There are sound political reasons why state representative James Talarico is mounting a surprisingly competitive campaign in the United States senate race in Texas. He is laser focused on monetary issues important to voters, and no issue is more vital to them than the rising cost of health care. A recent KFF tracking poll found “nearly two-thirds of adults are worried about being able to afford health care costs.”
While most candidates talk about health care costs in generalities, Talarico has gotten specific. On one recent appearance on the campaign trail, he made a major announcement, detailing how steps should be taken to break up the health care monopolies. “Healthcare corporations are ripping us off,” he told CNBC that day, “jacking up premiums and profiting off our pain. [My] plan will break up monopolies, lower medical debt, bring down the cost of prescription drugs, and ensure doctors decide what medication their patients need — not insurance companies.”
Importantly, Talarico has gained support, and a spirited endorsement, from Texas businessman Mark Cuban, who, fed up with inflated drug costs, founded the Mark Cuban Cost Plus Drug Company, “which,” according to one report, “is focused on lowering the consumer cost of generic prescription drugs by cutting out PBMs and negotiating directly with pharmaceutical manufacturers.” After assiduously studying the field, Cuban identified what he believed was one central cause of inflated drug prices — the PBM, short for Pharmacy Benefit Managers.
Created in the 1950s, PBMs were originally used by insurers and employers to negotiate discounted bulk-rate purchases from pharmaceutical companies. However, PBMs took on a decidedly different function starting in 2018 when insurance companies began using them to circumvent the profit caps placed on them by Obamacare.
Under Obamacare, an insurance company may be prohibited from making unrestricted profits, but a PBM is not. So, CVS created its PBM, Caremark; Cigna, Express Scripts; and UnitedHealth Group, Optum RX. These three PBMs — the “Big 3,” as they are called in the business — now process roughly 80 percent of all prescriptions nationwide, up from 50 percent in 2012.
To show how powerful the Big 3 PBMs — essentially pass-through shell companies for insurance companies — have become, The New York Times, in a seminal 2024 investigative article, noted: “If they were stand-alone companies, [they] would each rank among the top 40 U.S. companies by revenue.” This stunning fact, in part, prompted Talarico to observe: “Mark and I agree it’s time to break up the Big Medicine monopolies that control our broken healthcare system.”
One of the constant criticisms of PBMs is that they profit through secret negotiations with drugmakers that force the pharmaceutical companies to intentionally raise the prices of their drugs. This happens because the PBMs earn profits by negotiating rebates from the drugmakers that they can keep. In essence, the greater the list price of the drug, the higher the rebate the PBMs can collect.
The scheme by the health insurers could become even more egregious on October 15 with the release of the Quarterly Prescription Drug Plan Formulary, Pharmacy Network, and Pricing Information, an extensive document that lists the drugs covered by individual health insurance companies and what consumers will pay for that drug in 2027. Specifically, in the formulary, it’s worth examining how the insurers will treat many prominent drugs including Enbrel, Eliquis, Otezla and Jardiance. In particular, one drug that is being closely watched by the healthcare industry is the popular GLP-1 weight loss drug Ozempic, made by Novo Nordisk.
To comprehend what the PBMs may be up to in 2027, it’s important to understand that this summer Novo Nordisk lowered the monthly cost of Ozempic to $675. However, the drugmaker Eli Lilly has not announced a plan to lower the monthly cost of its Ozempic competitor, Mounjaro, from $1,100. Many observers believe that Eli Lilly will retain the higher price to keep their product more expensive so that insurers will give preference to Mounjaro on the 2027 formulary, because Mounjaro translates into larger rebates to the PBMs.
If such a scheme by the health insurers transpires, patients who get weight loss medications through private insurers will be forced to pay more for Ozempic than Mounjaro. It also means that Eli Lilly was right not to lower their monthly price so the PBMs would reward them with access to millions of patients by giving their GLP-1 drug preference on the 2027 formulary.
Lastly, if the insurers favor a variety of drugs that are more expensive than their competitors, it will send a clear message to Washington that recent efforts by the Federal Trade Commission and the Congress to reign in this kind of bad behavior by the PBMs is not working. Clearly worried about how GLP-1 drugs will be treated in the formulary that is about to come out, two members of the House of Representatives, Earl L. “Buddy” Carter (R-GA) and Nanette Diaz Barragán (D-CA), sent a letter dated September 10th to the heads of the three largest health insurers asking them to “please describe how your formulary design, rebate and fees practices, utilization management policies, and benefit structures are being adjusted to ensure that drugs with higher list prices are not favored over those with a lower list price.”
So it’s no wonder why Cuban has proposed the elimination of PBMs — “I think it’s absolutely necessary for the biggest insurance companies to divest their non-insurance assets” — and the reason why he has offered Talarico his unwavering support on this issue.
Polls show a dead heat in the Texas senate race. Should Talarico win, he could help shift the balance of power in the new Senate to the Democrats. One reason he could win is because he’s found an issue — breaking up health care monopolies — that resonates with voters who are stretched to their limits with trying to pay for health care costs. Ironically, a health care scam created to dodge Obamacare regulations may end up determining which party controls the Senate after November, yet another curveball in a political season full of more than its share of twists and turns.
