Why do some Capitol Hill lawmakers continue to peddle Big Pharma’s predatory drug pricing agenda?
Arizonans desperately need Congress to lead on this issue. Polling shows that 80% of Arizonans are very concerned about the cost of their prescriptions. They have every reason to be. In just five years, the average annual prescription drug treatment cost rose over 50% in the state. Over 20% of the state’s residents have also reported stopping taking prescribed medications due to cost.
And yet, rather than address these concerns, the Senate Commerce Committee recently held a hearing at the behest of major drug companies. There was little mention of Big Pharma’s greed for high drug prices. Nor was blame assigned for the sweetheart deals those companies make with federal, state, and local officials. Instead, the alleged culprits are Pharmacy Benefit Managers (PBMs), even though study after study shows PBMs are responsible for lowering drug costs by taking on Big Pharma.
Think of PBMs as your health plan’s Costco or Sam’s Club. They purchase drugs in bulk from manufacturers to obtain rebates that allow you to pay less at the counter. And they’re very good at what they do, earning bipartisan praise for their efforts.
Economist Casey Mulligan’s testimony at the hearing made this clear. After investigating PBMs for President Trump when serving on the Council of Economic Advisers, he found they save the health care system at least $148 billion. President Obama’s OMB director, Peter Orszag, came to a similar conclusion. In an earlier congressional hearing, he credited PBMs with being “the primary explanation for why Part D in Medicare is costing a lot less than was projected initially.”
So how on earth can PBMs be the problem? Why does Big Pharma insist that Pharmacy Benefit Managers are villains?
The drugmakers’ war on PBMs is no different than the hotel industry’s attacks on Airbnb or the taxi lobby’s finger-pointing at Uber. Entrenched interests don’t like marketplace disruptors that force them to lower their prices. They never have, never will, and will always pull out every stop to crush them.
The drugmakers don’t mind that PBMs exist — after all, they need to “negotiate” pricing with someone, but they want those negotiations to resemble the smoke and mirrors of pro wrestling. Namely, by having the federal government strip their negotiating antagonists of all their leverage.
The bill advocated at the hearing, the PBM Transparency Act, would mandate PBMs’ “full and complete disclosure of … the cost, price, and reimbursement of prescription drugs to the health plans and pharmacies.” This would force PBMs to expose their trade principles to every drugmaker in America.
By mandating that PBMs publicize the rebates they agree to with drug manufacturers, the current negotiation leverage of the PBMs would disappear, as would significant consumer savings.
As Medicare expert David Hogberg put it, “Consider a scenario in which a PBM negotiates a $20 rebate with Drugmaker A for each dose of its diabetes medication. However, it is only able to extract a $10 rebate for a similar medication from Drugmaker B. When the ‘transparency’ mandated by the Act forces the PBM to reveal its rebates, what will Drugmaker A’s reaction be other than to demand the PBM give it the same deal as Drugmaker B? That process will play out across all negotiations between PBMs and drugmakers, resulting in higher drug prices for insurers and patients.”
The negotiating leverage this bill would strip from PBMs would cost the American people dearly. According to Mullen’s analysis, it would total almost $25 billion annually.
Big Pharma doesn’t need more leverage – it already has way too much. If Congress nukes PBMs on its behalf, nothing will be left to stop the major drug manufacturers from raiding our wallets and pocketbooks. Big Pharma will laugh all the way to the bank while John and Jane Q. Public are left paying higher prices.
Is that really what Congress wants?
J.D. Hayworth served in the U.S. House from 1995-2007. As the first Arizonan on the Ways & Means Committee, he helped establish Medicare’s Prescription Drug Benefit.
Wasn’t J.D Hayworth one of the GOP lawmakers who made sure that the Mdiecare and Medicaid was not allowed to negotiate drug prices when they set up the prescription insurance program?