Prescription drug affordability is a tremendously important issue to the American public. Its importance is only expanding as Americans grow older and are prescribed more medications to treat medical conditions. Over 70 percent of American adults now report taking at least one medication daily, with 24 percent reporting they take four or more medications. Together, they purchase over six billion drugs each year in the United States.
The price of these prescription drugs continues to climb, stretching Americans’ budgets and putting millions of people’s wellbeing in jeopardy. Since 2014, drug prices have increased 35 percent, while the cost of all other items and services has increased only 19 percent. Americans now spend more than $1,500 annually on drugs, an amount substantially higher than that which citizens of other developed countries spend.
Lawmakers have narrowed down a suspect responsible for this abnormal increase in prescription drug costs. A growing body of research suggests that Pharmacy Benefit Managers (PBMs) are largely to blame. These industry middlemen negotiate drug prices and manage prescription drug benefits for various health plan payers. Originally created in the early 1960s to process claims and negotiate lower prices with drug makers, PBMs have, over time, lost sight of this original mission. They now increasingly leverage their position as third-party administrators to enrich themselves at the expense of everyone else, including consumers who, researchers say, routinely overpay for drugs.
Published in its entirety in The Economic Standard.