As a Type 1 diabetic for more than 50 years, every single day I have required insulin injections to stay alive. While I’ve been faced with rationing and skipping doses, I’ve been fortunate to still be healthy. That is not the case for too many Americans when the cost of treating a chronic condition becomes overwhelming.
Patients are spending more out-of-pocket on prescription drugs than ever before. From 2014 to 2022, patient out-of-pocket costs for brand-name drugs rose by 50%. In the last few years, Congress has worked to reign in prices, but there is one cause of rising costs they have yet to address: Pharmacy Benefit Managers (PBMs).
For patients to feel real savings, Congress must reform and regulate these companies that are actually setting exorbitant drug prices.
The original purpose of PBMs was to reduce drug costs for employers and patients by negotiating the best prices for those employers and patients. PBMs now operate behind the scenes by using hidden practices. They have leveraged their influential position to rake in profits, all at the patient’s expense. PBMs no longer exist to save patients and employers money, but rather to maximize their own profits.
Just three PBMs (OptumRx, CVS Caremark, and Evernoth) control 80% of the market. These PBMs oversee prescription drug purchasing on behalf of more than 200 million Americans. These companies are not household names, but their parent corporations are: UnitedHealth Group owns OptumRx and insurer UnitedHealthCare, CVS Health owns Caremark and Aetna, The Cigna Group controls Evernorth and Cigna.
How can PBMs save patients money while at the same time returning profits for their corporate owners? Simple: They can’t.
The need for PBMs to generate profits for their corporate owners (who they answer to) has created incentives for those in the middle to raise prices and limit access to lower-cost alternative drugs. Patients have borne the brunt of their conflicts of interest in the form of higher costs.
One of the major tasks for PBMs is to negotiate rebates and discounts directly with drug manufacturers. Rebates are not the same as rebates that consumers are used to with forms and getting a few dollars back. PBM rebates are worth millions of dollars and are received through some accounting magic when the manufacturer invoices at a certain amount, then applies the “rebate” to that same amount. It is time for PBMs to actually use these savings to lower costs for patients. Instead of calculating patient out-of-pocket costs using the after rebate price, PBMs charge patients based on the higher list price before rebates and discounts kick in.
A decade ago, manufacturers were retaining nearly 70% of the list price of their brand-name drugs as profit. Today that number has fallen to 50% as PBM profits have soared.
PBMs have also been driving patients toward higher-priced drugs to earn larger manufacturer fees. PBMs charge manufacturers fees in exchange for making the drugs available on insurance plans. The size of the earned fee is determined by the cost of a drug. The fees are nothing more than a cash-grab meant to enrich corporations at the expense of patients.
There’s been a lot of progress in recent years to address prescription drug prices: insulin co-pay caps, insulin price caps, Medicare allowed to negotiate medication prices, etc. Now, Congress must shift the attention to PBMs. Luckily, the FTC’s recent report and investigation shed an important light on PBM practices, and Attorneys General from around the country, including Colorado, are pushing for greater regulation. Our Senators and other leaders in Washington must now join in.
Congress must help by passing legislation to de-link PBM fees from drug costs, to tie patient co-pays to the price PBMs actually pay, and to force transparency at these companies. Without real reforms, patients will continue to come last behind corporate profits.
