Getting your Trinity Audio player ready...

BY KENNETH E. THORPE

Insurers and healthcare middlemen are making it harder for everyday Americans, including many living with chronic diseases, to access the prescription drugs they need. 

Fortunately, Congress and President Biden can address the problem by passing two bipartisan reforms during the current “lame duck” legislative session. For us Democrats, this is a chance to build on the historic progress we’ve already made toward healthcare access and affordability for all Americans.

At issue are middlemen known as “pharmacy benefit managers” – or PBMs. PBMs act on behalf of insurance companies to negotiate with drug manufacturers and administer “formularies,” or lists of which medications the insurer covers and what patients owe out of pocket.

PBMs use their control over formularies to extract price concessions from drug companies in the form of rebates and discounts. Since drug makers want their products to be covered by insurers, they have a strong incentive to comply with PBMs’ demands. In 2023 alone, the total value of rebates, discounts, and other payments to PBMs and insurers may have been as high as $334 billion.

These savings could meaningfully reduce prescription drug costs for millions of patients. But in practice, many health plans simply keep rebates and discounts for themselves while continuing to charge patients based on the nominal “list price” of a drug, rather than the much lower “net price,” which accounts for discounts and rebates. 

A more fundamental issue is that in today’s distorted market, PBM compensation is directly tied to how much medicines cost. The rebates, discounts, and fees PBMs collect are typically calculated as a percentage of a drug’s list price. Since PBMs get to keep a portion of these payments for themselves, they naturally gravitate toward the most expensive drugs. 

PBM practices hit the 129 million Americans living with heart disease, cancer, diabetes, and other chronic illnesses particularly hard. Around half of patients living with chronic diseases already skip doses or forgo treatment for cost reasons – much higher than the overall rate of medication “nonadherence” among all adults. 

When patients don’t take their medications as directed, whether it’s because of cost or other reasons, manageable conditions can snowball into costly and life-threatening emergencies. By refusing to pass savings along to patients and pushing people toward the most expensive drugs, PBMs and insurers could be inadvertently making the problem of non-adherence worse.

The good news is that Congress seems to be waking up to this reality. Two bipartisan reforms have been gathering momentum in recent months. One bill would delink PBM compensation from drug prices and the other would require health plans and PBMs to share rebates and discounts with patients. Both bills have already passed the Senate Finance Committee.

PBM reform is a golden opportunity for Congress to deliver on a critical kitchen-table issue that impacts millions of Americans. Let’s hope they take it.

(Kenneth E. Thorpe is the Robert W. Woodruff Professor of Health Policy at Emory University and the chairman of the Partnership to Fight Chronic Disease.)