In 2021, via legislation that I chief-sponsored through the State Legislature, Oregon became an early adopter of an insulin price cap. Just two years later, the Inflation Reduction Act brought similar savings on insulin to seniors across the country.
For far too many Americans, prescription drug prices are still a significant strain. With more than 30 years’ experience as a public health nurse, I believe our leaders must do more to tackle drug costs. In 2024, that means Congress should focus on pharmacy benefit managers (PBMs).
PBMs touch nearly every aspect of the drug market. They negotiate discounts, rebates and fees directly with drug manufacturers. They create the lists of prescriptions that insurers will cover, and most importantly, they set the prices patients pay at the pharmacy counter.
PBMs call themselves the middlemen between drug manufacturers, health insurance plans and pharmacies, but the truth is, the biggest have chosen sides.
Over the last several years, extreme consolidation has taken place in the PBM market. Though there are technically nearly 70 PBMs currently operating in the country, just three PBMs control 80% of the marketplace.
All three of the biggest PBMs are owned by massive health care companies. The biggest is OptumRX, which is owned by UnitedHealthGroup. Next is CVS Caremark, which is owned by CVS Health. Finally, there is Evernorth, which is owned the Cigna Group. These companies are some of the biggest corporations in the United States. They dwarf other actors in the health care system like biopharma companies or hospital groups.
PBM consolidation has been bad for patients. Many believe they are now padding the pockets of the Fortune 500 corporate owners at the expense of patients.
PBMs utilize a pricing model that has helped them earn record profits, even if it means patients pay more for their drugs. The rebates and discounts PBMs negotiate with drug manufacturers rarely trickle down to patients. Instead, PBMs charge copays and out-of-pocket costs that are determined by the full retail price of a drug.
As they look to lower drug costs, here is something our members of Congress should investigate. According to studies, the prices that PBMs are paying for brand-named drugs is growing at historic lows, but the costs patients are paying for those same drugs at the pharmacy counter has increased more than 50% in the last decade.
Why? Corporate PBMs' new drive for profits could be the answer.
The power of PBMs to determine what drugs insurers will cover has also negatively impacted patient access and costs. PBMs charge drug manufacturers administrative and other fees in exchange for insurance companies covering those drugs. These fees are linked to the retail price of a drug. As a result, PBMs prioritize more expensive brand medicine. If a brand arthritis medicine, for example, nets a PBM $200 in fees, but the generic version of it would only earn them $30 in fees, it’s easy to guess which one a PBM will make sure insurers cover.
The PBM market is broken. It has become a profit center for big health care companies that is hurting patient access and driving up costs. PBMs now take nearly 50 cents of the retail price of many prescription drugs. That’s more than some drug companies take home. Novo Nordisk, for example, recently told the Senate Committee on Health, Education, Labor and Pensions that it receives just 25% of the list price of the medicines it manufactures.
If there is a sliver of good news, it is that some Oregon leaders are starting to take notice of how PBMs profit from patients. Oregon Attorney General Ellen Rosenblum has recently signed to an amicus brief urging the Supreme Court to review a case involving PBM oversight, and Sen. Ron Wyden is leading one of several pieces of bipartisan legislation to rein in PBMs.
Those are good first steps, but patients struggling to afford their medicines need more.
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