FTC Cracks Down On Middlemen Jacking Up Prices Of Your Medications
Prescription Benefit Managers — only in America!
In recent years, due to pressure from both the public and the government, pharmaceutical companies have dropped the price of insulin down to $35 per month for most people. That’s good news, but it only solves part of the problem, and not in any sort of permanent way. What really needs to change, ultimately, are the things that led to a medication that has been on the market for decades and costs only $2 to make costing consumers so much in the first place. Prescription drug benefit managers (PBMs) are one of those things.
On Friday, the Federal Trade Commission (FTC) announced a lawsuit against the USA’s top three PBMs — CVS Health’s Caremark, Cigna’s ESI, and United Health Group’s Optum — and their affiliated group purchasing organizations (GPOs) — Zinc Health Services, Ascent Health Services, and Emisar Pharma Services — for engaging in shady practices that artificially jacked up the prices of insulin and other medications.
We don’t talk a lot about PBMs, but they’re a pretty big deal. According to a report from the New York Times, these three “would each rank among the top 40 U.S. companies by revenue.” Caremark, on its own, “generates more revenue than Ford or Home Depot.” Together, they administer about 80 percent of all prescriptions in the United States.
Theoretically, PBMs are supposed to bring down prices for consumers, and that’s what they claim to do. The industry’s lobbying group says they saved “their clients and patients” $286 billion in 2022.
If you have a brain in your head, you are probably thinking, “How would an entity that exists only to reduce prices for consumers be so profitable? How would the clients also be saving money? That seems like some bullshit!”
And it is. It is absolutely some bullshit. Of course it is. All of their profit comes from getting a percentage of what the consumers pay, so obviously they have a ton of incentive to make consumers pay more.
The FTC accuses the PBMs of having created a “perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices.” Because of this, the complaint says, when cheaper insulins came on the market, the PBMs shut them out in favor of insulins with higher list prices and higher rebate prices, which in turn encouraged companies to drive up the price of insulin in order for their products to be included.
This strategy, according to one PBM vice president, allowed the PBMs to “drink down the tasty … rebates.”
Ew.
“Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed,” said Rahul Rao, Deputy Director of the FTC’s Bureau of Competition. “Caremark, ESI, and Optum—as medication gatekeepers—have extracted millions of dollars off the backs of patients who need life-saving medications. The FTC’s administrative action seeks to put an end to the Big Three PBMs’ exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers.”
PBMs, by the way, are one of those things that do not exist in other countries. You know, like at-will employment, criminalized jaywalking, juvenile solitary confinement and $5,000 ambulance rides. Why? Because Americans are willing to pay for the privilege of capitalism.
In many other countries, the state negotiates the price of pharmaceuticals with the pharmaceutical companies, their healthcare system covers what it covers, and all consumers pay the same out-of pocket cost (in the instances where they pay any at all). It’s very simple. It makes sense.
In the US, we don’t have that. Instead, we have these separate Prescription Benefit Managers, whose job it is to “negotiate” prices with pharmaceutical companies and help determine what insurance companies will cover, and in exchange, they get a cut of the profits. Therefore, it is in their interest for us to either buy more expensive prescriptions or pay more for prescriptions than we should, and not in their interest for consumers to buy/insurance to cover the lower cost prescriptions.
Let me explain it this way. When you buy wholesale, you pay a lower price than you do if you pay retail — because the person who sells you the item has to get their cut as well. That is basically what happens here. Other countries pay direct-to-consumer wholesale prices, we pay retail. Because we don’t just have to pay for our medical care and our prescriptions, we also have to pay for PBMs and private health insurance to exist and make ridiculous amounts of money.
Part of the reason our healthcare is so expensive here is because the “for profit” model just really does not make sense for healthcare, so we have to do 14 backflips, eight umbrella twirls, a triple axel and a double Cincinnati time step in order to make it work. We have to stick random people in there to do pretty much nothing other than put their hands out and take their cut, just so it can qualify as sufficiently capitalist. We have to do everything in the stupidest, least efficient, most ass-backwards and most expensive way possible, just to be able to be able to go, “Look at us! We’re not commies! Isn’t it great how we’re not commies?”
It’s great that the FTC is cracking down on PBMs, which should not exist to begin with. It’s even better that they are also looking to hold other entities responsible for this. But as long as these entities exist, we’re going to be paying more than we should have to for our prescriptions, because that is literally the only way they can turn a profit.
[FTC]
PREVIOUSLY ON WONKETTE!
Anybody who thinks for profit medicine is a good idea really needs to be slapped upside the head with a hot autoclave. {{{full stop}}}
Anyone who employs a lobbying *group* is NOT saving you money. I know how lobbyists are.