Paul Alexander: Shapiro figured out how to combat high drug prices — can it help Kamala Harris?

In a recent poll conducted by the Pew Research Center, health care was the third most important issue for voters in the presidential race, a concern voiced by 57% of respondents who were interviewed.

In many cases, voters are worried about high drug costs. That’s why, this year before he ended his campaign, President Joe Biden summoned help on the issue from Sen. Bernie Sanders of Vermont, who chairs the Health, Education, Labor and Pension Committee. It remains to be seen whether Kamala Harris will seek assistance from Sanders, but if the vice president does want a credible cohort on the subject of lowering drug costs, she need look no further than Pennsylvania Gov. Josh Shapiro, who last month signed into law the bipartisan Pharmacy Audit Integrity and Transparency Act (House Bill 1993). Once implemented, the legislation will lower drug costs in Pennsylvania.

HB 1993 is effective because it addresses the real reason drug prices are out of control — the pharmacy benefit manager. PBMs are middlemen who dictate what drugs get sold and at what price. An insurance company, whose profits are capped by Obamacare at 15 cents out of a dollar, often owns a PBM, which does not have a cap on profit-making.

Harris is aware that PBMs are the problem. Last week, in a speech detailing her economic plans, she announced she would “demand transparency from the middlemen who operate between Big Pharma and the insurance companies, who use opaque practices to raise your drug prices and profit off your need for medicine.”

Among the questionable practices PBMs employ are forcing pharmaceutical companies to pay hefty rebates they keep instead of passing along to consumers. If a pharmaceutical company refuses to pay the rebate demanded by the PBM, the insurance company (which owns the PBM) will refuse coverage of that medication. It’s essentially a form of extortion, so the drug companies usually end up offering massive rebates to the PBMs.

What’s more, the top three PBMs — CVS Caremark, OptumRx and Express Scripts — control almost 80% of prescriptions filled yearly; add in the next three, smaller PBMs, and market control reaches 95%. This monopoly allows these health care companies to make staggering profits. CVS Health, thanks in part to its PBM CVS Caremark, ranked, according to one source, “as the sixth largest company by revenue in the latest Fortune 500 list, with over $357 billion earned in 2023 alone.” It’s clear, then, why insurers turned to PBMs to get around Obamacare’s 15-cent-on-the-dollar rate cap on profits.

HB 1993 addresses various bad practices carried out by PBMs, but the most consequential reform demanded by the bill is the requirement that a PBM must disclose all rebates from pharmaceutical manufacturers that it keeps and, to quote from the bill, “pass through to the health benefit plan no less than 95% of any prescription drug manufacturer rebate obtained by the PBM.” In other words, the law will bring down drug costs by returning 95% of the drug manufacturer’s rebate to the customer or their health plan — and it will demand transparency as a form of proof.

Sanders has long fought for lower drug costs, but if he wants to achieve demonstrative success, he should follow Shapiro’s lead and pass a federal version of HB 1993. Currently, Sanders has scheduled for September a hearing featuring Novo Nordisk chief executive officer Lars Jorgensen to question him about the high cost of drugs like Ozempic, when, in fact, Sanders knows the cause — PBMs. After all, he himself has authored a PBM reform bill, and so many of his congressional colleagues are aware of the issue 24 of them have written similar bills. Sanders simply needs to pick the best bill and try to pass it.

If Shapiro can accomplish PBM reform in Pennsylvania, Sanders, one of the lions of the Senate, should be able to do the same in Washington — and in the process hand Harris a vital issue that could help her win the presidency.