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Illustration: Caresse Haaser, Rebecca Zisser / Axios

After months of circular finger-pointing over high drug prices, lawmakers, administration officials and parts of the health care industry seem to have settled on an initial target: pharmacy benefit managers, the middlemen that health insurers and employers hire to negotiate with drug companies.

Yes, but: There are savings to be wrung out of the highly concentrated PBM industry. That's why insurers are so eager to operate their own PBMs. But analysts say squeezing PBMs won't solve some of the fundamental problems that drive high drug spending.

What Washington is doing: Health and Human Services Secretary Alex Azar and FDA Commissioner Scott Gottlieb both had strong words for PBMs and insurers last week. Gottlieb said they misuse the rebates PBMs negotiate on drugs, and rely on a "short-term profit goose" rather than bringing down consumers' drug costs.

  • Azar and Gottlieb want PBMs and health plans to pass on more of those savings to consumers when they pick up their prescriptions at the pharmacy.
  • UnitedHealthcare said last week it would start doing so, in a limited fashion.

Several members of Congress also have called out PBMs over the past year.

What pharma is doing: The pharmaceutical industry, meanwhile, has consistently cast PBMs as the villains in its year-long lobbying campaign to prevent the government from cracking down on prices.

  • "It's clear the knives are out for (PBMs) politically as a way for pharma to save their own pricing practices," said Andrea Harris, a health care analyst at Height Capital Markets.

What insurers are doing: Merging with PBMs.

  • Cigna's pending $52 billion acquisition of Express Scripts followed the proposed merger of CVS Health and Aetna. And these deals come roughly three years after UnitedHealth Group's OptumRx bought Catamaran.
  • If those deals clear antitrust review, the three largest PBMs in the country — Express Scripts, CVS and OptumRx — would all be tied to the hip of health insurance conglomerates.

Combining insurers and PBMs under one roof was the status quo a decade ago, and it makes some sense. It leaves one fewer mouth that needs to be fed profit, and offering medical and prescription drug benefits together is less disjointed.

But these deals are about gaining an upper hand in negotiations with drug companies and could spur pharmaceutical makers to pursue their own round of mega-mergers. No company enjoys losing negotiating leverage.

The intrigue: PBMs have helped bring down net spending on some drugs, according to data from industry reports. But they also have profited from secretive rebates and raised concerns about whether they have exploited their market power. Changing PBM structures could help people who are struggling to pay for their medicine.

The catch: Squeezing the middleman can only go so far.

  • PBMs negotiate rebates off a drug's list price. That process begins with high list prices, and drug companies are still free to jack up those numbers at will.
  • There's no guarantee higher rebate amounts will actually go back to patients, and insurers can easily raise their premiums to offset any rebates they have to dish out at the pharmacy.

"If there is increased clout, leading to lower drug prices from pharmaceutical companies, will they pass those savings on to consumers? We don’t know that," said Ben Gomes-Casseres, a professor at the Brandeis International Business School who studies mergers.

Go deeper

Fed: Rate hikes "will soon be appropriate"

The Federal Reserve's headquarters building. Photo: Anna Moneymaker/Getty Images

Federal Reserve officials expect "it will soon be appropriate" to raise the central bank's main target interest rate, setting the stage for a rate hike at its next meeting in mid-March.

Driving the news: In a statement following a two-day meeting published Wednesday afternoon, however, the policy-setting Federal Open Market Committee teed up its next move without taking new action.

How long it’s taken to confirm Supreme Court justices

Expand chart
Data: Axios research, U.S. Supreme Court, Supreme Court Historical Society; Chart: Jacque Schrag/Axios

It takes a U.S. president an average of 70 days from the date a Supreme Court seat is vacated to nominate a replacement, according to data from the Supreme Court Historical Society.

Why it matters: With news outlets reporting liberal Supreme Court Justice Stephen Breyer's plans to retire, Democrats will be looking to confirm President Biden's nominee with enough time to refocus the national political debate ahead of the midterms.

Updated 30 mins ago - Science

Blizzard likely to hit New England this weekend as "bomb cyclone" forms

Computer model projection of the precipitation and wind field from the weekend storm in the Northeast. (Earth.nullschool.net)

A powerful blizzard is likely to strike parts of New England and the Mid-Atlantic beginning Friday and lasting into the weekend, with snow totals that are likely to be measured in feet.

The big picture: The joining of weather systems embedded in both the polar, or northern branch, of the jet stream and the southern branch is projected to create a bomb cyclone. Such storms undergo a process known as bombogenesis, with their minimum central air pressure readings plunging at least 24 millibars in 24 hours.