It’s no secret that Americans today are required to fork over more on healthcare services than ever before. In 2021, U.S. healthcare spending grew to $4.3 trillion, or $12,914 per person. This marked a 2.7% year-over-year increase and brings aggregate spending to 18.3% of GDP .

Pharmaceuticals are a key factor behind the rise in healthcare spending. The Congressional Budget Office (CBO) notes in a recent report that prescription drug prices have nearly doubled since 1980.

Not so coincidentally, the 1980s also saw the rise of pharmacy benefit managers, which serve as middlemen between health insurance companies, pharmacies, and drug manufacturers. Now, PBMs have vertically integrated themselves throughout the entire healthcare system. Just three PBMs — Caremark, Express Scripts, and OptumRx — control 80% of the market. These major PBMs own insurance companies, their own pharmacies, and, in some cases, even healthcare providers.

Given PBMs’ outsized role in the healthcare system and their stated role to control costs and lower premiums for patients, it’s worth asking whether PBMs have contributed to skyrocketing healthcare prices.

All of the evidence suggests they do. In fact, PBMs seek to deliberately raise healthcare costs in some cases via spread pricing, a tactic where they charge payers such as Medicaid more than they pay the pharmacy to fill a prescription. PBMs then pocket the difference between the two prices as their own profit. The National Community Pharmacists Association (NCPA) found that taxpayers have paid dearly for this practice. In Ohio, an audit report detected that between 2017 and 2018, PBMs collected $2.5 billion from plans, and retained $225 million through spread pricing. Similarly in Kentucky, PBMs pocketed $123.5 million via spread pricing.

Seeing the explicit impact spread pricing has on healthcare costs, several states, including Arkansas, Georgia, Kentucky, Louisiana, Maryland, New Hampshire, New York, Ohio, Pennsylvania, and Virginia, have implemented a pass-through model. This alternative practice requires PBMs to charge payers the actual amount it reimburses the pharmacy, truly passing rebates obtained from the manufacturer down to consumers.

Fortunately for taxpayers and consumers, federal legislators are acting too. I, Rep. Carter, introduced H.R. 1613, the Drug Price Transparency in Medicaid Act, alongside Reps. Vicente Gonzalez (D-TX), Elise Stefanik (R-NY), Deborah Ross (D-NC), Rick Allen (R-GA), and Jake Auchincloss (D-MS). This critical legislation, which passed unanimously out of the Energy and Commerce Committee in May, would save taxpayers $1 billion over 10 years by banning spread pricing and requiring full pass-through in all Medicaid-managed care programs. It would also provide needed transparency over PBMs’ predatory practices by mandating National Average Drug Acquisition Costs reporting to the Centers for Medicare & Medicaid Services by all pharmacies participating in state Medicaid programs.

It’s crucial that the Drug Price Transparency in Medicaid Act is signed into law, and we call on Congress to act swiftly.

As the national debt stands at over $31.8 trillion, Congress must seek intuitive ways to scale back wasteful spending. The taxpayer-funded kickbacks PBMs receive through spread pricing models arbitrarily raises the costs of prescription medication and have only yielded more government waste. A pass-through pricing model ensures payers and patients are receiving actual drug discounts and taxpayers are insulated from the cost-hiking practices of PBMs as currently used.

Rep. Buddy Carter is a U.S. representative for Georgia and David Williams is the president of the Taxpayers Protection Alliance.