On this episode of the podcast, Terry and Bob discuss how pharmacy benefit managers (PBMs), middlemen between drug manufacturers and insurers, profit at patients’ expense. PBMs collect hundreds of billions of dollars worth of rebates each year from drug companies but then don’t pass these on to patients in the form of lower drug prices. Manufacturers pay these massive rebates to PBMs in order to get placed on insurers’ formularies. (Formularies are the lists of medicines that insurers agree to cover.)

Rebates increase the prices of medications because they inflate list prices, which insurers generally charge patients a percentage of in the form of coinsurance. This convoluted and opaque pricing system often incentivizes PBMs and insurers to choose not the lowest-priced drug to put on their formulary, but the one with the biggest rebate. Eliminating this kickback scheme is perhaps the most important public policy reform to lower prescription drug prices. 

Bob interviews Dr. Madelaine Feldman, president of the Coalition of State Rheumatology Organizations, who discusses the recent revolution in treatments for autoimmune disorders. However, despite these wonder therapies existing, getting access to them is very difficult because even with insurance, they are too expensive. Dr. Feldman explains how the rebate dynamic boosts the prices that patients have to pay: 

  1. Drug manufacturers bid against each other via rebate size to get selected by PBMs to get placed on formularies. 
  2. As rebates grow in this competitive bidding process, so do list prices. 
  3. A drug with, say, an $800 rebate and a $1,000 list price is chosen by the PBM to go on the formulary.
  4. Even though insurers and PBMs enjoy this $800, they still charge patients a 20 percent coinsurance payment on the list price — i.e., another $200. 
  5. Drugmakers and patients could cut out the whole middle, inflationary apparatus of PBMs and insurers and still pay and earn the same amount: $200. 
  6. Absent middlemen, patients would save their premiums, and drugmakers would save these rebates and direct some to patients, reducing drug prices.

PBMs try to obscure their inflationary impact by talking in terms of “savings,” but these savings — as demonstrated by the model above — incentivize higher prices. And real prices — not abstract costs or savings — are what really matter to patients. Dr. Feldman argues that education and legislation at the state level are needed to fix this broken pricing dynamic. 

Patient correspondent Kate Pecora interviews Marc Winski, who has raised awareness for stuttering through his performing arts, including his popular TikTok account. Mark tells his stuttering journey, which included speech therapy. He discusses how he learned that stuttering is a psychological, biological, and visual characteristic that is natural. It’s not a defect that needs to be “fixed” to conform with society’s communication norms.

Listen HERE.