September 1, 2023
The rise of pharmacy benefit managers (PBMs) has transformed them into the dominant force in U.S. healthcare, wielding nearly unchecked power allowing them to manipulate the system for record profits. Recently, these behemoths have been a hot topic in Congress as bipartisan legislation takes aim at their role in increasing the costs of healthcare and undermining market competition. With Congress locked in a fierce battle against this healthcare parasite, an urgent question is in front of us: Can the free market survive PBMs’ insatiable appetite for power, or will patients continue to pay the price?
In recent decades, PBMs have fought to increase their market power and today, their monopolized influence is completely corroding fair and open competition in the marketplace needed to keep healthcare costs down. In fact, out of the over 70 PBMs in the United States, the top 10 control 97 percent of the prescription drug market. This consolidation has resulted in PBMs having unprecedented powers to influence drug prices and dictate nearly all the terms in their agreements with manufacturers, and pharmacies.
To make matters worse, a hallmark of major PBMs today is their vertical integration with insurers, further allowing these conglomerates to bully other players in the system into submission. For example, PBMs’ shadow extends over many small, independent pharmacies that play a crucial role in local communities, especially in rural areas. A report from Rep. Buddy Carter (R-GA), a practicing pharmacist for over 30 years, explains how PBMs muscle independent pharmacies out of the market through escalating fees, steering practices, and heavy-handed agreements that primarily seek to fatten their profits. The report notes that between 2017 and 2020 the U.S. lost over 2,300 independent pharmacies. PBMs reap the rewards of this arrangement while the free market withers.
These middlemen essentially form a chokepoint in the pharmaceutical supply chain between manufacturers and patients that allows them to act with impunity to further capture market share and advance their corrupt profit-driven schemes. These practices ultimately increase healthcare costs without considering the most important actor: patients.
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