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Balto: Congress must protect consumers from predatory drug middlemen


Patients rarely get better by adhering to the belief that an infected wound will heal on its own without medical intervention. Similarly, when aspects of our healthcare system are severely broken and adversely affecting lives and livelihoods, society’s well-being is only going to worsen unless corrective action is taken.

The time has come for Congress to do something about the corporate middlemen who game the system and inflate the cost of vital prescription medications.

Pharmacy benefit managers, or PBMs, have successfully evaded scrutiny and accountability for far too long, even as they have become a leading factor in rising prescription drug prices. Free-market principles might suggest that government should take a hands-off approach, but that approach for the past decades has led to skyrocketing drug costs, abuse and denying consumers access to vital drugs and services.

The PBM market is anything but competitive — not when three of the world’s largest corporations control a collective 80 percent share and use that oligopoly to enrich themselves. That’s when lawmakers have no choice but to step in and protect their constituents.

In their original concept, PBMs were the brokers who used their purchasing power to negotiate favorable terms from pharmaceutical manufacturers, thus making drugs more affordable.

They were supposed to be honest brokers seeking the lowest cost of drugs and the most effective forms of distribution. The consumer was supposed to be king, as in any free market.

Through mergers and acquisitions, though, including vertical integration with insurance companies and pharmacies, they have become mammoth, complex entities — so complex, in fact, that they have become almost impervious to government oversight and legislative guardrails.

Moreover, these acquisitions have distorted their purpose — rather than neutral middlemen seeking the lowest cost, they now game the system seeking to inflate costs by securing massive kickbacks or rebates. Those rebates are the major driver for escalating drug costs. As we see patients getting hit with unaffordable out-of-pocket costs and formularies limited to only those medicines that generate the greatest profits for the PBMs, this has to end.

Senators Maria Cantwell, D-Wash., and Chuck Grassley, R-Iowa, have introduced two bills, the Prescription Pricing for the People Act and the Pharmacy Benefit Manager Transparency Act, that would force the PBMs to be more transparent in their business practices and ban unfair pricing schemes.

Opponents will argue that this is government overreach and the market should be allowed the opportunity to correct itself. Here are two reasons this argument is fatally flawed and why this legislation must be enacted:

First, the PBMs have demonstrated that they will never voluntarily replace opacity with transparency and let stakeholders see how the dollars flow. Remember, these companies placed gag orders on pharmacists, forbidding them from telling patients how they could save money on their prescriptions.

PBMs engage in a practice called “spread pricing,” in which they charge their private and public health plan clients significantly more for drugs than they reimburse the pharmacists who dispense them.

They don’t want anyone to know how much money they are keeping.

Second, a marketplace intermediary and negotiator, as PBMs are supposed to be, can only be trusted if it has no self-serving conflict of interest. In this case, PBMs have evolved to control virtually every aspect of a consumer’s access to pharmacy care, from owning insurance carriers and pharmacy service providers, therefore controlling their competitors’ destinies.

PBMs have also evolved to tie the level of the rebates they collect and their administrative fees to a drug’s list price. So, the higher the drug price, the more they profit. And because they also control the formularies, it is not a mystery why cheaper generics and biosimilars are made inaccessible to patients and their physicians.

This is hardly a market where the consumer is king.
The path of least resistance for politicians has traditionally been to stay hands-off because of its complexity (it’s easier to blame the drug manufacturers, even though they are taking a lesser share of the dollar in the supply chain than the middlemen), but this is no longer an option.

One in every four Americans — millions of us — says they are finding it difficult to afford their medicines at the pharmacy counter and are either foregoing their prescriptions or reducing the dosages their doctors recommend. People are getting sicker, so a handful of companies can increase their profits. Congress has to pass the Cantwell-Grassley bill and start making this right.

Congress, drugs