The trend of rising prescription drug prices has been a cause for alarm for the Delaware Pharmacists Society. We’ve continued to advocate for Delawareans’ access to affordable healthcare, including their prescription drugs.
At the federal level, it’s clear this is a priority too. The Inflation Reduction Act gave Medicare the ability to begin negotiating drug prices. This legislation was a step in the right direction, but there is more to do. The only way to truly reign in prescription drug prices once and for all is to reform the entities that determine what most patients pay at the pharmacy counter: insurance companies and their pharmacy benefit managers (PBMs). PBMs have a complicated structure. Though they technically sit in the middle of insurance companies, prescription drug manufacturers, pharmacies and patients, the biggest are really aligned with insurers.
The three largest PBMs (OptumRx, CVS Caremark, and Evernorth) control 80% of the PBM market. Each of them is financially connected to a publicly traded insurance company or healthcare conglomerate. UnitedHealth Group, which owns OptumRxm, and CVS Health, which owns CVS Caremark and Aetna, are two of the 10 largest companies in the world. The PBM business drives more than half of these major corporations’ profits.
The sheer size of these companies has given their PBMs tremendous power. They control everything from the drugs insurance companies cover to the cost patients pay. When making these decisions, they prioritize profits over patients – a business model that’s seen PBM profits more than triple in a decade.
There are a number of troubling ways PBMs profit off patients.
One is how they base patient co-pays on a higher “list” price, while at the same time acquiring the drugs at a much lower “net” price that reflects the rebates and discounts they negotiate directly with manufacturers. On average, that “net” price can be as much as 50% lower than the “list” price. Instead of passing those savings down to patients, PBMs pocket them to help pad their enormous profits.
Another anti-patient practice is how PBMs use fees. PBMs have collected billions in fees from prescription drug manufacturers. In many cases, these fees are tied to the price of a drug. This fee system incentivizes PBMs to offer prescriptions with higher copays and to make lower priced drugs inaccessible through insurance. Often, this practice manifests through PBMs selecting name brand products on their formularies instead of the lower cost generics to ensure higher kickbacks.
Just last year, the three largest PBMs combined to deny access to over 1,100 prescription drugs – many of these drugs had prices lower than other available treatments, which would have meant less money for the PBMs and insurers.
The PBM market is broken. The companies bear no responsibility for the arduous work that brings new treatments to the marketplace, yet they have the final say in drug access and costs. Worse, they are using their power to reap enormous profits on the backs of patients and manufacturers.
For many drugs, PBMs can receive 50% or more of the “list” price as profit. In no system should the companies doing the least work earn the highest profits. Not even Shark Tank deals see investors earn these margins for 0% of the work.
Thankfully, Delaware’s State Legislature is taking serious steps to rein in PBMs, including by banning them from discriminating against providers serving the most vulnerable populations. In Congress, several bills that seek to make PBMs disclose rebates, discounts, and fees, as well as end the link between fees and drug prices, have been introduced. Additionally, Insurance Commissioner Navarro is leading the fight against these unfair practices.
Now it’s time that the Senate and Congress get serious, investigate and pass legislation. Anything else is a half measure that fails to fully address the problem of prescription drug prices.
Kim Robbins is the executive director of the Delaware Pharmacists Society
