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Washington Examiner
Restoring America
13 Sep 2023


NextImg:Pharmacy benefit manager reform must remain a priority for Congress

Congress has returned to Capitol Hill from summer recess. Lawmakers in both chambers have a full slate of policy priorities to attend to — not least among them funding the government and averting a shutdown before the Sept. 30 deadline.

Several healthcare items will also remain near the top of the to-do list. House Republicans , for instance, just put the finishing touches on a package that would, among other things, reform the practices of pharmacy benefit managers.

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That's a smart idea. PBMs have sown dysfunction in the prescription drug market to the detriment of patients.

Insurers hire these middlemen to manage their prescription drug benefits. PBMs extract discounts from pharmaceutical companies in exchange for favorable placement on a health plan's formulary, or list of covered drugs.

Patients might expect that they would share in those savings when they pick up their prescriptions at the pharmacy. But that's not how the system works.

Perversely, PBMs often prefer medicines with higher price tags. That's because the rebates and administrative fees they claim from drug companies are typically based on a medicine's list price. The higher that price, the more money PBMs make.

This warped set of incentives raises costs for patients, whose cost-sharing obligations are based on the list price of a drug, not the lower net price that PBMs negotiate.

Three PBMs — Caremark, Express Scripts, and OptumRx — control 80% of the market. Barriers to entering the market are high. This lack of competition perpetuates this dysfunctional system.

There's support from Democrats and Republicans alike for increasing transparency in the pharmaceutical purchasing market and delinking PBM payments from a drug's list price. At the dawn of a busy month, Congress would do well to keep these proposals near the top of its list of priorities.

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Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is  False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her @sallypipes .