March 28, 2017 – It’s not insurers or Big Pharma sustaining rising prescription drug prices—it’s PBMs that are supposed to be saving patients and self-funded insurers money.

Stop me if you’ve heard this one before—PBMs insist that drug prices would be even higher without them. Since you don’t have much of a choice (just three firms control 80 to 85 percent of the market, and each of “the big three” appears at the top of the Fortune 500), you may have been forced into accepting this notion. Now, after years of PBM abuses, most self-funded companies employ additional layers of consultants to limit pricing mischief.

David Dayen, writing in The American Prospect notes that, “Americans pay the highest health-care prices in the world.” And thanks to a system that allows undisclosed rebates, artificial price inflations, kickbacks, steering, and other deceptive practices, “PBMs are sucking money out of the health-care system—with hardly any public awareness of what they are doing.”

According to the Centers for Medicare and Medicaid Services in the past 20 years, expenditures on prescription drugs have jumped 1,100 percent. There are lots of reasons for this—biosimilars and other specialty drugs among them—but there is no question that PBM profit margins have been growing as well. According to one report, Express Scripts’ adjusted profit per prescription has increased 500% since 2003.

Your PBM’s posture as a cost-reducer depends on the notion that by aggregating customers—including employers that self-insure—they are able to negotiate discounts from both drug companies and pharmacies. The savings, in theory, pass through to plans and their patients. That’s not what’s happening of course. Industry consolidation, including vertical integration, has meant that the billions of dollars in profit are coming not out of the pockets of big drug companies or insurers, but of struggling independent retail pharmacies and consumers.

There are indications, for instance, that PBMs place drugs on their formularies based on the rebate they are able obtain, rather than the lowest cost or what is most effective for the patient, and pricing games with brand-name drugs are just par for the course—PBMs have devised even more profitable schemes for generics. Check out Mr. Dayan’s eye-opening article here (and maybe call one of Scripta’s pharmacy savings experts…)

Read more from The American Prospect:
The Hidden Monopolies That Raise Drug Prices: How pharmacy benefit managers morphed from processors to predators.