The plan includes several promising reforms that could sharply reduce out-of-pocket costs.
Already, the administration has made progress in curbing the nation's drug spending.
After FDA Commissioner Scott Gottlieb won Senate confirmation last spring, he introduced a Drug Competition Action Plan to streamline the approval process for generic drugs. Last year alone, the FDA approved over 1,000 generics — an all-time record. Thanks to the newly available, cheaper treatments, Americans saved nearly $9 billion.
Now, the administration is turning its attention towards pharmacy benefit managers. These middlemen work on behalf of insurers, corporations, unions, municipalities, and other entities that sponsor health plans. PBMs act as the arbiter for all things drug-related in these plans.
They determine which medicines are covered and how much patients will pay at the pharmacy.
PBMs use their gatekeeper role to demand large rebates from drug companies. If manufacturers don't acquiesce, PBMs can blacklist their products. Three PBMs — OptumRx, CVS Caremark, and Express Scripts — control over 80% of the market, so they have enormous leverage.
On average, PBMs receive rebates and discounts that reduce medicines' list prices by about one-third. But they only pass about 10% of these rebates to patients. They share the rest with their clients — or pocket the savings for themselves. And they keep these figures under wraps. So neither patients nor health plans know the full scope of the rebates.
Anthem, one of the nation's largest health insurers, actually sued its PBM in 2016 for allegedly overcharging by $3 billion each year and failing to pass on rebates. Patients have filed numerous class-action lawsuits against PBMs, alleging that the middlemen overcharged them.