To Improve Pharmaceutical Pricing, Reform PBMs And Fix Health Care’s Systemic Problems

Accusations that pharmaceuticals are driving the problem of health care affordability abound. But, political misdiagnoses are just as problematic as medical misdiagnoses. Policies based on the wrong political diagnosis will not solve the health care affordability problem, and could cause irreparable harm to medical innovation.

The misnomer that drug prices are a primary cause of the health care affordability problem persists, in part, due to the overly complex pricing system for pharmaceuticals. Pharmacy intermediaries, known as pharmacy benefit managers (or PBMs), play a large role in perpetuating this overly-complex pricing system.

Much of the news coverage discussing rising pharmaceutical prices focuses on the list price. For most markets, this makes sense because the list price accurately portrays the typical transaction price. However, the list price for pharmaceuticals varies, often significantly, from the drug’s typical transaction price.

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