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Congress has a great opportunity to investigate a financial threat to patients




Congress has a great opportunity to investigate a financial threat to patients

Following a massive cyberattack on a subsidiary of UnitedHealth Group, the Senate Finance Committee has summoned the company’s CEO, Andrew Witty, to testify 30th of April. The hackers stole millions of medical recordswhich reflects poorly on the company’s ability to protect patients.

But as members of Congress question Witty about the cybersecurity breach, they should also question him about other ways his company is harming patients. Lawmakers should start demanding clarity on the industry’s middlemen known as pharmacy benefit managers, or PBMs, one of the largest of which is owned by UnitedHealth Group.

PBMs negotiate drug prices with drug manufacturers on behalf of insurers. You would expect this to lead to lower costs for patients, but in reality the opposite happens due to misaligned incentives.

PBMs’ bargaining power comes from their control over insurance company “formularia” — or the lists of what drug insurers cover and patients’ cost-sharing obligations. The problem is that PBMs are reimbursed a percentage of the nominal “list price” of drugs, meaning they have an incentive to favor the most expensive drugs for formulary placement, even when cheaper brand or generic alternatives are available.

This harms patients because the amount patients pay at the pharmacy counter is not based on the “net price” that PBMs and insurers pay after the discount. Instead, patients’ cost-sharing obligations are typically based on the much higher cost of the drug list price. As a result, many patients have to pay hundreds or even thousands of dollars more per year than they otherwise would.

To make matters worse, PBMs and insurance companies like UnitedHealthcare are increasingly consolidated. The three largest PBMs, Optum, Express Scripts and Caremark, which jointly exercise control 80% of the PPE market– either own or are owned by insurance companies.

This consolidation has real-world consequences. For example, PBMs often use integration with insurers to find out whether patients have used copay assistance coupons (rebates provided directly by pharmaceutical companies) to cover their portion of the amount owed when they purchase a drug. Then the PBMs and insurers refuse to count the amounts paid with coupons toward the patient’s deductible, even though they still pocket the money.

All these practices mean that the annual out-of-pocket expenditure on medicines is even higher – if they can even afford their medicines. In a 2023 study from the Kaiser Family Foundation, three in 10 adults reported not taking their medications as prescribed in the past 12 months due to cost.

It is difficult to overstate the impact of PBMs on our healthcare system. Payments collected by PBMs accounted for a staggering amount 42 cents of every dollar spent on brand-name drugs last year. And the difference between list prices and net prices is increasing, he said data from the Drug Channels Institute. That means PBM profits are likely to rise – again without benefit to patients.

To reduce excessive out-of-pocket costs, we must bring clarity and competition to the murky world of PBMs. When Witty takes the stand, senators should ask him how much Optum Rx makes from drug makers, what it charges insurers, and what benefit, if any, patients see from it. This information will help lawmakers develop policies to dismantle the current incentive structure and expose PBM deals.

Patient well-being depends on such reforms.