I have always supported a competitive, free market as the best way to ensure fair prices and promote innovation. Good ol’ fashioned American competition brought us many of the technologies we rely upon today and healthy markets can keep prices reasonable for a wide range of products and services.
But when competition is reduced and whittled away, monopolies and oligopolies will hike prices, ignore quality, and work to maintain monopoly power rather than advance new innovations.
Some of our greatest health market failures are occurring in the pharmaceutical space. With three pharmacy benefit managers now controlling about 80% of the market and all three consolidated with an insurer and pharmacy, the PBM market is full of conflicts of interest. Community pharmacists such as Joe Moose testifying today and Ray Carvajal of San Antonio, are very familiar with the problems posed by consolidation. These community pharmacies are a vital part of our health care system—often providing patients invaluable professional counseling.
Just as hospital and provider consolidation is edging out independent providers, PBM and pharmacy consolidation is resulting in independent, community pharmacies being dropped from networks or effectively edged out through anticompetitive contracts.
No single PBM reform is a panacea, and many may do more harm than good if implemented in isolation without reforms to manufacturer pricing. We need guardrails that harness the negotiating power of PBMs while ensuring a fair market. And recognizing that many drug prices are effectively nonnegotiable because of pharma monopolies, we need policies that ensure reasonable prices from the moment a drug is launched and timely generic competition to further contain costs.
In the pharmaceutical space, government-sanctioned monopolies in the form of patents have granted manufacturers lengthy periods of market exclusivity and pricing power. Big Pharma then manipulates our patent system to extend their monopolies and delay generic competition long past our system’s initial intent.
By one new estimate, about $40 billion in taxpayer dollars were wasted in 2019 alone on drugs that violated antitrust laws when delaying competitors. Thanks to Big Pharma’s anticompetitive behaviors and monopoly prices, 30% percent of adults report not picking up prescriptions or skipping doses because they could not afford their medications. Last year, a single company made over $100 billion in revenue. Where are these profits going? Pharma pours millions into lobbying Congress each year to block even the smallest reform and point fingers at their favorite boogeyman, pharmacy benefit managers. I can seldom open a Capitol Hill paper without seeing a colorful pharma-funded ad attacking PBMs. And there is a reason for that, PBMs are the one part of the supply chain pushing back on monopoly drug prices.
Though I am certainly not a defender of some PBM anticompetitive behavior, these so-called middlemen are one of the few tools we have to contain outrageous drug prices. Since Big Pharma secured a law from this Congress to deny Medicare the right to negotiate drug prices, pharmacy benefit managers are among the few that are able to negotiate substantial discounts.
Increasing health care consolidation combined with flawed system design and policies that sanction monopolistic behavior is failing patients across the health care system. Prices increase year after year, emergency room wait times lengthen, doctors’ offices close, and quality of care suffers.
Due to lack of antitrust enforcement, 95% of metropolitan areas have highly concentrated hospital markets, nearly 80% have highly concentrated physician markets, and 58% have highly concentrated insurer markets. In my hometown of Austin, I continue to hear from independent physicians facing the threat of consolidation, often through a private equity buyout. This consolidation is not only increasing health care costs by stifling competitive forces, it threatens patient care. In one egregious example, researchers found that post-nursing home discharge mortality rates among Medicare patients increased by 10% after a private equity acquisition. Meanwhile, Medicare spending increased by 6-8%. This is just one of the many harmful impacts of consolidation.
I look forward to today’s discussion on the broad range of anticompetitive behaviors that have gone unrestrained for too long and how best to advance a fair, just, and affordable health care system for all patients.
Original source can be found here