American healthcare innovation has saved countless lives. Whether it’s a new vaccine to prevent serious illness or a breakthrough treatment from helping someone manage a previously debilitating chronic disease, we owe a lot to those researchers and scientists in white lab coats.
But what if they toiled away in the lab to make that new medicine and no one could access or afford it? And what if the reason was that some unknown middleman was dictating the cost and skimming vast sums of money off the top to pad their bottom line?
While we’d like to think that no one would stand for such a thing, this is, unfortunately, what happens every day in our modern healthcare system.
It should be a lot simpler. Scientists develop a medicine, physicians determine when to prescribe it, pharmacists dispense it, and patients take it to manage their health. But somehow, it became commonplace for an insurance company to dictate which medicines a patient can take—and for a pharmacy benefit manager, or PBM, to determine how much they pay for it. And we’re supposed to believe they do this to help businesses and individuals save money.
Because of these unfair practices, tens of millions of Americans struggle at the pharmacy counter. And with worsening inflation on all the necessities of life, this situation is only worsening. In fact, the Kaiser Family Foundation found that 30 percent of patients don’t take their prescriptions as prescribed due to cost—and instead choose to cut pills, skip doses or not fill prescriptions at all.
If you’re still not convinced, consider this: in recent years, the net prices of drugs—the list price, minus rebates and other discounts and reductions—have been going down. This should translate to lower patient costs, but we’re seeing the opposite. Patients are spending more on prescription medications, even though PBMs and insurers are saving more.
Not surprisingly, PBMs and insurers are working hard to protect the complex web they’ve created to snare as much money as possible and increase their profits. But legislators at the state and federal levels are continuing to fight on patients’ behalf—and thanks to their efforts, we’re moving in the right direction.
In 2020, the Kentucky General Assembly passed groundbreaking legislation to rein in PBMs’ involvement in the state’s Medicaid program by creating a single drug formulary managed by one PBM. Cutting out multiple unnecessary PBMs is expected to save taxpayers hundreds of millions of dollars a year while ensuring patients can more easily access the medications they need to manage their health.
Of course, additional work remains to ensure patients are not bearing the brunt of PBMs’ unfair practices. That’s why a large and growing group of patient advocates and healthcare providers are encouraging legislators to focus on patients over PBM profits—and are calling for legislation requiring middlemen to share manufacturer rebates directly with patients at the point of sale.
PBMs and insurers negotiate with drug manufacturers to get lower prices on prescription medicines. In theory, these savings should be passed to patients to reduce out-of-pocket costs. In reality, the system allows PBMs and insurers—massive, billion-dollar corporations—to keep the rebates while continuing to charge patients higher prices for their medications.
“Share the savings” legislation would end this unfair practice and save Americans living with chronic diseases hundreds or even thousands of dollars per year. That’s more money in the pockets of Kentuckians where it belongs.
PBMs and insurers defending the status quo argue that premiums will rise sharply if these rebates are shared with patients. And they also falsely claim that it will also increase the costs for our businesses. But actuarial studies show that’s not true, including a 2022 study from Milliman that projects an increase in premiums of less than one percent—and that’s not even counting the savings from reduced hospitalizations that would result from patients taking their medications as prescribed.
The truth is that patients can’t afford not to share in these rebates. And that’s why it’s time for PBMs to start sharing the savings.
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