Americans are paying too much for prescription drugs, and while the blame often falls on drug companies, insurers, and the government, another group plays a significant, often overlooked role: Pharmacy Benefit Managers (PBMs). These middlemen, who oversee prescriptions for over 200 million Americans, are driving up drug costs for millions of people, employers, and the government.
The Role of PBMs
PBMs are supposed to reduce drug costs by negotiating with drug companies, paying pharmacies, and deciding which drugs patients can get and at what price. However, the reality is often the opposite. PBMs frequently steer patients towards more expensive drugs, charge high markups on cheaper medicines, and extract billions of dollars in hidden fees.
Market Dominance and Influence
The three largest PBMs—owned by CVS Health, Cigna, and UnitedHealth Group—control roughly 80% of prescriptions in the United States. Their significant market share allows them to influence drug prices heavily, often prioritizing their financial interests over those of patients and employers.
Findings from The New York Times Investigation
An investigation by The New York Times, which involved interviews with over 300 industry experts and review of court documents, revealed several concerning practices by PBMs:
Pushing patients towards drugs with higher out-of-pocket costs while ignoring cheaper alternatives.
Charging employers and government programs like Medicare multiple times the wholesale price of a drug, keeping most of the difference for themselves.
Establishing subsidiaries to collect billions of dollars in fees from drug companies, which does nothing to reduce healthcare costs.
Undermining independent pharmacies by not paying them enough to cover their costs, which limits healthcare access for poorer communities.
Impact on Patients and Healthcare Costs
Patients often encounter PBMs when there are issues with getting their medications, leading to serious health consequences in some cases. Moreover, the opaque business practices of PBMs result in higher insurance premiums and taxes for everyone, even those who do not take prescription drugs.
Case Examples
The article highlights specific cases illustrating the negative impact of PBMs:
In Oklahoma, CVS's PBM, Caremark, overcharged the health plan for state employees by more than $120,000 a year for one patient's cancer drug.
In Illinois, a cancer patient paid hundreds of dollars more for her pain medication because Caremark required her to use a more expensive version.
In New Jersey, a retiree was asked to pay $211 for a three-month supply of an allergy drug that could have cost $22 at Costco.
The Political and Legal Landscape
Lawmakers, regulators, and attorneys general are increasingly scrutinizing PBMs for inflating drug prices and engaging in anticompetitive behavior. David Joyner, president of CVS Caremark, and other PBM executives defend their business models, claiming their size is necessary to counteract the high costs set by drug manufacturers. However, these claims are difficult to verify due to the system's opacity.
Conclusion
Pharmacy Benefit Managers have a significant and often detrimental impact on drug prices in the United States. While they claim to save money, their business practices often result in higher costs for patients and the healthcare system overall. As scrutiny intensifies, the role and practices of PBMs in the healthcare industry may come under increasing pressure to change.
For the full article and more details on how PBMs operate and their impact on drug prices, visit The New York Times