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Kamala Harris has an advantage over Donald Trump on the traditionally strong Democratic topic of health care.
Cold-eyed political types looking for a Democratic victory in November argue that Kamala Harris has to deal with the stereotypical first impression from voters, coded largely by race and gender, that she’s too liberal. Because Harris hasn’t given people much to go on about her own beliefs, she has an opportunity to define herself through popular stances that would contrast with that automatic, if not completely correct, opinion of her as a far-left liberal.
One place where Harris does have an advantage over Donald Trump is on the traditionally strong Democratic topic of health care. She also could advance proposals to get out from under some of the inflation perceptions that stuck to Joe Biden. Lurking at the intersection of reducing costs and health care is a thoroughly bipartisan policy that could be championed and even passed right now.
This week marked the third in a series of hearings by the House Oversight Committee on pharmacy benefit managers (PBMs), the middlemen that skim off the top of prescription drug transactions and keep prices high. CEOs of the leading PBMs were brought in to testify.
PBMs work on behalf of health plans and claim to win discounts from drug companies, in part through use of a formulary that dictates what drugs they will cover. In actuality, they exploit an information advantage in this multisided market to skim as much as one in every five dollars out of every prescription drug purchase, harming pharmacies, health plans, and consumers alike. They have incentives to keep list prices high, because their fee depends on a higher rebate off that list price, which they often don’t pass on to health plans but keep for themselves. PBMs are also highly concentrated—the top three, each associated with a major insurance company, control about 80 to 85 percent of all drug transactions—and compete with the pharmacies where they facilitate drug sales. They also play games with reimbursement to earn themselves more cash, and steer patients to their own mail-order pharmacies to drive competitors out of business.
I defy you to listen to the Oversight Committee hearing without looking and figure out which of the questioners are Democrats or Republicans. Rep. Ro Khanna (D-CA) asked Optum Rx’s CEO about denying medication to a ten-year-old despite a doctor’s recommendation, due to cost, while Rep. Gary Palmer (R-AL) asked the president of Express Scripts about how name-brand drugs were 35 times more expensive at PBM-owned mail-order pharmacies than at independent competitors. You could have just had them read each other’s questions and nothing would have been different.
Republicans on the committee released a staff report detailing self-dealing among leading PBMs just days after Democrats on the Federal Trade Commission released their own report detailing the same. It’s been reported that the FTC will sue several PBMs imminently. The Republican attorney general of Ohio has called PBMs “modern gangsters” and sued them for collusion; the split legislature in Pennsylvania just passed a new law, signed by potential VP pick Gov. Josh Shapiro, prohibiting PBMs from steering patients to their own pharmacies, or charging patients more for a drug than what they would pay in cash without a health plan. In an incredible show of bipartisanship, every single state has gotten at least one PBM regulatory law passed since 2016.
Lurking at the intersection of reducing costs and health care is a thoroughly bipartisan policy that could be championed and even passed right now.
But the federal government is easily the biggest payer in health care, and federal policy to protect against PBMs remains absent. The Pharmacists Fight Back Act, introduced by Reps. Jake Auchincloss (D-MA) and Diana Harshbarger (R-TN), would standardize reimbursement to pharmacists for federal health plan drugs. Today, pharmacists often have no idea whether they will make or lose money by dispensing a drug until after they dispense it. The bill would also bar PBMs from steering, force sharing of nearly all rebates on prescriptions with health plans, allow patients to get their drugs from any in-network pharmacy, prevent overcharging patients above the reimbursement rate to the pharmacy, prohibit “spread pricing” where PBMs pocket the difference between what they tell the health plan a drug costs and what they reimburse the pharmacy, and much more.
Proposals for PBM reform have passed multiple committees, and one even got through the House last December. The votes are almost certainly there in Congress; it just needs to be made a priority. If the presumptive Democratic nominee for president lends her support in a timely manner, that could get the bill over the line. Even if Republicans reverse themselves on the question because Kamala Harris endorsed these reforms, that 180 would hand Harris and the Democrats a very exploitable issue.
PBMs have overrun so much of the market that reform could be positioned as helping both patients and small businesses. It’s part of a cost-saving agenda and an agenda to tackle corporate greed. The benefits to independent pharmacies even make it a key rural agenda item, as the support for legislation from rural-district Republicans makes clear. It shows continuity with the Biden agenda while also backing a policy driven by no less than Rep. James Comer, the guy who wanted Biden impeached. And it would improve people’s lives by limiting theft in a $300 billion pharmaceutical transaction market.
Endorsing PBM reform would provide Harris the opportunity to teach a bit about how the economy really works, and explain how she would untangle a mess that dissatisfies everyone. While inflation is seen as the cause for negative feelings about the economy, the pervasive sense people have that they’re getting ripped off is just as much of a problem, and probably a deeper one. PBMs are a perfect illustration of that, and we have an achievable reform that both parties support.
There’s no real need to wait on this. Leverage from the presumptive Democratic nominee could put Republicans and Trump in an uncomfortable position. In 2018, the Trump administration actually favored a reform that would have eliminated the shield PBMs have from anti-kickback statutes, essentially making the business model of negotiating rebates illegal. Instead, PBMs would have to just lock in a lower cost and pass that on, while charging the health plans a flat rate.
It would have been revolutionary, but the Congressional Budget Office scored it as somehow costing the government money (based on a weak reading of how negotiating lower drug prices would proceed), and Democrats then killed it to “save” money that was used to fund things like infrastructure and climate spending.
If Democrats are coming around now with a PBM crackdown, that’s great. The point is that if Harris endorsed the reform, Trump would have to either agree or contradict himself, while also taking a position for higher drug prices. The same goes for the many Republicans already on the record for PBM reform. These are the moments of leverage that get decent policy made.
“Whether you are a Republican or Democrat, you want affordable and accessible quality health care … There is only one word I know how to describe this and that is despicable.” said Rep. Buddy Carter (R-GA), one of the few pharmacists in Congress, during the Oversight Committee hearing. If Vice President Harris is looking for a way to burnish bipartisanship, follow through on something that’s part of her core pitch to voters, squeeze her opponents, and deliver a tangible benefit to people’s lives, she need look no further than this issue.
