When Charles Dickens wrote “It was the best of times, it was the worst of times” 175 years ago, he wasn’t talking about 21st century health care in America — but it is an apt analogy. While we have robotic surgery and gene-targeted cancer therapy that can cure afflictions that were a death sentence a generation ago, health care costs consume an enormous portion of our economy — nearly 18 percent of the nation’s gross domestic product, which amounts to almost $5 trillion. 

There are several reasons why health care is so expensive: Most cutting-edge medical research is done here, the cost of testing a new drug or medical device approaches $1 billion and we have an aging population that demands access to top-notch treatment. 

But Nevada Attorney General Aaron Ford wants to blame middlemen — that is, the pharmacy benefit managers (PBMs) — for high prescription drug prices. He recently wrote that their profits come out of the pockets of patients and urged Congress and the Federal Trade commission to rein them in. 

However, Ford’s logic — if a middleman is making money it must ergo be bad for consumers — is nonsensical. PBMs are a necessary counterweight to the market power of pharmaceutical companies granted to them via patents, and eliminating them would increase their profits without benefiting patients. 

PBMs serve as an intermediary between the pharmaceutical companies that create medicine and the entities that pay for it — such as insurance companies, state governments or large employers. A PBM manages the drug formulary and negotiates the cost of prescription drugs for its clients. Because the Robinson-Patman Act prohibits quantity discounts, PBMs negotiate rebates instead of price discounts for their clients, and it returns most of these rebates to their clients, who in turn pass it along to their members via lower insurance costs. 

Pharmaceutical companies may have monopolies on their drugs under patent, but there are often a number of competing drugs to choose from. If a pharmaceutical company refuses to provide a discount, the PBM might choose to put a competitor drug in its clients’ formularies instead. 

A recent report from University of Chicago School of business professor Dennis Carlton found that PBMs effectively drive down drug costs for their plan sponsors. The study reports that PBM operating margins have hovered below 5 percent in recent years, and were lower in 2022 than they were in 2017 — hardly an excessive profit margin.

Not only do PBMs increase competition, but their own landscape itself is competitive: There are more than 60 PBMs operating in the U.S. and their customers can— and often do — switch one PBM for another. 

Independent pharmacists also have a beef with PBMs, primarily because they often institute the direct delivery of drugs to their patients, which can cut them out of the loop. However, bringing drugs directly to the door of rural and elderly patients greatly increases drug adherence, which leads to improved health outcomes and saves billions of dollars a year for the economy as well as Medicare. 

The federal government itself acknowledges that PBMs lower drug prices: In the absence of PBMs, the Center for Medicare and Medicaid Services estimates that the cost of Medicare Part D plan subsidies and premiums would increase by about $4 billion per year. PBMs save states money too: For example, states using PBMs to manage their formularies saved millions of dollars a year by paying less for the direct-acting antivirals that cure Hepatitis C 

PBMs reduce the cost of prescription drugs and improve health outcomes. Blaming them for high prescription drug costs is self-serving political sleight of hand on behalf of a pharmaceutical industry that wants them out of the way. Hindering PBMs would make the worst of times even worse for Nevadans. 

Jared Whitley is a former congressional adviser, White House staffer and winner of this year’s Top of the Rockies award for column writing. 

The Nevada Independent welcomes informed, cogent rebuttals to opinion pieces such as this. Send them to [email protected].