Skip to content
With health care affordability a top concern for many Americans, pharmacy benefit managers (PBMs) continue to stand at the center of the debate. Working with insurance companies, these intermediaries decide what medicines patients can get and what is paid at the pharmacy. As BIO President and CEO John Crowley testified before the U.S. House of Representatives:
“The U.S. is the only country in the world where 50 cents of every dollar spent on medicine goes to middlemen … PBMs and insurers generally pocket these dollars and negotiated savings rather than pass them on to patients at the pharmacy counter.”
Yes, but: the problem may be worse than we thought.
An investigation by Hunterbrook Media uncovers an invisible layer of the PBM ecosystem—PBM-affiliated group purchasing organizations (PBM GPOs)—that raises more questions about how these entities operate and their impact on health care affordability.
Here are three key findings from the Hunterbrook investigation:
#1. PBM GPOs Channel Billions in Revenue
Hunterbrook explains in deep detail how the Big Three PBMs each established affiliated GPOs—two of which are located overseas. GPOs on paper are meant to aggregate purchasing power. Yet despite massive revenue flowing through these entities, they maintain minimal staffing and limited operational footprints. The investigation suggests PBM GPOs may serve primarily as financial conduits, channeling billions in revenue while keeping their operations largely hidden from their clients. According to James Gelfand, an expert in administering employer-based health plans:
“We reached out to PBMs and we said, ‘Hey, can you explain to us what these GPOs do?’ … They gave us a Cheshire Cat grin, and no more information.”
#2. Market Consolidation Amplifies the Impact
The investigation underscores the enormous concentration of power in the PBM industry. The three largest PBMs manage 80% of U.S. prescriptions—giving them extraordinary control over patients’ health and financial well-being. These same entities are also vertically integrated with the largest insurance companies, and while they’ve always been shrouded in secrecy, the emergence of overseas PBM GPOs makes the problem worse. Employers, unions, state Medicaid programs, and commercial insurers have no way to know if they are getting the best deal. As Michael Sherman, a former insurance executive, explained:
“You get 100% back of what you know about, but not the stuff they’re hiding.”
#3. Complexity a Feature—Not a Flaw
According to sources cited in the report, the creation of PBM-affiliated GPOs was not incidental. The structure itself may have been designed to help preserve revenue streams that might otherwise be disclosed or passed along to the PBMs’ clients. The result is a system that is extraordinarily difficult for anyone to fully scrutinize. According to Gelfand:
“The entire thing was a scam in order to be able to do that fee function that we just described as a way of hiding that money so it is never disclosed to the plan sponsor.”
Congress has taken a first step — but more work remains
Congress recently took the first step toward PBM reform, but it’s only a first step. As this investigation makes clear, more work is needed. PBMs are making innovative medicines too costly and unavailable. That’s why BIO is calling on Congress to adopt a 21st Century Access and Affordability initiative, which would help ensure no one goes without the medicine he or she needs.
As BIO’s John Crowley testified:
“The system is broken, and it needs to be simplified if we want to make meaningful progress toward reducing costs and increasing access.”
To read the full Hunterbrook investigation, click here.
To read Crowley’s full testimony and plan for a 21st Century Access and Affordability initiative, click here.
