Delawareans pay far too much at the pharmacy counter. In fact, all Americans do. But the real culprits behind the First State’s sky-high prescription drug spending might surprise you.
A new study from the Berkeley Research Group found that industry middlemen, insurers and other “nonmanufacturing” entities pocket more money from drug sales than the firms that actually develop and manufacture medicines. Over half of gross U.S. drug expenditures go to companies that don’t make a single pill or vaccine. To address Americans’ skyrocketing prescription drug spending in earnest, lawmakers have to change this harmful dynamic.
Just who are the middlemen in this picture? They are called “pharmacy benefit managers” (PBMs), and they are wreaking havoc within America’s health care system.
PBMs negotiate significant rebates from drugmakers on a wide range of medicines. They’re able to do this because of the leverage they hold. PBMs oversee entire health plans and can determine which drugs are — and are not — covered for millions of patients. They’ve become even more powerful in recent years, with just three PBMs controlling nearly 80% of the market.
As a result, they are the ones significantly increasing their profits, as they drive up consumer out-of-pocket costs. PBMs are not required to disclose the size of discounts they extract from drug companies — thus, they keep a hefty chunk of these “savings” for themselves, without passing them on to insurers and patients.
PBMs and other middlemen received $187 billion in discounts from manufacturers in 2020 alone. Exactly how much went toward reducing patients’ total out-of-pocket spending is shrouded in mystery. Delawareans know all too well, however, that our costs have not gone down.
For the sake of their bottom line, PBMs would like nothing more than to keep the status quo. But their unconscionable practices come with enormous costs to Delaware patients, who already spend more on health care per capita than every state except Massachusetts and Alaska.
Some members of Congress, including Delaware Democratic Sens. Tom Carper and Chris Coons, have introduced legislation that would begin addressing these issues. This legislation would inject transparency into the drug supply chain by requiring PBMs to disclose the size of discounts they receive from drug manufacturers. Their legislation would also help reduce premiums by making PBMs pass along these negotiated savings to patients. These commonsense improvements can be made immediately and would have a meaningful impact on our costs at the pharmacy counter.
The middlemen in our drug supply chain have gotten away with bilking patients for long enough. Finding ways to ease patient burdens should start with cracking down on PBMs, who are not even pretending to play fair. Reducing costs at the pharmacy is particularly urgent for Delawareans. We must encourage our leaders to continue — and bolster — their efforts to fix our health care systems, so they benefit patients, not PBMs.
Dr. Jay C. Patel is the founder and president of Ivira Pharmacy (formerly Greenhill), an independent provider with multiple locations in the tri-state area.
