Daily Outtakes: The Hidden Hand Behind Rising Drug Prices

Few players wield as much influence—yet remain invisible to most consumers —as Pharmacy Benefit Managers (PBMs) in America’s healthcare system. These corporate middlemen, created initially to help control medication costs, have instead become a driving force behind skyrocketing prescription prices.

The Middlemen of Medicine

PBMs are intermediaries between pharmaceutical manufacturers, pharmacies, insurance companies, and consumers. The three largest—CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth’s Optum Rx—control prescription benefits for over 200 million Americans.

Last year, a New York Times investigation revealed that these companies have established sophisticated systems that allow them to charge employers and government programs multiple times the wholesale price of medications, retaining substantial profits rather than passing savings on to consumers.

IMG_3206-2 copy - Rick's Blog — Credit Christine Brewster

In a recent interview with Inweekly, author and attorney Mike Papantonio said, “There is nothing about a PBM that in any form or fashion benefits a consumer.”

He added, “The very best scammers in the country from Wall Street and some small part of the healthcare industry said, ‘Let’s come up with a system. We’ll tell the American public that we’re going to protect them from not having to pay high rates for their medicine, protect them from price gouging and give them this notion of what the best medicine is.’”

Instead of passing savings to patients, PBMs have created complex systems that allow them to pocket the difference between what manufacturers charge and what consumers pay.

Papantonio said, “What’s really happening is the PBMs are buying up pharmacies, doing backdoor deals with the manufacturer and controlling drug prices.”

The Insulin Crisis

Where is the impact of PBM practices maybe most evident? Insulin pricing.

WHY THIS MATTERS: Insulin is a lifesaving drug. Insulin manufacturers know that patients who need it will pay whatever it takes to acquire it, regardless of the price. Studies back up that statement.

In 1999, a vial of insulin cost approximately $21. By 2017, that same vial had jumped to $275. The American Diabetes Association reports that insulin spending nearly tripled from $8 billion in 2012 to $22.3 billion in 2022.
Legal experts blame what they described as the “pay-to-play” relationship between drug manufacturers and PMBs.

STARK REALITY: Insulin costs about $2 to produce, yet patients pay more than 100 times that amount. Many people with diabetes face impossible choices—buy insulin or pay rent, purchase medication or buy food. The PBMs, meanwhile, collect substantial “rebates” (effectively kickbacks) from manufacturers to place their medications on formularies.

The Damage to Local Healthcare Access

The effects extend beyond individual patients. PBMs systematically underpay independent pharmacies, forcing hundreds out of business and creating healthcare deserts in vulnerable communities. Federally qualified health centers report receiving significantly less reimbursement due to PBM contracts, directly impacting their ability to provide essential medications to uninsured patients.

WHY THIS MATTERS: In 2023, Community Health Northwest Florida, which serves Escambia and Santa Rosa counties, reported receiving 34% less reimbursement than typical pharmacies due to PBM contracts for the 340B program.

DIG DEEPER: Established in 1992, the 340B program requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to community health centers and safety-net hospitals that serve low-income and uninsured patients. The program allowed hospitals and FQHC clinics to reduce outpatient drug prices for patients and expand health services. However, the reimbursement reduction has forced cuts in services.

In 2021-23, the age-adjusted per 100,000 population of Deaths From Diabetes (All) in Escambia County was 27.6 compared to Florida at 22.6, according to Achieve Dashboard created by the University of West Florida Haas Center. The death rate from diabetes has risen from 19.7 a decade ago.

Legal Challenges Mount

The tide may be turning against PBMs. In September 2023, the Federal Trade Commission took legal action against the “Big Three” PBMs, accusing them of inflating insulin prices and steering patients toward higher-cost products to increase profits. The PBMs have strongly denied these accusations, with representatives arguing they’re being unfairly blamed for high drug prices set by manufacturers.

“This baseless action demonstrates a profound misunderstanding of how drug pricing works,” Elizabeth Hoff, speaking for Optum Rx, told the New York Times. At the same time, CVS Caremark’s spokesman David Whitrap defended his company’s record on making insulin more affordable.

A second FTC report in January focused on PBMs’ influence over specialty generic drugs, revealing significant price markups for cancer and HIV medications. The report focused on PBMs’ influence over specialty generic drugs, including considerable price markups by PBMs for cancer, HIV, and other critical drugs. The markups allowed the Big 3 PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing medications above the drugs’ estimated acquisition costs from 2017-2022

Levin Papantonio is a key player in an insulin overpricing legal consortium that alleges that drug manufacturers, including Eli Lilly, Novo Nordisk and Sanofi, and the Big 3 PBMs have artificially inflated insulin prices. The litigation aims to reimburse for past overpayments and seek injunctive relief to ensure reasonable insulin pricing.

A Bipartisan Opportunity

Addressing PBM practices represents a rare opportunity for bipartisan action. Papantonio said, “This could actually come to an end with the Republican administration because Trump has got to fix the problem. He’s got to bring the cost of medicine down for the elderly.”

Papantonio believes his former law partner, Bobby Kennedy Jr., will address the PBM issue as Secretary of the Health and Human Services (HHS).

“He knows what’s going on here,” Papantonio said. “Somebody’s going to be looking at it.”

Papantonio suggested that Kennedy’s knowledge of the situation could lead to greater scrutiny of PBMs, potentially requiring them to show their records regarding rebates and administrative fees from pharmaceutical manufacturers, which he characterizes as a “total utter fraud.”

He said, “What is it about the American healthcare system that is causing extreme price increases to the point where people can’t even get healthcare anymore? The PBM is number one on my list.”

The Time is Now

Until meaningful reform occurs, millions of Americans will continue paying inflated prices for essential medications while PBMs operate in the shadows. As Papantonio warns in his new book “The Middleman:” If we don’t address PBM practices, “it’s going to continue to evolve, and it’s going to get uglier and uglier.”

The time for transparency and accountability in prescription drug pricing has arrived — American lives depend on it.

Daily Outtakes: The Hidden Hand Behind Rising Drug Prices

The Middlemen of Medicine

The Insulin Crisis

The Damage to Local Healthcare Access

Legal Challenges Mount

A Bipartisan Opportunity

The Time is Now

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