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Limiting pharmacy managers will push up Nevada’s health care costs up even more

Jared Whitley
Jared Whitley
Opinion
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The price of health care is going up more than other things Nevadans need, with 73 percent of respondents in one recent poll saying they're more likely to support a political candidate whose top priority is reducing health care costs. 

Last week the Nevada Health Exchange announced that premiums for families will increase by 9.2 percent in 2023. Come January, the average monthly premium for a family of four who obtain medium-level health coverage via the Nevada exchange will be $1,400.

Healthcare prices have increased for a variety of reasons, but one group that the Biden Administration and others have singled out for blame – incorrectly – are pharmacy benefit managers, which administer prescription drug programs for insurance companies, government health plans, and others. PBMs are the intermediary between the companies that create medicine and the entities that pay for it. They negotiate cost reductions for their clients in the form of rebates. 

The existence of PBMs serve to reduce the ability of pharmaceutical companies to exploit their government-granted monopoly to charge high prices for their drugs, and limiting PBMs’ actions would invariably push up prescription drug costs for health plans and individuals. 

Federal Trade Commission head Lina Khan recently announced an inquiry into the impact that PBMs have on the market, with her stated premise being that if PBMs have too much power, it is axiomatically bad for consumers. What she misses is that accumulating market power is precisely why PBMs are effective, as that helps them combat the significant market power pharmaceutical companies have by way of their patents. 

Besides using their power to engender competition in the expensive prescription drug market, PBMs steer the patients covered by their clients to generic equivalents or other, more affordable substitutes. The presence of alternative drugs allows PBMs to obtain lower prices from pharmaceutical companies.

PBMs also encourage their patients to receive prescriptions via the mail whenever possible, which turns out to not only be less expensive but it also significantly enhances drug adherence, as patients can’t forget to pick up refills when they are automatically sent to patients’ homes. It’s especially beneficial for older people with mobility issues or people who live in rural areas, far from a pharmacy. Nevada has a surfeit of people in both categories. 

Home delivery saves the government alone about $14 billion a year in medical expenses because of improved adherence.

The government has tacitly acknowledged that PBMs are, in fact, effective at keeping drug prices in check: a government study estimated that increased spending on just Medicare Part D plan subsidies and premiums would increase by about $4 billion per annum in the absence of PBMs.

PBMs help reduce the cost of prescription drugs and improve health outcomes for beneficiaries. Blaming them for high prescription drug costs is mistaken and limiting their ability to negotiate lower prices would cost Nevadans dearly. 

Jared Whitley is a former congressional adviser, White House staffer, and winner of a “Best in the West” journalism award for his political analysis. 

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