Reforming PBMs Improves the Drug Market and Thwarts Efforts to Socialize Medicine
By Sally Pipes & Wayne Winegarden
There they go again. Free-market advocates are jeopardizing pro-market healthcare reforms based on an inability to recognize how cronyism tars the current industry dynamics. That distinction between companies operating in a free market and companies using cronyism to flourish in a government-dominated market is the key.
At question are the operations of pharmacy benefit managers (PBMs). PBMs serve large insurers, employer-sponsored health plans, and government health plans. The three largest PBMs control nearly 80% of the market and are subsidiaries of large insurers — CVS Health/Caremark (33% of the market), Cigna/Express Scripts (24%), and UnitedHealth/OptumRx (22%).
If patients were in control of the healthcare system, then such market dynamics would not necessarily matter. But they are not. The lack of patient control combined with the opaque and complex pricing structure creates practices that harm patients. Most notably, PBMs enable a discount bait and switch that would never arise in a free and competitive market.Read More