Fighting To Lower Drug Costs by Targeting Pharmacy Benefit Managers

With annual out-of-pocket expenses for prescription drugs nearing $50 billion, many American families are struggling with the high costs. This burden is especially severe for seniors, with many spending over $3,000 each year on essential medications.

Thankfully, due to the efforts of Majority Leader Chuck Schumer, seniors have seen some relief this year with the introduction of a cap on out-of-pocket costs in Medicare Part D. Next year, this cap will be reduced further, providing even more savings for seniors.

However, the broader issue of high drug prices continues to affect too many Americans. The Senate now has an opportunity to address the next critical aspect of this problem. Lawmakers in Washington need to focus on reforming Pharmacy Benefit Managers (PBMs) to help lower prescription drug costs for patients.

PBMs are large corporations that exert control over multiple facets of the prescription drug industry. They influence everything from the amount you pay for medication to whether your insurance covers it and which pharmacy you can use.

Recently, PBMs have faced scrutiny from the Federal Trade Commission (FTC), which has uncovered evidence that PBMs are artificially inflating drug prices to increase their profits. The FTC has launched a lawsuit against PBMs, particularly focusing on insulin pricing.

PBMs represent big business.

For years, the largest PBMs have become integrated into major healthcare conglomerates, often including insurance companies. Today, six PBMs manage 90% of all prescriptions nationwide, with five of these PBMs owned by some of the largest corporations in the U.S.

Consider UnitedHealth Group, for instance, the fourth-largest company in the nation. It owns both the insurer UnitedHealthCare and the PBM OptumRx. In fact, UnitedHealth Group is nearly four times larger than Johnson & Johnson, the country’s biggest drug manufacturer. Even if OptumRx were separated from UnitedHealth Group, it would still outsize J&J.

The practices of PBMs demonstrate that their priority lies in maximizing profits for themselves and their parent corporations, rather than reducing drug costs or enhancing patient access.

A large portion of PBM revenue comes from rebates and discounts negotiated directly with drug manufacturers. While a small portion of these savings reach patients, most PBMs still base patient co-pays and out-of-pocket costs on the original, non-discounted price of the drug. In essence, PBMs pay one price for a drug, while patients are charged a different, higher price. With millions of prescriptions processed annually, these profits accumulate quickly.

Another significant source of revenue for PBMs, which has doubled in the past five years, is manufacturer fees. These fees, often tied to the price of a drug, incentivize PBMs to promote more expensive medications over cheaper alternatives, directly impacting patient costs.

As intermediaries, PBMs have become some of the highest earners in the prescription drug market. Along with other non-manufacturers, PBMs are now capturing over 50 cents of every dollar spent on medication.

The FTC report has highlighted how PBMs leverage their power and negotiating capabilities to enrich themselves, often at the expense of patients. It is now up to Congress to respond.

Steps that federal lawmakers can take to address this issue include increasing transparency around what PBMs and insurers pay for drugs, disconnecting fees from drug prices, and ensuring that co-pays reflect the discounted cost of medications.

Additionally, any changes must avoid harming union members. Unions have historically fought hard to secure better healthcare benefits for their members and retirees, many of whom are seniors. It is vital that reforms do not undermine these hard-earned benefits. Legislation must focus on making drugs more affordable while protecting the rights and benefits that unions have won for their members and retirees.

It’s time for meaningful change that prioritizes patients and working families.

Are medications getting costly and difficult for you? At Mediserv Pharmacy in the Bronx, New York, we understand the challenges faced by our community regarding rising prescription costs. Our mission is to provide affordable medications and personalized care to ensure that every patient receives the support they need. As advocates for fair pricing and transparency in the pharmacy industry, we remain committed to serving you and your family’s health needs.