ICYMI: Economic Experts Sound Alarm On Misguided Legislation Targeting Pharmacy Benefit Companies

Economists Explain Policies Restricting Pharmacy Benefits Will Lead To Higher Costs, Less Competition, And Fewer Choices For Employers

In case you missed it, Joe Grogan, visiting senior fellow at the USC Schaeffer Center and former White House domestic policy adviser, discusses how misguided legislation targeting pharmacy benefit companies will have unintended consequences for patients, employers, and the health care system while doing nothing to address the root cause of high drug prices in an op-ed published by the Washington Examiner.

“What is Congress doing? Over the past several months, several committees in the House of Representatives and Senate have considered proposals claiming to address the challenge of high prescription drug prices. But these bills do not go after the true causes of higher drug prices.”

“…The proposed Senate policy would target pharmacy benefit companies, or PBMs, and impose restrictions on employers’ business decisions in providing prescription drug benefits. PBMs have few friends in the healthcare sector because when they do their job well, drug manufacturers’ and pharmacies’ revenues are limited. But the patient pays less and most importantly has access to the drugs they need.”

Grogan further explains how pharmacy benefit companies secure savings for patients, taxpayers, and health plan sponsors, like employers, and that policies targeting pharmacy benefits would dramatically increase prescription drug costs:

“During the Trump administration, a regulation was finalized to prevent drug company rebates (secured by PBMs) to be used to decrease insurance premiums, instead requiring that they be used to discount drug prices at the pharmacy counter. CBO estimated that the increase in premiums for Medicare drug coverage would cost the government and taxpayers $177 billion over 10 years. So, while it may appear this regulation was good for patients, the resulting premium increases essentially made it a case of robbing Peter to pay Paul.”

“…PBMs exist to negotiate prices with drug companies and manage drug spending for insurers and employers. The work of PBMs generates value exceeding $145 billion.”

Read the full Grogan op-ed in the Washington Examiner HERE.

In a recent blog, Alex Brill, CEO and founder of Matrix Global Advisors (MGA), senior fellow at the American Enterprise Institute (AEI), and former senior advisor and chief economist for the U.S. House Ways and Means Committee, explains that the drivers of these misguided policies are special interests that stand to gain at the expense of patients, taxpayers, and the health care system.

“Broadly speaking, the political rhetoric motivating PBM reform revolves around two complaints: community pharmacists argue that PBMs are providing insufficient reimbursement for their services, and pharmaceutical manufacturers argue that PBMs are forcing drug companies to increase their prices. These claims are regularly amplified by each of the respective trade associations… acceptance of these claims is both a surprise and a triumph of special interests’ pursuit of legislative interference in the market with little more than anecdotal claims to support their views.”

Brill goes on to underscore that policies aimed at restricting pharmacy benefits will undermine competition in the market and increase costs.

“Policymaking can have unintended consequences and is often difficult to reverse. In this case, the risks include outcomes that run counter to the broader objective of promoting competition and affordability across the entire pharmaceutical supply chain.”

Read the full Brill blog HERE.

Legislation targeting pharmacy benefits serves special interests and will increase prescription drug costs for patients and families. Lawmakers should instead focus on policies that strengthen competition in the market, which is the most effective way to lower costs, by cracking down on Big Pharma’s anti-competitive tactics that keep more affordable alternatives, such as generics and biosimilars, from entering the market.


Learn more about public policy solutions that would promote competition in the prescription drug market and effectively lower prices for patients HERE.

Learn more about the critical role of pharmacy benefit companies and how Big Pharma’s egregious practices are the root cause of high drug prices HERE.


PCMA is the national association representing America’s pharmacy benefit companies. Pharmacy benefit companies are working every day to secure savings, enable better health outcomes, and support access to quality prescription drug coverage for more than 275 million patients. Learn more at www.pcmanet.org