At nearly $50 billion annually, out-of-pocket costs for prescription drugs are a significant burden on American families. This financial strain is especially hard on our seniors, many of whom spend over $3,000 each year just to access the medications they need to manage their health.
Fortunately, thanks to the efforts of Majority Leader Chuck Schumer, seniors have seen some relief this year with a new cap on out-of-pocket costs in Medicare Part D. Next year, that cap will be lowered even further, saving seniors even more money.
However, the issue of exorbitant drug prices remains a pressing problem for too many Americans. It is time for the Senate to address the next piece of this puzzle. Lawmakers in Washington must focus on Pharmacy Benefit Managers (PBMs) and push for reforms that will reduce prescription drug costs for patients.
PBMs are massive corporations that have taken control of multiple aspects of the prescription drug industry, from determining what you pay for a drug to deciding if that drug is covered by your insurance and which pharmacy you can use.
Recently, PBMs have come under fire from the Federal Trade Commission (FTC), which has found that PBMs are artificially inflating the price of prescription drugs to boost their profits. The FTC has launched a lawsuit targeting PBMs for these practices, particularly around insulin pricing.
PBMs are big business.
For years, the largest PBMs have been vertically integrated into major healthcare conglomerates, which include insurance companies. Just six PBMs manage 90 percent of all prescriptions in the country. Five of these PBMs are owned by conglomerates that rank among the largest companies in the U.S.
Take UnitedHealth Group, for example, the fourth largest company in the country. It owns both the insurer UnitedHealthCare and the PBM OptumRx and is nearly four times bigger than the country’s largest drug manufacturer, Johnson & Johnson (J&J). Even if you separated the PBM business from UnitedHealth Group, it would still be larger than J&J.
The practices of PBMs show that their priority is generating profits for themselves and their parent corporations, not lowering drug costs or improving accessibility.
PBMs make most of their money through the rebates and discounts they negotiate directly with drug manufacturers. Although some of these savings trickle down to patients, most PBMs base patient co-pays and other out-of-pocket costs on the higher, non-discounted price of medicine. Essentially, PBMs pay one price for medicine, and patients pay another. With millions of prescriptions processed each year, the profits add up quickly.
Another major source of profit for PBMs, which has doubled over the last five years, is manufacturer fees. PBMs charge manufacturers fees linked to the price of a drug. For patients, this means that PBMs are incentivized to direct insurers to cover higher-priced drugs instead of less expensive alternatives.
As middlemen, PBMs have become some of the highest earners in the prescription drug ecosystem. Alongside other non-manufacturers, PBMs are taking in more than 50 cents of every dollar spent on a drug.
The FTC report has exposed how PBMs use their immense power and negotiating strength to enrich themselves at the expense of patients. Congress must now act in response.
Increasing transparency so patients know what PBMs and insurers pay for drugs, delinking fees from drug prices, and mandating that co-pays be tied to discounted prices are just some of the steps our federal lawmakers can take to lower drug prices.
Moreover, it is crucial that any changes do not negatively impact our sisters and brothers in unions. Unions have historically fought for better healthcare benefits for their members and retirees, all of whom are seniors. Reforms should ensure these hard-won benefits are not compromised. We need to tailor any legislation so that it supports affordable drug prices while safeguarding the rights and benefits that unions have secured for their members and their retirees.
It is time for real change, and it is time to put patients and working families first.
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Author:
Wilfredo Lopez
City Council Candidate, Harlem
Community Advocate & Attorney
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Featured image credit: DepositPhotos.com
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