very different. Insurers and their PBMs rig the system to prop up drug monopolies year after year. Newer, more effective medicines are shut out.

Health insurance CEO pay exploded in 2020—while American life expectancy continued to fall. How are insurers making so much money during an economy-crushing pandemic?

Every big insurer now either owns or is owned by a PBM. These little-known cash cows keep lists of medicines (formularies) that insurance policies cover, negotiate contracts with pharmacies, and process claims. Their earning power can be massive. Fully 60% of CVS’s revenue comes through its PBM Caremark. And Cigna’s 2019 merger with Express Scripts, a mega-PBM, immediately tripled the insurer’s revenues.

PBMs use a slew of tricks to game the system, and most Americans have no idea this is happening. These shadowy and increasingly powerful middlemen employ armies of lawyers and lobbyists to keep the books locked up tight.

One trick is point-of-sale remuneration fees. This means when you buy medicine at your local pharmacy, a PBM skins off an undisclosed portion of the price you pay. They also keep a cut of what the insurer pays the pharmacy, playing both sides for profit. These ruthless tactics drive mom-and-pop pharmacies, so crucial for vaccinating Americans against COVID-19, out of business. Continue Reading


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