Part of the genius of our political system is the idea of divided government. The competition both between federal and state governments and different branches at both levels means that no one entity can become so strong it bowls the citizenry over.
The principle doesn't just work for government. In our byzantine healthcare system, it may appear as though different competing interests just make things that much costlier — but in some cases the reverse is actually true. Competition means no one entity can become so strong it bowls the citizenry over.
Last week, the Republican-led House Committee on Oversight and Accountability held a hearing on Pharmacy Benefit Managers (PBM), a largely misunderstood player in American healthcare. As evidence of that misunderstanding, Chairman James Comer's, R-Ky., stated goal for the hearing was to examine PBMs' "tactics at multiple levels of the payment and supply chains that are increasing costs for consumers and harming patient care."
But as a sign of what a drive-by hearing this would be, the otherwise good chairman didn't even invite anyone from the PBM industry!
This is after a hearing last week in the Senate where several senators threw shade at PBMs because some of their parent companies are big (two of them are in the top five of the Fortune 500).
To sum up their role: PBMs contain the drug distributors' prices. Health plan operators hire them to manage their plans and negotiate for better deals against the drug wholesalers. Despite their size being a crime (somehow), the only reason they're able to successfully negotiate for lower prices is because of their size.
PBMs need to be able to go toe to toe against Big Pharma — similar to how our rights are protected under competing branches of government.
See, three drug distributors — Cardinal Health Inc., AmerisourceBergen Corp., and McKesson Corp. — control and distribute more than 90% of the pharmaceutical drugs sold in America. As our friends at The Washington Times reported, "These three companies have net worth valuations of over $20 billion, making them three of the top 15 wealthiest companies in the country."
So, it would have been helpful for the House Oversight Committee, if it wanted to better understand the tactics of the PBM industry, to actually invite some of them to the hearing.
PBMs having some muscle of their own is the only way they can push back on Big Pharma — who play a small role in America's high drug prices.
This drug distributor cartel needs to fight to protect their profits, of course, because they keep losing millions and even billions for their many transgressions of the law.
And more costly legal payouts could be on the way: Cardinal, Amerisource, and McKesson Corp. are all currently under investigation by 49 state attorneys general.
That means this isn't a partisan issue, this is a universally accept health issue: PBMs save folks money. Two independent studies — one from the White House's Council of Economic Advisers and another from the Government Accountability Office — found that PBMs save the taxpayer about $145 billion per year in rebates for medicine.
Great to see so many AGs on the same side together. This is one of the issues where traditional liberals should be cheering the populist, Trump-era transformation of the GOP. Whereas we used to dance for Big Pharma, now we've changed the tune.
Alas, support for Big Pharma seems to be something the bipartisan D.C. establishment is agreed on. The anti-PBM bill in the Senate was sponsored by Sen. Bernie Sanders, I-Vt.! Big donations may be the glue that keeps the wheels of democracy as sticky as they are.
Going forward, members of both parties need to make sure PBMs have a place at the table. If drug prices are bad now, wait until they've been "reformed" so Big Pharma can bowl us over.
Jared Whitley is a longtime politico who has worked in the U.S. Congress, White House and defense industry. He is an award-winning writer, having won best blogger in the state from the Utah Society of Professional Journalists (2018) and best columnist from Best of the West (2016). He earned his MBA from Hult International Business School in Dubai. Read Jared Whitley's reports — More Here.
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