The Federal Trade Commission has an opportunity to impact healthcare for Americans.
Fat can sometimes cause healthcare issues, but not the extra 10 pounds — which is actually 30 — that some Americans want to lose. It's the fat in the U.S. healthcare system.
You might immediately think of the $25 aspirin in hospital bills, but that's a rounding error. It's the opaque partners of health insurers — known as pharmacy benefit managers (PBMs) — who are sporting the most fat — feasting on $28 billion in profits between 2017 and 2019, according to a recent report by the PBM Accountability Project.
Such bold thievery has not gone unnoticed. The PBMs, holding secret contracts with insurers, as of 2019, were being, or have been, sued by attorneys general in 20 states in the past decade, paying $370 million in fines — which is another rounding error. But it's not small enough to stop PBMs from fighting back. A 2021 rule from the departments of Health and Human Services and the Department of Labor directed the Internal Revenue Service to require PBMs to make net prices charged to pharmaceutical companies public. Instead, PBMs sued the government and related individuals to block the rule.
The USC Leonard D. Schaeffer Center for Health Policy & Economics, in collaboration with the Chief Science Policy Officer of the Global Healthy Living Foundation, Robert Popovian, released a study demonstrating that opaque pricing by PBMs forced consumers to overpay for their generic drugs — the ones that are supposed to cost a few dollars for a 30-day supply, and the ones that account for an estimated 90% of prescriptions written in the U.S. Whether you're on Medicare, private insurance or Obamacare, you're likely getting fleeced by your friendly PBM if you're taking a generic drug.
After receiving 24,000 letters during a public comment period — the vast majority against PBMs — the Federal Trade Commission (FTC) through a bipartisan agreement announced it will begin a wide-ranging investigation of PBM price-gouging practices.
FTCs involvement means something might happen that will benefit the consumer, so it's time for a quick review of how PBMs fit into the healthcare system.
At every byzantine stage of U.S. healthcare, someone makes money. With all these hands in the pot looking for a cut of the $3.6 trillion pie (2019 figures), there is sustained upward pressure on prices. Until now, there hasn't been one egregious standout player since Martin Shkreli took the decades-old antiparasitic generic drug Daraprim and bumped the price from $13.50 to $750 a pill. The key phrase in that last sentence is "until now."
It's not hyperbole to suggest that PBMs are the new Martin Shkreli. The scale of legal kickbacks PBMs receive in the form of rebates, fees and other concessions from biopharmaceutical companies and pharmacies easily dwarf Shkreli's breathtaking profit-seeking...
To completely rein in the PBMs, the specifics of how a prescription drug claim is processed and paid will need to be delineated. In other words, PBMs will need to be told they will be nothing more than claims adjudicators. Prices of prescription drugs will have to be rolled back to where they are in line with other countries. How this will take places is anyone's guess because at the moment there is no one with a backbone to make this happen.