It’s time to share the savings in prescription drug costs

Published 10:17 am Tuesday, November 15, 2022

Getting your Trinity Audio player ready...


American health-care innovation has saved countless lives. Whether it’s a new vaccine to prevent serious illness, or a breakthrough treatment to help someone manage a previously debilitating chronic disease, we owe a lot to those researchers and scientists in white lab coats.

But what if they toiled away in the lab to make that new medicine and no one could access or afford it? And what if the reason was because some unknown middleman was dictating the cost and skimming vast sums of money off the top to pad their bottom line?

Email newsletter signup

While we’d like to think that no one would stand for such a thing, this is unfortunately what happens every day in our modern health-care system.

It should be a lot simpler. Scientists develop a medicine, physicians determine when to prescribe it, pharmacists dispense it, and a patient takes it to manage their health. But somehow it became commonplace for an insurance company to dictate which medicines a patient can take—and for a pharmacy benefit manager, or PBM, to determine how much they pay for it. And we’re supposed to believe they do this to help businesses and individuals save money.

Because of these unfair practices, tens of millions of Americans struggle at the pharmacy counter. And with worsening inflation on all the other necessities of life, this situation is only getting worse. In fact, the Kaiser Family Foundation found that 30 percent of patients don’t take their prescriptions as prescribed due to cost—and instead, choose to cut pills, skip doses or not fill prescriptions at all.

If you’re still not convinced, consider this: in recent years, the net prices of drugs—the list price, minus rebates and other discounts and reductions—have been going down. This should translate to lower costs for patients, but we’re seeing the opposite. Patients are spending more on prescription medications, even though PBMs and insurers are hauling in more savings.

Not surprisingly, PBMs and insurers are working hard to protect the complex web they’ve created to snare as much money as possible and increase their profits. But legislators at the state and federal levels are continuing to fight on patients’ behalf—and thanks to their efforts, we’re moving in the right direction.

In 2020, the Kentucky General Assembly passed groundbreaking legislation to rein in PBMs’ involvement in the state’s Medicaid program by creating a single drug formulary, managed by one PBM. Cutting out multiple unnecessary PBMs is expected to save taxpayers hundreds of millions of dollars a year, while ensuring patients can more easily access the medications they need to manage their health.

Of course, additional work remains to ensure patients are not bearing the brunt of PBMs’ unfair practices. That’s why a large and growing group of patient advocates and health-care providers are encouraging legislators to focus on patients over PBM profits—and are calling for legislation that would require middlemen to share manufacturer rebates directly with patients at the point of sale.

PBMs and insurers negotiate with drug manufacturers to get lower prices on prescription medicines. In theory, these savings should be passed along to patients to reduce their out-of-pocket costs. In reality, the system allows PBMs and insurers—massive, billion-dollar corporations—to keep the rebates, while continuing to charge patients higher prices for their medications.

“Share the savings” legislation would put an end to this unfair practice—and could save Americans living with chronic diseases hundreds or even thousands of dollars per year. That’s more money in the pockets of Kentuckians where it belongs.

PBMs and insurers defending the status quo argue that premiums will rise sharply if these rebates are shared with patients. And they also falsely claim that it will increase the costs for our businesses as well. But actuarial studies show that’s not true, including a 2022 study from Milliman that projects an increase in premiums of less than 1 percent—and that’s not even counting the savings from reduced hospitalizations that would result from patients taking their medications as prescribed.

The truth is that patients can’t afford not to share in these rebates. And that’s why it’s time for PBMs to start sharing the savings.

George Huntley of Indianapolis is CEO of the Diabetes Leadership Council and the Diabetes Patient Advocacy Coalition. He has lived with Type 1 Diabetes for 39 years. Lexington insurance agent Stewart Perry is a lifelong patient advocate living with Type 2 diabetes and a founding member of the Diabetes Leadership Council.