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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

Updated 3 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: WHO: AstraZeneca vaccine must be evaluated on "more than a press release."
  2. Politics: McConnell temporarily halts in-person lunches for GOP caucus.
  3. Economy: Safety nets to disappear in DecemberAmazon hires 1,400 workers a day throughout pandemic.
  4. Education: U.S. public school enrollment drops as pandemic persists.
  5. Cities: Surge in cases forces San Francisco to impose curfew — Los Angeles County issues stay-at-home order, limits gatherings.
  6. Sports: NFL bans in-person team activities Monday, Tuesday due to COVID-19 surge — NBA announces new coronavirus protocols.
  7. World: London police arrest more than 150 during anti-lockdown protests — Thailand, Philippines sign deal with AstraZeneca for vaccine.

Tony Hsieh, longtime Zappos CEO, dies at 46

Tony Hsieh. Photo: FilmMagic/FilmMagic

Tony Hsieh, the longtime ex-chief executive of Zappos, died on Friday after being injured in a house fire, his lawyer told the Las Vegas Review-Journal. He was 46.

The big picture: Hsieh was known for his unique approach to management, and following the 2008 recession his ongoing investment and efforts to revitalize the downtown Las Vegas area.

Dan Primack, author of Pro Rata
15 hours ago - Economy & Business

The unicorn stampede is coming

Illustration: Annelise Capossela/Axios

Airbnb and DoorDash plan to go public in the next few weeks, capping off a very busy year for IPOs.

What's next: You ain't seen nothing yet.