The Hidden Culprit Behind High Drug Prices

As Congress finalizes its year-end legislative agenda, lawmakers have a crucial opportunity to lower drug costs for millions of Americans. Two Medicare-focused bills on the table could dramatically reduce drug prices, particularly for vulnerable Hispanic seniors. 

These bills go directly to the heart of the problem -- the outsize influence and profit of pharmacy benefit managers, or PBMs. These middlemen negotiate drug prices between manufacturers and insurance companies and determine which medications are covered. While PBMs should, in theory, help lower drug costs, their practices often achieve the opposite, driving prices up and limiting patient access to vital medications.

If you've never heard of PBMs, you're not alone. They operate in secrecy behind the scenes, but their impact on drug prices is enormous. Just three companies -- CVS Caremark, Express Scripts, and OptumRx -- control 80% of the market. This concentration of power has warped the prescription drug landscape, often at the expense of patients.

Let's break it down with a simple example. Imagine a drug with a list price of $100. The PBM negotiates a $50 rebate from the manufacturer, meaning the insurer is effectively paying $50 for the drug. But patients don't know anything about the rebates and discounts. The insurer charges patients coinsurance based on the list price, not the $50 the insurer actually paid. If the coinsurance is 30%, that means the patient pays $30 rather than $15, and the PBM and insurer, whose corporate ownership is typically interlocking, pocket the difference. 

This system hits Hispanic Medicare beneficiaries particularly hard. For instance, Latino Americans are 60% more likely to be diagnosed with diabetes than non-Hispanic whites, making affordable access to medications like insulin literally a matter of life and death in our community. Yet between 2014 and 2018, insulin list prices surged 40%, while prices received by manufacturers dropped 30%. Where did that money go? Right into the pockets of PBMs and other middlemen.

PBMs also employ tactics that can obstruct patients from getting the medicines their doctors prescribe. "Prior authorization" forces doctors to get PBM approval before prescribing certain drugs, often delaying critical treatments. Even worse, "step therapy" -- aptly nicknamed "fail first" -- requires patients to try cheaper, often less effective medications before they can access the one their doctor originally prescribed. Imagine being forced to take a medication your doctor knows won't work, suffering side effects and wasted time -- all to pad a PBM's bottom line. 

For many Americans with chronic conditions, that's the grim reality of healthcare. This is about real people forced to make heartbreaking choices. It's about an abuela rationing her insulin, a parent struggling to afford their child's asthma inhaler, or a cancer patient wondering if they can afford the medication that could save their life.

Fortunately, Congress is considering two bills that could rein in PBMs and significantly lower drug costs for Medicare beneficiaries. The first, the Modernizing and Ensuring PBM Accountability Act (S. 2973), targets a core problem: PBMs often make more money when drug prices are higher. This bill would "delink" PBM fees from drug prices, meaning that PBMs wouldn't be able to base their earnings on a percentage of a drug's cost. This removes their incentive to favor expensive medications and could help drive prices down.

The second bill, the Better Mental Health, Lower Cost Drugs and Extenders Act (S. 3430), addresses another key issue: that discounts PBMs negotiate often don't reach patients. This bill includes a "share the savings" provision, requiring insurers to pass negotiated discounts directly to patients at the pharmacy counter. Patients would see immediate benefits in the form of lower out-of-pocket costs.

Including PBM reform in the year-end legislative package isn't just a policy change -- it's a lifeline for millions of Medicare beneficiaries drowning in high drug costs. For Latino families this reform could mean the difference between managing health and facing financial ruin. 

But the clock is ticking. Every day we delay PBM reform, more seniors in our communities are forced to make impossible choices between their health and their financial stability. It's time for Congress to pull back the curtain on these shadowy middlemen and put patients first.