Tuesday, January 19, 2021
Healthcare Middlemen Causing California Communities of Color to Pay More at the Pharmacy Counter
By Felicia Jones
Published June 12, 2020

African Americans in California face significant disparities in diagnosis, treatment, and access to health care they need. The recent COVID-19 pandemic has only exacerbated many of those inequalities. Our lawmakers have again expressed their desire to seek solutions to health disparities and rising health costs once the pandemic ceases, but action is needed. As California waits for the number of cases of COVID-19 to stabilize and, ultimately, for the state to lift its emergency orders, we urge policymakers to pursue sustainable solutions that reduce costs and create better long-term health outcomes for vulnerable communities.

In communities of color, rising health care costs have increased the likelihood of developing life-threatening diseases like heart disease, diabetes, and cancer. Treatments for many of these conditions have become unaffordable for Los Angeles families due to health care industry middlemen who manipulate drug pricing to increase their bottom line.

Though little known to the general public, pharmacy benefit managers (PBMs) are one of the most powerful players in health care. PBMs are middlemen who negotiate drug prices with pharmaceutical manufacturers on behalf of health insurers. These negotiations determine what treatments are available on your insurance plans. The role of the PBM was initially to provide the best pricing and pass the savings onto the consumer. The reality is that PBMs, who operate with little transparency, exploit the current drug rebate system to increase their profit margins on the backs of patients.


A report from the California Department of Managed Health Care found that CA health plans and pharmacy benefit manager profits are the leading cause of insurance premium spikes. More specifically, profits from California health insurance companies rose by 172 percent in just one year while insurance premiums increased by 6.2 percent. All while manufacturers have given more than $1 billion in rebates that PBMs are not passing down to consumers.

Without more stringent oversight, patients may continue not to see cost-savings in their pocketbook. One commonsense solution would be regulating the PBM industry to ensure that cost savings realized through drug manufacturer rebates are passed down to consumers. During these unprecedented times when health care concerns are at the forefront, it is important for policymakers to help the most vulnerable afford treatments and clear a pathway to access new and innovative life-saving drugs. This is particularly important with the advent of a new class of drugs called biosimilars.

Biosimilars are medicines that have nearly the same quality, safety, and efficacy as a more expensive brand biologic drug. Biosimilars are like generic medicines for the biologics market. But because PBMs determine what treatments are available on a drug formulary, and because they receive rebates based on the cost of the drugs, they would have little incentive to include these types of more affordable treatments. The higher the cost of the drug, the bigger the rebate for the PBM.

Our communities have been greatly affected by decades of racial health disparities. The high rate of infections and fatalities for the coronavirus are just the latest example. As our country and our state begin to discuss solutions to address the health inequities among communities of color, we urge them to end loopholes that are allowing PBMs to pocket the cost savings that are rightly due to California consumers. By regulating and requiring PBMs to pass rebates directly to consumers, lawmakers would be able to narrow the healthcare gap and save millions of dollars for families living in Los Angeles.


Felicia Jones is Executive Director of Healthy African American Families II located in Los Angeles, CA.

Categories: COVID-19 | Health | News

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