Regulating PBMs Will Not Lower Drug Costs | Citizens Against Government Waste

Regulating PBMs Will Not Lower Drug Costs

The WasteWatcher

Efforts by the federal government to reduce the cost of goods and services, like gasoline and pharmaceuticals, result in increased interference in the marketplace, new and restrictive regulations, and higher prices.  Simply put, price controls do not work. 

A recent example of these damaging and failed policies is S. 4293, the Pharmacy Benefit Manager Transparency Act of 2022.  The bill seeks to impose price controls and unnecessary regulations over pharmacy benefit managers (PBMs), which will increase drug prices, not lower them, and harm patients.

The bill would authorize unprecedented power to the Federal Trade Commission (FTC) over PBMs.  As Citizens Against Government Waste President Tom Schatz noted in his May 25, 2022, comments to the FTC on the impact of PBMs’ business practices, “CAGW has for many years been involved in the debate over the regulation of pharmacy benefit managers (PBMs) as part of the effort to lower drug costs.  The organization has consistently argued that government meddling in this area does the exact opposite and raises costs.  PBMs administer drug plans for about 270 million Americans who obtain their health insurance from employers, unions, state governments, insurers, and other entities.  PBMs use a variety of tools like rebates, pharmacy networks, drug utilization review, formularies, specialty pharmacies, mail-order, and audits to drive down drug costs, improve quality, increase patient medication adherence, and prevent fraud.”  

The comments also stated, “Since PBMs provide benefits for multitudes of employers and millions of patients, they are able to bring to bear increased negotiating power and get substantial price discounts from pharmaceutical companies based on volume.  The savings are passed on to health plan sponsors, like employers, and consumers.”

S. 4293 would interfere with the negotiations conducted by PBMs on behalf of the patients they serve and constitutes an effort to impose price controls and rate regulation over a vibrant and competitive market.   

While patients should know what to expect their drugs to cost at the pharmacy counter, exposing privately negotiated agreements will increase rather than decrease those costs.  Price controls and overregulation never reduce costs for any product or commodity.  S. 4293 will further distort the medical marketplace by initiating transparency requirements that would reveal proprietary pricing information among different providers with private contracts.

No other private business is required to disclose detailed financial information of this nature and instituting these anticompetitive requirements will prevent PBMs from operating as efficiently as they are today.  If passed, S. 4293 will hinder an industry that effectively lowers costs.  PBMs will save their customers more than $1 trillion over the next 10 years.

Imposing pricing requirements or rate regulations on PBMs will distort the medical marketplace and limit their negotiation power causing harm to the customers they serve.  Implementing unnecessary and harmful oversight over PBMs will limit their ability to save money for their customers.  Bills like S. 4293 would take power away from patients and turn it over to government bureaucrats, opening the door to price controls and market manipulation.

PBMs provide a valuable service in delivering drug benefits and lower costs to patients.  Instead of interfering in this successful process, Congress should continue to encourage private-sector negotiations to create an environment that will spur competition, innovation, and increase healthcare quality for patients.



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