Azar’s Attempt to Lower Prescription Costs Takes a Backdoor Approach When the Government Should Challenge Corporations at Their Front Doorsteps
Statement of Peter Maybarduk, Director, Public Citizen’s Access to Medicines Program
Note: Today, U.S. Health and Human Services Secretary Alex Azar proposed a rule intended to lower prescription prices and out-of-pocket costs by encouraging manufacturers to pass discounts to patients.
The vast majority of the $481 billion prescription market goes to Big Pharma ($323 billion). Pharmacy benefit managers (PBMs) take $23 billion. The cut that these middlemen take, ultimately, is a percentage of an outrageously high price made up by prescription manufacturers. The higher the manufacturer’s launch price, the more consumers may lose to middlemen gaming. To solve the problem of unaffordable medicines, ultimately we will need to challenge the source: the monopoly power of Big Pharma.
There is no doubt that middlemen take advantage of rebates and play a role in driving up medicine costs. Under current practice, pharmacy benefit managers negotiate with corporations not so much to reduce prices – their ostensible purpose – but to increase rebates and then take a generous cut for themselves. Serious efforts to limit this gaming are helpful. The details matter and we will have to analyze the administration’s proposal.
A much more effective solution that both diminishes the role of PBMs and provides a counterweight to pharma’s monopoly power is direct price negotiations between the government and pharmaceutical manufacturers for Medicare Part D. President Donald Trump promised to deliver this solution. We are still waiting.