Pharmacy Benefit Managers: Market Power and Lack of Transparency

Today, the American Consumer Institute published a new educational ConsumerGram on Pharmacy Benefit Managers (PBMs) and how their market influence and lack of transparency can influence consumer drug pricing.

PBMs are virtually unregulated in what is an otherwise regulated health care sector. The ACI analysis of the PBM market highlights several issues surrounding PBM negotiations with manufacturers and pharmacies, including a lack of transparency and asymmetric market information – representing a market failure. This market failure means PBMs lack incentive to pass any savings achieved through manufacturer negotiations back to plan sponsors or consumers in the form of lower prices. Therefore, while PBMs benefit from raising drug prices, consumers do not.

We reviewed the industry structure, conduct and performance, and we found a host of problems (market failures and market power).  We concluded that PBMs are major drivers in higher prescription prices for consumers.  We propose a number of “light touch” remedies to increase transparency, heighten competition and increase consumer choice.

You can find the full ACI ConsumerGram here and a quick summary here.

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