The healthcare system in the United States is facing a crisis, with high costs and middling quality. The culprit? The so-called 'Big Medicine' conglomerates, which include pharmacy benefit managers (PBMs), insurance companies, and drug distributors. These entities wield significant power, driving up costs and pushing independent providers out of business. The situation is dire, and it's time to take action.
One of the key players in this crisis is the PBM industry. These middlemen, such as CVS Caremark, Cigna's Express Scripts, and UnitedHealth Group's Optum Rx, control a staggering 80% of U.S. prescriptions. But their influence goes beyond that. Each of these PBMs is vertically integrated with major insurance conglomerates and pharmacies, giving them immense control over the healthcare system. And it's not just about prescriptions; they also dictate which drugs patients receive, often steering them towards pricier options.
The Federal Trade Commission has exposed the extent of this manipulation, finding that the big three PBMs paid their affiliated pharmacies up to 7,736% more than unaffiliated competitors. This is a clear case of market power being used to drive up costs and undermine competition. The situation is so dire that it has led to legal action, with Cencora agreeing to pay $1 million to resolve allegations of violating the False Claims Act by paying kickbacks to healthcare providers.
But PBMs aren't the only culprits. Drug wholesalers, such as McKesson, Cencora, and Cardinal Health, control a massive 96% of U.S. drug distribution. And they, too, are vertically integrated with medical providers, creating conflicts of interest. The result is a system where profit margins can dictate which drugs patients receive, potentially impacting their health.
The pharmaceutical industry, or Big Pharma, is often blamed for high drug costs by PBMs. While it's true that Big Pharma abuses patents to keep costs high and block competition from generics, this doesn't absolve the rest of Big Medicine from their responsibilities. The situation is complex, and it requires a comprehensive approach to reform.
Policymakers have taken some steps to address the issue, such as banning PBMs from pocketing manufacturer rebates and excluding independent pharmacies from their networks in Medicare Part D. However, these reforms are only a start. The big three PBMs' vertically integrated business model remains intact, and they continue to wield significant power over the healthcare system.
To truly address the crisis, we need to break up the Big Medicine conglomerates. This includes prohibiting insurers, PBMs, and wholesalers from owning or controlling healthcare providers, as proposed by the Break Up Big Medicine Act. Research shows that such a move would lower healthcare costs and promote competition, with UnitedHealthcare paying its affiliated providers 17% more than competitors.
Public support for this kind of legislation is growing, with business leaders like Mark Cuban endorsing the idea. The American Economic Liberties Project, along with a coalition of 25 organizations, supports the Break Up Big Medicine Act. It's time to take a page from the Great Depression era, when the Glass-Steagall Act separated commercial and investment banks to prevent systemic risks. Breaking up Big Medicine is a necessary step to ensure a healthier and more affordable healthcare system for all Americans.
