ICYMI: Competitive Enterprise Institute Explains How Pharmacy Benefit Companies Lower Health Care Costs

In case you missed it, the Competitive Enterprise Institute (CEI) released a new video, “Pharmacy Benefit Managers and Healthcare Costs: Not a Policy Paper, Just A Thought,” explaining how pharmacy benefit companies lower health care costs.

Dr. Joel Zinberg, senior fellow at CEI and Director of the Public Health and American Well-Being Initiative at Paragon Health Institute, explains why it’s a bad idea for lawmakers in Washington to restrict pharmacy benefit companies:

“[Pharmacy benefit managers] PBMs function much like buyer clubs, such as Costco, do, negotiating lower drug prices and improved pharmacy services within a complex supply chain on behalf of drug insurance plan sponsors and their patient customers. It’s a free market solution. It gets patients more beneficial drugs at lower costs, translating into lower insurance premiums and improved health. Some criticize PBMs as middlemen and want to limit the rebates and discounts they obtain from manufacturers and pharmacies and dictate their business practices yet PBMs have lower profit margins than other actors in the drug supply system. Their earnings are linked to how much they save insurance plans and patients. Imposing new restrictions on the marketplace won’t lower drug costs for consumers. Government meddling in health care never works. When businesses compete for savings, consumers win. Not a policy paper, just a thought.”

The video comes after CEI published a new study, “A Free Market Solution for Drug Distribution,” that describes and explains the role of pharmacy benefit companies. Dr. Zinberg writes:

“PBMs are a free market solution that enhances competition through group purchasing and negotiated discounts… This is particularly important in the world of prescription drugs where manufacturers can be sole source providers of new, patent protected, brand name drugs or sometimes older generic drugs that have only one maker and where the top three wholesalers make up more than 80 percent of the market and the top three pharmacies more than 50 percent.” 

The study goes on to analyze the effects of pending legislative proposals that dramatically undermine pharmacy benefit companies’ ability to secure savings for patients and concludes:

“The legislation is likely to be counterproductive, resulting in reduced competition, higher costs, and an end to the natural evolution in the market of terms and arrangements which benefit the actors in the drug distribution system.”

Watch the full CEI video HERE.

Read the CEI study HERE.


See more of what Dr. Zinberg and other experts had to say about proposals targeting pharmacy benefit companies HERE and HERE.

See PCMA’s guide to understanding the role and value of pharmacy benefit companies HERE.