Another Voice: Thank Congresswoman Malliotakis for lower Medicare drug costs

In May, she and her colleagues on the powerful House Ways and Means Committee unanimously advanced a bipartisan bill that could substantially lower drug prices. It would do so by reining in middlemen known as pharmacy benefit managers, or PBMs, who inflate the price of medicine.

PBMs decide which treatments to include, and exclude, from insurance plans’ lists of covered drugs. PBMs have the power to grant — or deny — drug companies access to tens of millions of patients. And the PBMs use this enormous leverage to extract lower prices from drug manufacturers.

In theory, that should benefit patients.

But unfortunately, PBMs aren’t passing the tens of billions of dollars in discounts they negotiate along to patients at the pharmacy counter. In fact, PBMs actually inflate drug costs for many patients.

That’s because PBMs generally take a fixed percentage — often around 10% — of a drug’s initial “list” price as their cut. So when PBMs choose which medicines to cover, they have an incentive to select nominally more expensive ones that come with higher discounts, rather than drugs with lower list prices but lower discounts.

Patients never see the discounted prices at the pharmacy counter, though, because the discounted prices are kept secret. Patients’ coinsurance is calculated based on a drug’s original list price, rather than the discounted price that PBMs negotiate.

The impact is enormous. A report from the University of Southern California found that PBM schemes force consumers to pay up to 20% more on generic drugs than they otherwise would — drugs that are supposed to be cheaper alternatives to name-brand medicines.

This is where Congresswoman Malliotakis and her colleagues come in. Their bill, HR 8261, would finally de-link PBM compensation from a drug’s list price in the Medicare market. Instead, they’d be paid a flat fee for their negotiating and administrative services — regardless of a drug’s price.

This reform would remove the incentive for PBMs to favor high-price drugs, lower out-of-pocket costs for seniors and increase options for doctors.

Seniors and the Medicare system would feel immediate financial relief. Of course, lawmakers will eventually need to go further and delink PBM compensation in the commercial insurance market as well. But Malliotakis’ bill is a great first step to lowering drug prices. She’s standing up for Medicare patients in New York City and across the country.