We’ve been here before, right? A Congress and Administration eager to talk about mysterious escalating prescription drug prices. Over the years, both bodies have sought to close loopholes and require more transparency of pharmacy benefit managers (PBMs)—hearings were held, and bipartisan legislation was written. Unfortunately, a broader reform on drug pricing continues to be elusive.
Nearly 80% of adults say the cost of prescription drugs is unreasonable. Drug prices are high for many reasons, but one actor stands out as contributing to exorbitant costs without providing value to consumers—the PBMs.
PBMs are the middleman between the drug companies and the consumers. Like most go-betweens, PBMs prefer to operate without attention; yet, when confronted, they forcefully argue that they are invaluable to payers and consumers. They are notorious for price gouging, which not only impacts patients’ wallets and access to prescription drugs, especially brand name medications.
Cost of consolidation
The top three pharmacy benefit managers—CVS Health’s Caremark, Cigna’s ExpressScripts, and UnitedHealthcare’s Optum—process more than 77% of all prescriptions delivered to Americans. These PBMs are classic oligopolies, where a handful of companies dominate a market, arrogate disproportionate profits for themselves , deliver marginal value to justify enormous fees, and exercise undue leverage over businesses dependent on the market they dominate.
In the case of PBMs, control of adjoining markets is even more insidious. Each major PBM is at the center of a larger conglomerate that collectively dominates markets for health insurance, prescription drug coverage, retail, mail order, specialty, and long-term care pharmacy, resulting in higher costs and limited access for consumers and anti-competitive treatment of unaffiliated pharmacies. Even worse, these conglomerates also have become health care providers too.
Such anti-competitive practices threaten independent or specific market pharmacies like long-term care pharmacies, which are proven to support patient health by increasing medication adherence and compliance.
For example, one long-term care pharmacy, a member of the Senior Care Pharmacy Coalition where I serve as president, shared what happened to them when their pharmacy benefit manager arbitrarily increased the price on a key medication they provided to patients. As a small business they said they were forced to make an impossible decision: provide specific and much-needed prescription drugs at a loss that could put them out of business or stop providing necessary medication. They chose to protect their patients and are now trying to find a way to survive in a rigged game.
Prescription medications are essential to quality of life for seniors who need long-term care. They are medically complex, suffer multiple chronic conditions, and have extensive impairments in daily activities. They average 12-13 medications a day. Anti-competitive barriers that oligopolies impose restrict patient access to high-quality care and services from specially trained health care professionals like those at long-term care pharmacies and should be removed.
What can be done?
As a start, the Federal Trade Commission (FTC) should investigate PBMs and their corporate affiliates, and should partner with the Department of Health and Human Services to eliminate extortionate fees and abusive business practices detrimental to consumers and competition. The Centers for Medicare and Medicaid Services (CMS) should push prescription drug plans (PDPs) and PBMs to broaden consumer access to LTC pharmacy services. It is crystal clear that behind the curtain, PBMs and their corporate parents are extracting ever greater excess profits from consumers and payers for the same services while Americans are struggling to afford basic needs.
The FTC’s call for public comments on PBM practices is a good beginning, but much more must be done. The FTC must act on the information it receives. CMS must go farther than its current proposals contemplate. Congress must thoroughly investigate the anti-competitive behaviors of these conglomerates and act accordingly. Doing so will provide better outcomes both for patients and a more competitive marketplace for unaffiliated pharmacies. Free markets cannot last long with dominant oligopolies. If the government doesn’t act, you can be sure these business titans will continue their anti-competitive behaviors.
Photo: gerenme, Getty Images