Who determines whether a drug is covered by insurance? Or if a drug is a “specialty drug”? Who puts the price on drugs? You might think it would be the drug manufacturers or pharmacies that determine these things. However, another entity has overstepped and is making a profit off of the system while patients are paying the price.
Polling indicates a majority of Texans are dissatisfied with the quality of their health insurance plan, so it might be easy to blame either insurance, pharmacies or hospitals as the culprit for the skyrocketing drug costs, poor accessibility, or slow moving drug approvals. In reality, all of the entities are to blame, but the biggest culprit is a hidden third party called Pharmacy Benefit Managers (PBMs).
PBMs are the intermediaries between drug manufacturers and insurance companies. They were originally brought into the equation in the 1960s in order to handle insurance processing. Since then, PBMs have expanded their role and monopolized the market, with three PBM conglomerates controlling more than 80% of the market share.
PBMs’ expanded role now allows them to determine how much a drug costs, whether that drug is covered by an insurer, to and determine the rules for drug fulfillment (including prior authorizations) that have become a hindrance to drug affordability and accessibility. PBMs are not monetarily incentivized to “lower costs” as they claim to do. In other words, the more patients overpay for drugs, the more money lines the PBMs’ pockets. Why would they ever actually care about “lowering costs” because the truth is, PBM’s are a business?
Strategies such as spread pricing, for example, incentivize PBMs to raise costs for patients or providers in order to maximize their own profits, and that is one of the many tactics that PBMs use to profit off of the system they have created.
When it comes to specialty drugs, PBMs win again. In the PBM business, there is no financial incentive for them to lower the costs of specialty drugs either. With the PBM conglomerates owning the three largest specialty pharmacies, PBMs have a vested interest in whether certain drugs are deemed a specialty drug and can charge even higher prices for them. This can include drugs as simple as inhalers.
Another change that would lower costs and improve access for patients is the widespread implementation of direct primary care, a model in which patients pay a monthly fee to a physician, similar to a monthly Netflix subscription, that includes unlimited services for a flat monthly payment. One common misconception of direct primary care is that it is not cost-effective for healthy or infrequent users. However, usually a year’s worth of monthly payments are significantly less than just a few months of insurance premium payments. Therefore, healthy individuals who do not see their doctors monthly were already paying far more for insurance premiums—and that doesn’t even include the extra payments for deductibles and copays.
Direct care physicians can lower costs even more by bypassing PBMs entirely. Direct access or allowing physicians to directly dispense drugs to patients cuts out the middlemen, allowing patients to access the drugs right then and there while also giving a transparent price without hidden markups solely for the profit of intermediaries. However, Texas is one of the only states that prohibits or has strict regulations on physician direct dispensing. Actors in strong opposition to direct primary care are profiting off the fact that when patients pay more through insurance, “Big Insurance” can make money too.
At the end of the day, insurance and PBMs are businesses, seeking to maximize profits at the unfortunate expense of families. It’s common sense. In order to lower drug costs and increase accessibility, Texas must return to a simpler, primitive form of healthcare coverage in which middlemen are cut out, doctors are free to dispense directly to patients, and competition can drive better coverage and transparency within the healthcare market.