Opinion: Some Democrats Are Reluctant to Take on Health Insurers

It's no secret that many Republicans have been in the pockets of the health insurers for years. However, are some Democrats reluctant to curtail the health insurers' massive profits from selling prescription drugs to keep those companies from walking away from the state insurance exchanges created by Obamacare? It's certainly possible.

Recently, Sen. Bernie Sanders, a longtime patient advocate, held a hearing examining why Americans pay so much for weight-loss and diabetes drugs. It's a good question; anyone who understands our healthcare system knows the answer is health insurers. Or, more specifically, the Pharmacy Benefit Managers, or PBMs, owned by health insurers that earn massive profits from the sale of prescription drugs.

PBMs were created initially to negotiate drug prices for small drug stores. After Obamacare capped the profits of health insurers, the insurers went out and purchased PBMs to get around those pesky profit caps.

In the hearing, the CEO of Novo Nordisk, the company that makes the weight-loss and diabetes drugs Ozempic and Wegovy, told Sanders that the PBMs keep 75 cents of every dollar that Novo Nordisk charges for drugs. It's all part of a bizarre system where pharmaceutical companies are incentivized to charge high prices. This is because PBMs profit by securing hefty rebates from the drug company, a percentage of the cost the drug company charges for the medication. So, the higher the drug's list price, the bigger the rebate the PBM can earn.

If the drug company cuts its price, the PBM makes less money, and the insurance companies can refuse to offer coverage for that drug. This can mean pharmaceutical companies lose huge chunks of their sales. Why? Because the top three PBMs control about 80 percent of prescription drug sales in the United States.

During the hearing, Sen. Maggie Hassan of New Hampshire said she had written commitments from some of the largest PBMs that if Novo Nordisk lowered its price, the PBMs would promise to still cover their drugs. That's good, but it's unclear if the PBMs will take a smaller rebate. So, instead of keeping 75 cents of every dollar of the drug's cost, the PBM will keep an even higher percentage.

It's no wonder why, during the hearing, Sen. Tim Kaine said, "We're letting PBMs get away scot-free."

Another concern is that Sen. Elizabeth Warren and Rep. Lloyd Doggett of Texas, both Democrats, urged the administration to use its authority to take Novo Nordisk's patents and allow generic drug companies to manufacture and sell Ozempic and Wegovy.

I support the feds using emergency powers in a crisis. But this isn't an emergency because there is legislation in Congress to cap the fees charged by PBMs. That PBM reform bill sailed through Sanders' committee with bipartisan support.

Congress should look at a new law in Pennsylvania. Signed by Gov. Josh Shapiro, it would dramatically lower the cost of drugs like Ozempic and Wegovy by returning 95 percent of the rebate charged by the PBM to the patient or their health plan. Shapiro said about that law: "Pennsylvanians are getting screwed by the high cost of prescription drugs … while the few PBMs that dominate the market are raking in billions."

Some Democrats won't challenge the PBMs because the health insurers have threatened to leave the state insurance markets. Sanders and other Democrats know low-income Americans rely on these exchanges to get insurance. Health insurers lose money covering those poorer individuals. If the insurers agree to keep offering coverage to these low-income Americans, some Democrats may ignore the PBM's transgressions.

Even if Sanders can curtail the costs of Ozempic and Wegovy, it still means that people will overpay for most drugs because of the PBMs. I sympathize with Democrats trying to do the right thing for their low-income constituents. It's time to reform PBMs.

Democrats shouldn't embrace bad public policy because health insurers say either let us overcharge for drugs or we'll take away coverage options for the poor.