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Pharmacy Benefit Managers, or PBMs, are possibly the most pernicious agents of higher drug prices that most ordinary Virginians don’t know about. They are the middle men between the pharmacies where you buy your drugs and the health insurance companies and government programs that cover your drug costs. They were originally created to administer drug benefits for companies and government insurers. But, through multiple mergers and acquisitions, the top three – including CVS Health and UnitedHealth’s OptumRx – now control 80% of the U.S. market. And their business model has metastasized: they negotiate which drugs are covered and which are excluded, the prices paid, the rebates drug chains get, and so on. One big problem – being owned by drug store chains and health insurance companies means they are frequently negotiating with themselves. They claim to have firewalls in place to prevent shenanigans. But judging by some incredible price hikes — with reported mark-ups of as much as 38,000% — it looks like that separation of interests has not been working. There are few things both major parties agree on these days but, as evidenced by recent hearings on PBM’s in the U.S. House, both Republicans and Democrats have aggressively questioned this state of affairs, and called for legislation to curb these practices. The House report found that the “three largest PBMs have used their position as middlemen and integration with health insurers, pharmacies, providers, and recently manufacturers, to enact anticompetitive policies and protect their bottom line.” As Rep. Katie Porter (D-CA) put it: “Pharmacy benefit managers today are the worst kind of middlemen… you stop competition, you prevent transparency, you manipulate markets, and you make our health care system more complicated.”
Even Republicans, from the same party that has argued for decades against government oversight of businesses, have called for strict regulation. “These self-benefitting pricing tactics pushed by PBMs have done nothing but jeopardize patient care, undermine local pharmacies, and raise prescription drug prices,” said a July 23 statement from Committee Chair James Comer (R-KY). “I would certainly support busting up the PBMs. I don’t think a PBM should be owned by a health insurance company. I don’t think a PBM should own a pharmacy.”
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