CARTER: Prescription drug pricing reform must rein in pharmacy benefit managers
Piece courtesy of the Washington Times, Congressman Buddy Carter (GA-01), and Terry Wilcox.
This month, President Biden signed an executive order directing federal health departments to create plans within 90 days to lower prescription drug costs that are burdening so many Americans. Any robust program to meaningfully bring financial relief to patients at the prescription counter must address the root cause of skyrocketing drug prices — pharmacy benefit managers (PBMs).
A new report by one of us (Rep. Buddy Carter) reveals the outsized role PBMs play in making medications unaffordable and inaccessible. Federal health departments can achieve the bipartisan goal of reducing medication prices by taking this opportunity to rein in PBMs’ predatory practices.
PBMs are middlemen between pharmaceutical manufacturers, pharmacies and health insurers. They artificially spike prices, emboldened by a lack of transparency in the drug pricing chain, without providing any value to consumers. The biggest three PBMs, which account for almost 80% of the nation’s prescriptions, are owned by health insurers, creating a massive conflict of interest.
PBMs dramatically inflate drug prices by demanding huge rebates from manufacturers in return for placement on insurers’ lists of covered medications known as formularies. Since 2006, when PBMs took a more active role in the market, drug prices have increased by 313%. Annual rebates now exceed $200 billion, approaching half of the country’s prescription drug market.
In 2020, total gross expenditures for branded medications reached $517 billion. Manufacturers earned only 31% of this spending, while middlemen made 69%. One analysis concludes that $339 out of the $425 cost of a box of insulin pens is rebate dollars. PBMs and their pay-to-play rebate scheme explain why this 100-year-old medication remains unaffordable for so many.
By excluding low-rebate drugs from formularies, PBMs also routinely prevent patients from accessing their needed medications. The three largest PBMs block more than 1,150 treatments from formularies, including a low-cost insulin alternative called insulin glargine. Patients prescribed these drugs often must endure long waits, so-called step therapy (where insurers force patients to try and fail on formulary drugs first), and far higher expenses.