In last week’s Senate Finance Committee hearing on drug pricing, U.S. Secretary of Health and Human Services Alex Azar reiterated the Trump Administration’s commitment to lowering drug prices and improving access to care for all Americans.
Perhaps unsurprisingly, Democratic members of the committee peppered Secretary Azar with hostile questioning, painting a partisan patina over what should be an important and bipartisan conversation. Still, one debate between Sec. Azar and the committee should ring alarms for all Americans.
Sec. Azar noted that in many instance, Pharmacy Benefit Managers have been resistant to efforts by the administration and by drug manufacturers to lower the list price of a drug. Though not the final price that a patient pays, the list price is an important starting point for negotiations between PBMs, insurers and manufacturers on final discounts, rebates and other offerings. In his testimony, Sec. Azar explained that manufacturers have reached out to HHS about lowering their costs, but are concerned they will be “discriminated against” by PBMs that benefit from higher list prices.
Sec. Azar’s comment underscores the unique position that PBMs occupy in our healthcare system and why their unchecked influence has helped drive up the cost of prescriptions for consumers with no consequences. We’ve written about PBMs before, but for the uninitiated PBMs are among the largest companies in the United States, operating as “middlemen” that negotiate with manufacturers on behalf of insurers. In effect, PBMs hold all the negotiating chips, leveraging their size and their contracts to extract better deals from manufacturers, insurers and pharmacies.
In many instances, PBMs use this leverage to guarantee discounts from manufacturers, which are supposed to go to patients, but in reality just increase the PBMs bottom line. In theory, PBMs can help negotiate more competitive pricing for large corporate and government plans; but too often in practice these companies are simply adding to the murky healthcare space and driving up the cost of drugs.
Thankfully, Secretary Azar and President Trump have specifically identified these middlemen as cost drivers in our healthcare system and are looking for solutions to bring added accountability and transparency to the system so that PBMs cannot get away with these abuses any longer.
