Op-Ed: Inflation Reduction Act is full of missed opportunities on healthcare
President Biden recently took a victory lap for passing the Inflation Reduction Act — a $430 billion legislative package that was signed into law last month. But reality had other plans that put a damper on the event. According to federal government data that was released on the same day, inflation remains sky high.
More specifically, core consumer prices — which is the indicator closely watched by the Federal Reserve — increased by 6.3% in August compared to the year before. That amounts to an acceleration from the two prior months and suggests inflation is picking up steam rather than slowing down. Last month's news flies in the face of White House rhetoric, which has repeatedly suggested the IRA would in fact pump the brakes on the pain Americans feel at the checkout counter.
But broad, economy-wide inflation isn’t the only area in which The White House and its allies in Congress missed the mark with the IRA. Proponents of the legislative package also argued the bill would meaningfully tackle drug prices. But instead of moderating healthcare inflation, the bill does the opposite. Curiously left out of the final version that was signed into law were provisions to address the middlemen of the drug supply chain that are primarily responsible for bloated medicine costs paid by consumers.
You see, these entities — called Pharmacy Benefit Managers — act as the gatekeepers between drug makers and the consumer market. In their intermediary role, PBMs use their leverage to pressure drug manufacturers into offering rebates alongside their products. In a perfect world, these discounts would all be passed along to patients as savings at the pharmacy counter. But unfortunately, Americans struggling to afford their prescription drugs get the short end of the stick. Much of the discounts are pocketed by PBMs.
It's a sweet gig for middleman executives, but a raw deal for patients. In 2020, PBMs collected nearly $200 billion in rebates from the drug supply chain — a cash cow that has grown by more than 80% since 2014.
A snapshot of the last four years helps show the real consequences patients have experienced at the hand of PBMs. Since 2018, when taking into account the rebates already offered by drugmakers, the net price of brand name pharmaceuticals has declined every year. But the average American wouldn’t know that. The prices they pay — after drugs make their way through the PBM spiderweb — have gone up. Translation: The middleman scheme is driving up the cost of medicine, not the pharmaceutical companies that are often made the villain.
To add insult to injury, not only did the IRA not broadly address the profiteering role PBMs play in the drug supply chain, but the bill permanently nixed a Trump-era executive order that would have lowered the cost of medicine for seniors. Nicknamed the rebate rule, the executive action — if left to take effect — would have forced PBMs to pass along discounts already provided by drug makers to patients accessing medicine through Medicare Part D. But sadly the status quo remains and congress has avoided providing even limited relief.
The Inflation Reduction Act is full of missed opportunities. Inflation is still raging, and the middlemen of the drug supply chain still have the green light to pad their pockets at the expense of patients. Lawmakers should head back to the drawing board, but this time with the needs of patients who cannot afford prescription medications as a priority rather than the needs of special interests.
Dr. Robert Campbell is a practicing physician anesthesiologist in Lebanon County and a partner of the Job Creators Network Foundation, which manages HealthcareForYou.com.
This article originally appeared on The Intelligencer: Op-Ed: Inflation Reduction Act missed an opportunity on healthcare
