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I have spent a lifetime in public service and medicine and as a member of Congress have worked diligently on one of the most pressing issues to Iowans and Americans: the rising cost of prescription drugs. One key actor in the dramatic rise of prescription drugs is Pharmacy Benefit Managers (PBMs), especially combined with vertical integration by health insurers.
PBMs are third-party companies that function as intermediaries between insurance providers and drug manufacturers. These multibillion-dollar middleman play a major role in negotiating drug prices and reimbursements for pharmacies. Currently, 97% of all prescription drugs in the United States flow through just six major PBMs.
Through their abusive practices, these entities are particularly squeezing independent and community pharmacies (particularly rural) which serve as crucial lifelines for many Americans, especially those in states like Iowa where 25 independent pharmacies have already closed this year.
PBMs regulate which drugs are covered under a specific plan, set copays, negotiate rebates with drug manufacturers, and process prescription medication claims for insurance companies for a fee, among other roles.
In order to maximize their profits, PBMs employ shady practices such as “spread pricing,” where they charge insurers more than they reimburse pharmacies, pocketing the difference for themselves. Over the last decade, PBM profits from fees increased more than 300%, while prescription drug prices rose almost 40% - a rate far surpassing inflation in our country.
Patients are left holding the bag and paying for these excessive profits to middlemen who don’t research, develop or produce any drugs! My first PBM reform bill was as Iowa State senator and passed in 2019 to try to discern these opaque practices.
It is also why I have introduced the Delinking Revenue from Unfair Gouging (DRUG) Act, legislation that bans spread pricing and other common PBM practices that raise prescription drug prices, including patient steering. My bipartisan bill, which has already passed the House Oversight and Accountability Committee, will also implement delinking policies. This approach allows PBMs to charge only a flat fee for drug placement instead of continuing to charge a percentage of the drug's list price, which leads to ever spiralling cost increases.
By removing the incentive for PBMs to drive up the list price of medications, the DRUG Act puts downward pressure on prescription drug prices and insurance premiums, ensuring that patients receive the vital drugs they need at an affordable price.
This is not a partisan issue – every American who utilizes prescription medications experiences the impact that PBMs and vertical integration have on our healthcare system. This is partially why the Federal Trade Commission (FTC), after our inquires and hearings, is investigating the harmful impacts of middlemen and gearing up a lawsuit against the three largest PBMs for driving up insulin costs.
While the FTC taking notice and investigating PBMs is a positive step forward, an official act of Congress is necessary to reform PBMs. In Congress, I will keep fighting to get the DRUG Act signed into law so we can begin lowering drug prices now for patients everywhere and foster a more transparent healthcare system where patients come before excessive profits.
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