Sunlight best disinfectant for rising drug costs

A recent op-ed published in these pages from former Arizona Congressman J.D. Hayworth rightly argues that prescription drug costs are out of control. Expenditures on pharmaceuticals in the U.S. have exploded — more than tripling  since the year 2000. And sadly, as a result of rising prices, 35% of Americans are reportedly not taking prescribed medication as directed.

It’s a health care crisis that’s mounting by the day.

But rather than taking a holistic approach to addressing bloated medicine prices, the former congressman has blinders on. He argues the problem is a result of pharmaceutical manufacturers alone without acknowledging the drawbacks created by other players. Considering the U.S. health care system is a complex web of insurance companies, hospital systems, pharmacies, and supply chain middlemen, the stance is naïve at best.

While demonizing drug makers, the former congressman gives a full-throated defense of Pharmacy Benefit Managers (PBMs) — better known as the middlemen of the drug supply chain. But PBMs are not the altruistic entities that Hayworth makes them out to be.

PBMs are huge corporations that rake in more than $300 billion a year, with three of the largest ones controlling 80% of the prescription market. And considering that PBM profits have more than doubled over the past decade while offering limited additional value, it’s reasonable to wonder where the money is coming from? Hint: Not from thin air. The billions are being syphoned from the drug supply chain at the expense of patients.

PBMs act as the gatekeepers to the consumer market — a position that gives them considerable leverage to demand drugmakers provide discounts alongside their products. It’s akin to paying a cover charge at a bar or nightclub just to get through the door. However, unlike what the PBM lobby suggests, those discounts don’t get passed down to consumers. The cash is pocketed by PBMs.

As the middlemen continue to game the system, a strong natural experiment has unfolded to help shed light on the cost-multiplier PBMs inject into the drug market. Enter “Shark Tank” investor and Dallas Mavericks owner Mark Cuban.

The entrepreneur has launched an online pharmacy  that buys medicine directly from manufacturers — subsequently selling the product to consumers at a heavily discounted price while still making a modest profit. For example, the cancer drug Imatinib sells  for $12 on the website when the retail price is 200-times that. Meanwhile, an ulcerative colitis medication sells for nearly one-thirtieth of the retail cost.

What’s the secret to the cost saving magic? Cuban’s company is able to bypass the PBM bloat that’s largely responsible for the high drug prices Americans typically experience at the pharmacy counter. It just goes to show there’s a better way.

The U.S. health care system is plagued with complexity. Without transparency, that can lead to bloated costs that compromise the health of Americans. High drug costs are a prime example. Bipartisan efforts in Congress to inject transparency into the drug supply chain should be encouraged.

Sunlight is the best disinfectant.