Big Govt and Big Pharma Collusion Is a Loser for Small Business
As a small business operation owner and president of nonprofit Asian Industry B2B, my employees are not just people who work for me, but people whose lives I care about. On a surface level, we socialize after work. On a deeper level, I make decisions that take into account the whole person and root for them to win, when dealing with things like choosing a 401k plan or health insurance benefits, a regular topic I discuss with my fellow business owners. Contrary to what you’re constantly being told, business owners like me are not out to stick it to our employees. We actually want the best for them. The people who work for me know that I have their back.
Many in my group of business owner peers have found that insurance plans featuring Pharmacy Benefit Managers (PBMs) are a big plus for our personnel, managing prescription-drug benefits and saving Americans $145 billion annually. We like to think of PBMs as Patient Benefit Maximizers because they’re able to negotiate lower drug costs for our employees, provide predictability on pricing, and offer high-quality pharmacy networks and clinical programs that help keep them safe and healthy.
As inflation continues to squeeze Americans at the gas pump and the grocery store —along with small business owners— PBMs are saving 266 million payers and patients 40-50% on their annual drug and related medical costs, averaging a savings of $962 per person per year. For every $1 spent on their services, PBMs reduce costs by $10. They do this because they have the scale to negotiate with Big Pharma, which accounts for 65% of the cost of every prescription.
In fact, Big Pharma’s median gross profit margin for their products is a whopping 76.5%. That’s a figure we small business owners can hardly wrap our heads around, even a numbers guy like me. And because PBMs negotiate set prices for medications, we don’t have to worry about the price suddenly spiking one day. It’s actually common for one of our employees to get, not a rude awakening, but a pleasant surprise at the pharmacy checkout counter when they pay, for example, $7 for a medication that used to cost them $107.
Pricing is not the only patient benefit that PBMs maximize. Before I started my business, I worked at a global bank with about 15,000 US employees. When I had to choose a plan, the PBM was able to advise me on which was the best fit for me, given my personal needs. They also survey the pharmacy market, identifying and contracting with those who have established quality standards. Studies have shown that over the next ten years, PBMs will help prevent 1 billion medication errors.
With teams of doctors and pharmacists that detect questionable claims, PBMs can reduce the fraud, waste, and abuse that accounts for anywhere between 17% to 53% of annual healthcare spending which jacks up the costs for all of us.
Even more importantly, though, PBMs actually make sure you remember and get the medication you need, improving adherence rates by 10%. In diabetes patients, for example, this helps prevent some 480,000 heart failures, 230,000 incidents of kidney disease, 180,000 strokes, and 8,000 amputations annually.
Unfortunately, PBMs are often the target of Big Pharma, which spent $6.58 billion in advertising in 2020 and $23 million on lobbying in the first nine months of 2021. A great deal of that spending was aimed at shifting the blame for skyrocketing drug costs. Plenty of politicians on both sides of the aisle fall for it and try to implement big government “solutions” that seem like they’d be helpful but always end up costing everyday Americans more as both consumers and taxpayers.
You don’t have to be a financial planner or an economist to figure out that Big Pharma and Big Government colluding is bad news for the rest of us. When government distorts the market, which is what every regulation and piece of legislation does, it inevitably decreases access to goods and services and increases costs. Regarding prescription drugs, if we want affordability and consumer access, we need more competition in the marketplace. That is what pharmacy benefit managers do.
The free market has been the engine that powered the rise of small and ethnic-owned businesses in this country since its founding. As a small businessman, and representing many others like myself, I say let us benefit from the free market, grow it, and bring the country back to a stable and flourishing economy.
Marc Ang is an estate and financial planner at Mangus Finance and President of Asian Industry B2B.
