Believe it or not, Americans just might have received some good news on the inflation and prescription drug pricing front. But despite what the left might want to claim, the price controls included in Democrats’ Inflation (Reduction) Act had nothing to do with it.
The Wall Street Journal recently broke the news that pharmacy giant CVS Health is about to change its pricing model. Over time, an industry leader’s move to a more transparent way of pricing prescription drugs could lead to a simpler system — and real savings for patients.
An Opaque System of Rebates
Before analyzing CVS’s move, it’s worth dissecting the current system of drug pricing. Right now, most pharmaceutical benefit managers (PBMs) — which includes CVS — focus on achieving high rebates for their insurer customers.
For instance, a drug could have a public “list price” of $100, but the pharmaceutical company will pay the PBM a rebate of $60, lowering the net cost of the drug to $40. It sounds like the rebates bring down the price of drugs, but this system comes with some big catches.
For starters, patients’ co-payments or co-insurance for the drug get tied to the higher list price. To continue the example above, a 20 percent co-insurance on a $100 list price will obviously cost a patient more at the pharmacy counter than 20 percent co-insurance on the lower net price of $40.
PBMs generally do pass through rebates to patients, but via lower premiums, not lower cost-sharing. (PBMs can
