PBMA Briefing Recap: Signed. Settled. Now What?

This past Tuesday, experts and advocates gathered in Rayburn House Office Building for a conversation about where PBM and insurer reform stands and where it falls short. Moderated by Jeanette Contreras from the Organization for Latino Health Advocacy (OLHA), the panel featured Antonio Ciaccia of 46brooklyn Research, Dr. Madelaine Feldman of the Coalition of State Rheumatology Organizations (CSRO), and Mark Merritt  – formerly the President of the Pharmaceutical Care Management Association (PCMA). What emerged was a consensus that the American prescription drug system is dominated by vertically integrated middlemen serving their own interests – and the interests of their affiliated companies – rather than patients’ well-being.

The timing was notable. Just days before the briefing, John Oliver spent an entire episode of Last Week Tonight deep-diving into UnitedHealth Group’s sprawling network of subsidiary businesses and exploring how they distort the system for profit. Highlights from the conversation with our panelists are outlined below.

The Secret Profit Engine

It's not often you hear a former PBM industry executive explain the industry’s role in driving up prescription drug costs. Merritt explained that PBMs were once a reasonable tool for managing drug claims, but over time that changed. Today, he thinks of PBMs as a "secret profit engine for insurers" and a mechanism for extracting value from the system.

Merritt also explained how vertical integration allows the insurance conglomerates that own PBMs to game the Medical Loss Ratio (MLR). Insurers are required to spend 80 to 85 cents of every premium dollar directly on patient care, but because they own physician practices, chain and mail-order pharmacies, and even white-label drugmakers, they can funnel unlimited money to their own subsidiaries without running afoul of the MLR. And as long as premiums and formulary exclusions both keep growing, the math works in insurers' favor regardless.

Antonio Ciaccia made the same point from a different angle: the flow of money through these interconnected companies obscure the true cost of prescription drugs and makes it nearly impossible to tell who profits from the delivery of care. Oliver put it plainly: UnitedHealth, already the largest insurer in the country, is "often on both sides of billions of dollars in transactions."

This is the reality: no matter how well-intentioned, any attempt to reform this system that doesn’t sever the ties between these affiliated entities will easily be circumvented. Although recent FTC settlements with the big three PBMs are expected to rein in some of their worst abuses of the system, the insurers won’t miss a beat making those profits back somewhere else at patients’ expense.

What It Looks Like for Patients

Dr. Feldman outlined how this system interferes with the practice of medicine. Utilization management has become a weapon: insurers now decide not just what drug a patient gets, but when, if ever. Rheumatologists cut from networks and cholesterol shots denied under Medicare Advantage. Patients dropped not because their doctors opted , but because their insurer did.

"Medicare Advantage is great," Feldman said, "if you don't plan on getting sick before you die."

The Hamster Wheel

Ciaccia offered perhaps the clearest-eyed diagnosis: this is a "hamster wheel problem." Despite their claims to the contrary, everyone in the system – insurers, PBMs, GPOs, specialty pharmacies – has a vested interest in keeping prices high. "Don't listen to words," Ciaccia said. "Look at actions."

Consider the insulin example he walked through: a list price of roughly $400, a discount of roughly $350. The entire architecture is built around overpaying for a drug to generate a discount that never reaches the patient.

The parting wisdom from the panel was direct:

• Mark Merritt: Conflicts of interest are rampant and distort the system at patients’ expense. Without new antitrust enforcement, insurers will keep running the table.

• Dr. Madelaine Feldman: Patients and payers need real cost transparency that isn’t compromised by loopholes allowing insurers to hide money in new subsidiaries.

• Antonio Ciaccia: "We don't need another scheme intended to give us more discounts. What we need our actual low prices...what's actually happening is another discount scheme, whether it's MFN or rebates or discounts or 340B, whatever it is. No, the price should be the price.” 

  
  

Policymakers should be asking how a system designed to help patients has become a cash cow for intermediaries. It's time to refocus on the original mission: ensuring patients have access to medications at the lowest possible costs.

Learn more at pbmaccountability.org.