Help fight the big PBM middlemen, the profiteering bad guys

I spoke recently with a surgeon running his own practice. That makes him the owner of a business also. 

Like 74% of employers in the United States, he supplies health care benefits to his employees.

Like other employers, he struggles with the relentlessly rising, annual increases in the cost of those benefits.

They curtail his ability to grant raises to his employees.

They force him instead to reduce benefits.

They have even forced him to lay people off.

Consider lower-income workers. Their wages have been stagnant for three decades.

Why?

A leading cause has been those rising costs of health insurance and actual medical care. 

The surgeon running his own practice was dumbfounded to learn that because of his reliance on one of the big health care insurers — one joined at the hip to one of the three biggest pharmacy benefit managers (PBMs) — he was paying far too much for “insurance” (never to be confused with actual medical care) and medications for his employees.

He has plenty of company.

How could we have let them do this?

My last piece was about the PBMs — middlemen in the political-medical-corporate complex who have their fingers in many pockets when a patient picks up a prescription at the pharmacy counter.

These middlemen are gigantic cash cows for the big insurance companies who own them, and they are fully involved in gorging themselves at the federal, taxpayer-funded programs — Medicare Part D, Medicaid, and benefits to federal employees.

PBMs receive money from insurance companies and use it to pay the pharmacy where a patient picks up the medication. Sometimes, they even own those pharmacies.

PBMs also control the formularies (the list of medications the health insurance company will cover).

When they already have such money-making power, why would the United States government have been ridiculous enough in 2003 to grant to PBMs the permission to receive kickbacks, politely referred to as “rebates,” from pharmaceutical manufacturers? Wasn’t it enough to have granted the same permission in 1987 to group purchasing organizations, the middlemen between manufacturers and hospitals?

And if they were ridiculous enough to have done it, what does that make the rest of us who let them do it?

In a recent Senate hearing, Mark Cuban, who knows a thing or two about business, stated, “And here’s the saddest part: Self-insured employers, states, and anyone contracting with the big PBMs are signing off on this system. They approve plans that force patients to pay list price without realizing how badly their members are getting ripped off. We blame PBMs — but the real problem is the people and governments who keep signing these contracts without a clue.”

America, “get a clue.” You’re overdue.

Cuban saw an opportunity.

In a free-market maneuver marked by price transparency, he created the “Cost Plus Drug Company.” His aim was to lower drastically out-of-pocket expenses for consumers by selling generic medications at a price calculated from (1) the actual cost to the pharmacy; plus (2) a transparent, fixed markup (typically 15%); plus (3) small, set pharmacy and shipping fees.

He eliminated the PBMs, hidden markups, and administrative costs.

Just how bad is it?

The savings?

Cuban’s company sells abiraterone acetate, a medication used in treating prostate cancer, for under $20. When the PBMs are involved, the same drug retails for over $1,000!

Are you shocked?

At a July 2024 hearing of the House Committee on Oversight and Government Reform, Representative Jake Auchincloss (D-Massachusetts) described a Massachusetts-based, Fortune 500 employer that discovered abiraterone acetate marked up by CVS Caremark to $5,800.

Auchincloss gave multiple other examples of similar eye-popping, mind-boggling markups for medications. 

In a perfect world, we would simply do away with the big, untrustworthy PBMs.

But as voting taxpayers, we ought to curtail their legalized thievery — carried out by inventive gimmickry — in Medicare Part D, Medicaid, and government employee benefits.

Staggering amounts of public and private money could be saved by cutting the big PBMs out of the picture and favoring smaller, independent pass-through companies.

Getting there will take a while.

What you can do in the meantime

In the meantime, here’s what can be done at the legislative level.

And here’s why it needs to be done fast: Because with another couple of hundred pharmacies having closed in Pennsylvania in the wake of the commonwealth enacting an anemic law — Act 77 of 2024, the Pharmacy Benefit Reform Act — that was supposed to improve the situation, it’s apparent that we have a serious, ongoing problem. 

In 2024, Auchincloss and Representative Diana Harshbarger (R-Tennessee) introduced the Pharmacists Fight Back Act (PFBA). It was a solid bill that would ban pricing gimmicks and other PBM abuses in taxpayer-funded Medicare and Medicaid programs. Among other things, this legislation would insist on (1) the return of “rebates” to patients, (2) fair reimbursement to pharmacists, and (3) an end to “steering,” the practice by a health insurer or PBM of punishing patients for using a drug supplier that is outside of an approved network.

More than a year later, it’s still the most comprehensive package out there for reining in the PBMs. 

But there are other bills that could help curtail the abuses of PBMs.

A bipartisan bill in the House decouples the size of the “rebate” (again, a kickback extracted from the manufacturer) from the cost of the drug, thereby eliminating the perverse incentive to a PBM to choose a higher-priced medication for an insurer’s  formulary over a lower-priced one. (This perverse incentive injures the patient, who must pay a percentage of that higher cost.) Three Democrats joined three Republicans in introducing the bill.

Another bipartisan bill, this one in the Senate, introduced by the improbable duo of Josh Hawley (R-Missouri) and Elizabeth Warren (D-Massachusetts) would forbid PBMs from owning regular and specialty pharmacies.

Again, these are bipartisan legislative proposals.

Expose the posers in this fight

Call your representative.

Call your senators.

Tell them to push these bills to full votes that will expose who stands with patients and taxpayers and who stands with the status quo.

Tell them reform is long, long overdue.

And be sure to let them know two other things.

(1) You can tell the difference between a poser and someone who’s serious about fighting the outrage, the scandal, and the disgrace of how we pay for prescription medication in this country.

(2) You’ll remember in the voting booth how they voted on these matters.

Marion Mass, M.D., is a practicing pediatrician in Bucks County, a leading member of the Free2Care movement, and a member of The Independence’s advisory board.