Mathews: PBM regulation will raise drug prices, not lower them

Prescription medications pose a significant financial burden on families, and that burden could get a lot heavier.

Pharmaceutical companies are raising the costs of many drugs and other medications. Rather than going after Big Pharma for hiking drug prices, policymakers are responding by targeting pharmacy benefit managers (PBMs). These entities negotiate with drug companies to lower consumer prices.

Yes, you read that correctly. Policymakers are imposing reporting requirements and price controls on PBMs and limiting their ability to offer alternatives to drugs that may be too expensive for patients. Without the help of these mediators to negotiate prices and payments between drug companies, health insurance providers and pharmacies, taxpayers and patients will pay top dollar for meds.

PBMs exist to ensure that healthcare providers, drug companies and pharmacies can make a profit — without sticking patients with the bill. Because of the lack of a central negotiator in the healthcare system, different health plans and pharmacies use different PBMs to protect their products and ensure patients receive their medications.

Instituting a one-size-fits-all rule for PBMs makes no sense for the industry; negotiations undertaken by PBMs for a prescription painkiller will have different costs and variables than PBMs negotiating the price of a new innovative vaccine.

This year, PBMs and other parties reduced the costs of prescription inhalers and insulin multiple times. If policymakers regulate PBMs, these victories will not continue.

The federal government is trying to expand its power into the drug negotiating space. PBMs save consumers more than $1,000 per patient by negotiating down the prices of thousands of different drugs for different medical conditions.

Expanding federal government power into the drug negotiation space even more would make federal bureaucrats the only party able to negotiate down the price of medications. Since 1960, the country’s national health expenditures have more than tripled as a percentage of gross domestic product. Adding medication negotiation on top of current health expenditures would not only cause fiscal instability but would put the federal government at the mercy of some of the world’s largest drug companies.

The federal government often invests vast amounts of money into pharmaceutical companies for research and development of drugs. From 2010 to 2019, Americans’ tax dollars were responsible for the development of 356 drugs in funding to drug companies. Despite developing these new drugs with federal money, drug companies continue to raise prices for less expensive drugs wholesale.

Fusing the federal government even closer to the drug companies will lead to an explosion of crony capitalism, in which government bureaucrats will pick and choose how drugs are priced, regardless of the quantity or quality of the drug.

The same bureaucrats who sent $2 million to labs in Wuhan, China, to fund gain-of-function research — the research that the FBI and Department of Energy believe to have led to the development of COVID-19 — would be charged with the responsibility of negotiating the price of hundreds of different drugs for a country of 300 million people. That is a recipe for disaster.

PBMs allow Americans a level playing field with drug companies that have billions of private and government monies behind them. If a PBM cannot negotiate a consensus with a drug manufacturer, then it can exclude that manufacturer’s drug from being included in its health plans, effectively limiting the company’s ability to successfully market the drug at inflated prices. Slapping regulations on PBMs will limit their ability to impose market pressures that bring down costs for patients.

Going after PBMs and reducing their market share allows drug companies to expand theirs. Policymakers should not target the middlemen negotiators who deliver savings to millions of Americans. Instead, policymakers should reconsider how much taxpayer money is already being poured into the pharmaceutical industry and the incentive structure that exists between public money and drug production.

Targeting PBMs that are trying to mitigate the damage to Americans’ wallets will ensure there are no negotiations allowed for drug prices. When that is the case, patients will be paying much more for their medications than they are now.

Roy Mathews is a fellow at Young Voices.