- In February, Congress brought in a group of pharmaceutical CEOs and executives from seven companies to testify about the high price of prescription drugs.
- On Tuesday, Congress is set to keep the conversation going, this time grilling pharmacy benefit managers, the little-known middlemen responsible for negotiating lower drug prices.
- From when the drug is made to when you pick it up at the pharmacy counter, there can be as many as five companies involved.
- Here’s a look at who pays for a medication and why that can lead to higher prices.
When it comes to the high price of prescription drugs, there’s a lot of blame to go around.
For a single prescription drug, there are often five companies involved, from development all the way to your medicine cabinet. Those include the drugmaker, wholesaler, pharmacy, pharmacy benefit manager (PBMs), and your insurer. Each company makes a tidy profit along the way. And as prices increase, so do those profits.
We’re about to get a better picture of how PBMs – the entities responsible for negotiating discounts for prescription drugs – fit into that picture. Representatives from five of the biggest PBMs will testify in front of Congress on Tuesday.
It’s a continuation of hearings on drug pricing that started when CEOs and executives from seven pharmaceutical companies testified at a Senate hearing about the role they play. In the US, drugmakers ultimately set the list price of their medication, which they can increase at their discretion.
List prices for pharmaceutical have been increasing over the past decade. But many drug companies have said that net prices – which factor in discounts and rebates negotiated by PBMs on behalf of employers and insurers – have increased far less, or even declined.
They say consumers are paying high out-of-pocket costs for their drugs because of policies set by insurers and PBMs. On Tuesday, those PBMs – many of whom are now owned by health insurers – will have a chance for rebuttal.
Here’s an example of how drug prices get set, based on a theoretical monthly prescription with a list price of $100 a month for a person with a commercial insurance plan that covers all but a $20 co-pay. The graphic is based on Business Insider’s reporting and data on industry averages. The hypothetical example, of course, doesn’t cover every scenario in drug pricing.
- Skye Gould/Business Insider
This post was initially published in February and has been updated.
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