Middlemen driving up prescription drug costs The hidden middlemen driving up prescription drug costs | Guest column

PHARMACY BENEFIT MANAGERS

Prescription drug prices have become one of the most frustrating issues in American health care. Patients pay more at the pharmacy counter each year, while manufacturers, insurers and pharmacy benefit managers continue to point fingers at one another. The truth is that a big part of the problem lies with the middlemen known as pharmacy benefit managers, or PBMs.

Most people have never heard of PBMs, but they influence nearly every prescription filled in America. PBMs manage prescription drug benefits for insurers, employers and government programs like Medicaid and Medicare. They were originally created in the 1960s to help insurance companies control costs and handle the growing complexity of drug benefits. Over time, however, PBMs have evolved into powerful corporate players that operate largely behind the scenes.

PBMs perform several important functions. They negotiate rebates and discounts with drug manufacturers, design formularies (the lists of drugs that insurance plans will cover), assemble pharmacy networks, process claims, and conduct utilization reviews such as prior authorization and step therapy. In theory, PBMs are supposed to lower costs for patients and help insurers manage spending responsibly. In reality, the system has become so concentrated and opaque that it often drives prices up rather than down.

Today, just four large PBMs control about two-thirds of the national market. According to recent data, nearly 80% of prescription drug plan markets in the United States lack adequate competition. In most cases, the PBM is vertically integrated with an insurance company or a major pharmacy chain. That means the same corporation is deciding which drugs are covered, how much patients pay, and which pharmacies can dispense the medication. This level of consolidation has created a system where profits flow upward while patients and independent pharmacies struggle to stay afloat.

The result is a lack of transparency and accountability. PBMs negotiate large rebates from drug manufacturers in exchange for placing certain medications on preferred formularies. But those rebates are often not passed through to patients. Instead, PBMs and insurers keep a portion of the savings, while patients continue to pay high out-of-pocket costs. Meanwhile, local pharmacies are reimbursed at rates so low that many can no longer compete, forcing closures in rural and underserved areas.

The impact extends beyond consumers and small businesses. When PBMs fail to pass along savings, public programs like Medicaid and Medicare also pay more than necessary. These are taxpayer-funded systems that should be designed to deliver value and efficiency, not excess corporate profit.

This is not a partisan issue. Both Democrats and Republicans agree that PBMs need greater oversight and transparency. Virginia Gov.-elect Abigail Spanberger has made PBM reform a top priority, joining lawmakers across the aisle who recognize that the current system is unsustainable. At the federal level, there are bipartisan proposals to require PBMs to disclose the rebates and fees they receive and to ensure those savings are shared with patients at the pharmacy counter.

Real reform should focus on three goals: transparency, competition and accountability. Patients deserve to know where their health care dollars are going. Independent pharmacies should be paid fairly for the work they do. And PBMs should no longer be allowed to profit from opaque pricing structures that make essential medications less affordable.

The health care system works best when incentives are aligned around patient outcomes and affordability. That is not the case today. PBMs were created to lower costs, but without reform, they will continue to do the opposite. It is time for policymakers to act, not as partisans, but as stewards of a system that must once again put patients first.

Dr. Peter Breslin is double boarded in psychiatry and addiction medicine. He is chairman of the Virginia Addiction Recovery Council for which he was appointed by Governor Northam. He has been recognized by Richmond Magazine as a Top Doc and has served as a board member and medical adviser to the McShin Foundation and other Recovery Community Organizations in Virginia.