Washington, D.C. — Prior to today’s hearing on pharmacy benefit manager (PBM) reform at the House Committee on Energy and Commerce Subcommittee on Health (the Subcommittee), the American Economic Liberties Project sent a letter calling on the Subcommittee to advance legislation to re-structure the PBM market. The letter follows Economic Liberties’ launch of its Break Up Big Medicine initiative, which has already mobilized more than 56,000 people to call on policymakers to eliminate the structural conflicts of interest that sit at the heart of the healthcare industry.

“Without immediate congressional action, the largest PBMs will continue to use their market power to squeeze pharmacies out of business, allowing more patients to suffer and, in some cases, die from avoidable causes,” said Emma Freer, Sr. Policy Analyst for Healthcare at the American Economic Liberties Project. “Critically, Congress must go beyond imposing transparency requirements on PBMs and re-structure this rigged market. Members of the Subcommittee have already co-sponsored the best legislation to do this, including the Patients Before Monopolies Act, the Pharmacists Fight Back Act, and the Lower Costs, More Transparency Act. The Subcommittee must now advance these structural reforms, which address the root causes of the PBM problem.”

PBMs are middlemen who negotiate prescription drug benefits on behalf of health plans with drug manufacturers and pharmacies. The “Big Three” PBMs—CVS Caremark, Cigna Group’s Express Scripts, and UnitedHealth Group’s OptumRx—control nearly 80% of US prescription drug claims. The Big Three’s market power—combined with a rebate-driven business model that biases PBMs towards higher list price drugs, as Economic Liberties detailed in a February 2023 policy brief—has driven up the cost of prescription drugs. The list price of one brand-name insulin rose by more than 1,200% between 1999 and 2017 largely due to PBMs, according to the FTC.

The Big Three also leverage their market power to demand untenably low reimbursement rates from independent pharmacies in exchange for inclusion in their networks. Many pharmacies accept these rates for fear of losing access to a large share of the covered patients who make up their customer base. But these rates are squeezing them out of business at an accelerating pace, stranding their most vulnerable customers—including older Americans, rural residents, and individuals with chronic conditions—in pharmacy deserts without access to care.

The letter applauds the Subcommittee for having co-sponsored the strongest PBM structural reform legislation, including:

• The Patients Before Monopolies Act (S.5503, H.R. 10362), introduced by Sens. Elizabeth Warren (D-MA) and Josh Hawley (R-MO) and Reps. Jake Auchincloss (D-MA-04) and Diana Harshbarger (R-TN-01) late last session, which would force health insurers and PBMs to divest their pharmacy businesses within three years.

• The Pharmacists Fight Back Act (H.R. 9096), introduced by Representatives Jake Auchincloss (D-MA) and Diana Harshbarger (R-KY) and now co-sponsored by 55 bipartisan members, which would bolster independent pharmacy revenue by setting baseline pharmacy reimbursement rates in federal healthcare programs. The legislation would also prohibit PBMs acting on behalf of federal healthcare programs from engaging in anticompetitive business practices, such as patient steering and spread pricing, in which a PBM charges a health plan far more for a prescription than it reimburses a pharmacy for dispensing it.

• The Lower Costs, More Transparency Act (H.R. 5378) by Representative Cathy McMorris Rodgers (R-WA), which would similarly require all state Medicaid managed care programs and the PBMs with whom they contract to reimburse pharmacies according to their acquisition and dispensing costs. In doing so, the bill would establish parity in pharmacy reimbursements across Medicaid managed care and fee-for-service settings. It would also prohibit spread pricing.

Critically, these approaches go beyond transparency requirements, which are a low-hanging but insufficient response to PBM reform. As the letter makes clear, knowing how much they are being overcharged and underpaid by PBMs does not help patients afford their medications or pharmacies stay in business.

Read the letter here.

Learn more about the fight to Break Up Big Medicine here.

Read Economic Liberties’ policy brief, “Why We Should Ban PBM Rebates,” here.

Read Economic Liberties’ policy brief, “Medicare Advantage and Vertical Consolidation in Health Care,” here.

Read Economic Liberties’ op-ed in The Hill, “Too big to care: It is time for a Glass-Steagall Act for health care,” here.

Learn more about Economic Liberties here.

###

The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.