A recent Wall Street Journal editorial, “The FTC’s Anti-PBM Suit Could Mean Higher Health Premiums,” misses the mark on Pharmacy Benefit Managers (PBM). We respectfully disagree.
For the past three years, the Biden-Harris Federal Trade Commission (FTC) under Chair Lina Khan has engaged in fiercely ideological efforts that harm consumers more than they help. But as the adage goes, even a stopped clock is right twice a day. The FTC’s investigation and subsequent lawsuit regarding pharmacy benefit manager (PBM) practices would help restore a degree of desperately needed competition to our healthcare system.
By all appearances, the FTC investigation was thorough and not ideologically driven. Its report concluded that vertical integration and market concentration have allowed PBMs to increase drug costs. The FTC pointed out how “amidst increasing vertical integration and concentration, these powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.” Per that report, each of the largest six PBMs—which process over 90% of all drug claims—is part of vertically integrated conglomerates.
Such enormous consolidation in this market, the report concluded, allows these middlemen to influence what patients pay and how they access their medication in a significant way.
It is not just the FTC’s Kahn who has hit a nerve. Republicans and Democrats alike (not to mention doctors) have all voiced concerns about how the PBMs and their insurance company parents are operating. An independent report by the Republican-controlled House Committee on Oversight and Accountability came to the same conclusion: to pad their profits, PBMs are hiking drug costs and creating worse outcomes for patients. Indeed, the House Committee’s report concluded that PBMs interposing themselves between insurers and consumers leads to reduced competition and higher drug costs.
Because PBMs extract rebates supposedly based on a drug’s list price, PBMs are incentivized to select more expensive drugs for formulary status, which they also control. The bottom line is that PBMs push consumers to costlier medications when less expensive alternatives are available.
Driven by ObamaCare, the so-called Inflation Reduction Act (IRA), and a host of new regulations, PBMs have become a key part of the healthcare oligopoly. Vertically integrated healthcare conglomerates, made up of health insurers, specialty pharmacies, and provider services, dominate the market. They control treatment, medication, and payment.
Consolidation in the healthcare marketplace is no coincidence. Insurers and PBMs were aided and abetted by Democrats in Congress—who traded relief from antitrust scrutiny in exchange for political funding from big insurer-PBMs. They also benefitted from a cynical collaboration and financial partnership with the AARP, which actively supported the IRA and other progressive policies despite negative consequences for the Medicare Trust Fund.
The IRA siphoned more than a quarter trillion dollars out of Medicare to fund liberal spending priorities such as the Green New Deal and, you guessed it, subsidies for big insurer-PBMs. Now, in an election-year gimmick, a new Administration Medicare Part D “demonstration program” seeks to artificially suppress premium hikes (which jumped as a result of IRA spending) by injecting cash into the bottom lines of big insurers. As evidence of the absurdity of this program, the Congressional Budget Office (CBO) recently found that it could cost taxpayers $21 billion over the next three years.
Of course, size alone does not necessarily equate to consumer harm. But size combined with the force of federal law means that competition is squelched, prices increase, and taxpayer money is wasted.
Driven by collaborators in government and at the AARP, the healthcare oligopoly is harming American consumers. The FTC is often wrong in its witch hunts, but in this rare instance, its actions against PBMs are warranted. We can all agree that transparency and competition improve services and lower prices. Hopefully, the FTC has taken the first step in doing just that.
Andrew Langer is director of the CPAC Foundation’s Center for Regulatory Freedom and Executive Director of the Coalition Against Socialized Medicine (CASM).
David Safavian is the CPAC general counsel and executive vice president.
Read Full Article »