Guest opinion: Sen. Romney stood up to Big Pharma. Other senators should, too
It is no secret that Utahns are struggling to pay for health care. More than half have experienced health care affordability over the past year, while over 40% have delayed going to the doctor due to cost concerns.
But while residents across party lines want their political leaders to do something — anything — to get this problem under control, Sen. Bernie Sanders (I-Vt.) seems dead set on working with Big Pharma to make things worse.
Sanders is behind the Pharmacy Benefit Manager Reform Act (S. 1339), which undermines the authority of the eponymous group.
PBMs are third-party administrators of prescription medicine plans for insurance companies, businesses large and small, and government health plans. They administer the plan’s drug formulary, process prescription claims and negotiate discounts with drug manufacturers.
Basically, PBMs act as a check and balance — like in our system of government — on pharmaceutical companies, obtaining price discounts for the consumer in the form of rebates.
Sanders’ bill would gut their ability to negotiate, under the mistaken assumption that they are the “bad guy,” and it sailed through the Senate health committee by a terrifying 18-3 vote.
The three Senators wise enough to vote against it were Rand Paul (R-Ky.), Tommy Tuberville (R-Ala.) and Utah’s own Mitt Romney (R-Utah). It is commendable that these three stood up to Big Pharma in opposing this bad bill, and everyone watching hopes that Mike Lee — who does not serve on the health committee and has not had the chance to weigh in on the bill — joins Romney to vote against it when it hits the Senate floor.
The value PBMs provide have long been known.
Way back in 1998, the nonpartisan Congressional Budget Office concluded that “while drug companies have a vested interest in increasing costs, PBMs have a vested interest in restraining them.” Having an intermediary puts “downward pressure on the prices of brand-name drugs.”
In 2016, the Government Accountability Office found that PBM rebates offset Medicare Part D spending by $29 billion, effectively reducing overall expenditures from $145 billion to $116 billion. Former Trump economist Casey Mulligan confirmed the $145 billion number with a study of his own. The Insure the Uninsured Project said these savings are particularly important for small- and medium-sized businesses that cannot negotiate lower prices from pharmaceutical companies on volume that are the biggest drivers of increasing prices, accounting for 65% of the net cost of every prescription.
Now, pharmaceutical companies are not inherently evil. We need them to provide pharmaceutical drugs to us. But we know it is the nature of any organization with unrestricted power to abuse that power — so PBMs have a free-market incentive to push back on behalf of patients. Yes, they make money in the process, but they save us more.
However, the three biggest drug wholesalers pushing for Sanders’ bill — Cardinal Health Inc., Amerisource Bergen Corp. and McKesson Corp. — well, let us just say they are very self-interested.
The three control and distribute more than 90% of the country’s drugs. That means they control the crazy-high prices we pay for many drugs. In business school, they would call something like this a triopoly. In Columbia in the 1990s, they would call it a cartel.
State attorneys general have charged the group with allegedly participating in price-fixing schemes — but it is not every AG in America. Only 49 of them!
This is not the only time the cartel has been in trouble.
In partnership with Johnson & Johnson, these three companies also recently paid $26 billion to settle a lawsuit that accused them of fueling the opioid crisis. Thanks to the efforts of Attorney General Sean Reyes and his team, 27 counties in Utah have signed onto the agreement, setting themselves to receive $266 million over 18 years: half to the state and half to local communities for treatments, harm reduction and so forth.
In public, lawmakers like Sanders like to wag their finger at Big Pharma, but the wagging finger becomes an open hand come campaign season.
If McKesson, Cardinal Health and Amerisource Bergen can afford to shell out millions upon millions in legal settlements, they can throw a few bucks at a few senators. We can all be grateful that Romney was not among them.
Frances Floresca is a freelance policy analyst and reporter who has worked for free-market organizations in Utah, the District of Columbia and Nevada. She grew up in Utah and graduated from the University of Utah David Eccles School of Business in 2019. Frances was cited in the 2021 Republican Study Committee’s budget proposal to Congress and has been featured in a variety of publications including the Washington Examiner, InsideSources and Deseret News.