Following Inauguration Day, Jan. 20, 2025, President Donald J. Trump will have an incredible opportunity to address the factors that drive up healthcare costs for many Americans.
Trump has the chance to reduce waste and fraud and to improve the efficiency of Medicare's drug benefit, Affordable Care Act ACA subsidies, and Medicare Advantage programs. These reforms would save taxpayer dollars while improving the healthcare experience for millions of Americans.
One of the first places he and his team should look to reform is the powerful and unchecked pharmacy benefit managers (PBMs).
These corporate middlemen control which medications get covered, how much patients pay, and who profits. In the process, patients often pay more and have fewer choices, while PBMs rake in billions of dollars.
PBMs are private companies, such as CVS, Cigna, Humana, and Express Scripts, which manage prescription drug programs for various health plans, including those for private insurance, self-insured employers, Medicare's drug benefit, federal employees, and state government workers.
Each year, drug companies offer lucrative kickbacks to PBMs. In return, PBMs pressure insurers to steer patients toward a particular company's brand-name drugs, even if a different company's medications are cheaper or more effective.
In 2023, the "gross-to-net bubble" — the difference between the list prices of brand name drugs and net prices after rebates and other discounts — was a whopping $334 billion. But these so-called discounts rarely make their way to patients.
Instead, they often go straight into the pockets of PBMs, inflating costs for everyone. By reforming the way PBMs are compensated, Trump can tackle one of the most entrenched sources of rising healthcare costs.
One key reform that would significantly lower drug prices is delinking PBM compensation from the list price of medications.
Currently, PBMs are financially incentivized to favor higher-priced drugs because they receive larger rebates and payments from manufacturers. Severing the connection between PBM compensation and drug prices would encourage the use of lower-cost alternatives.
This would lead to direct savings for patients, especially those with high deductibles and coinsurance, who often pay the most out-of-pocket costs for medications. Delinking PBM compensation from drug prices would help lower out-of-pocket costs and increase coverage for more affordable medications.
Recent actions by the Federal Trade Commission (FTC) highlight just how urgent reform is.
In September, the FTC took legal action against the three biggest PBMs for inflating insulin prices. These PBMs, which control 80% of prescriptions in the U.S., steer patients toward higher-cost drugs to boost their own profits.
This practice hurts patients by limiting their choices and driving up costs. The FTC's lawsuit aims to stop PBMs from prioritizing expensive drugs over affordable alternatives, ultimately restoring competition, lowering prices, and addressing broader issues that impact the entire drug market.
This isn't just about insulin — it's about making healthcare more accessible and affordable for everyone. President Trump can lead the charge in supporting and expanding these efforts.
The Congressional Budget Office (CBO) estimates that delinking PBM compensation from drug prices and requiring savings transfers could save $700 million in Medicare's drug benefit over the next decade.
These savings would not only lower premiums but also expand patient options, benefiting taxpayers, employers, and patients.
By making the system more transparent and cost-effective, this reform would improve healthcare access while ensuring that costs don't spiral out of control. Realigning incentives in this way is crucial to addressing the inefficiencies that make our healthcare system so expensive.
This has become even more crucial in recent months since the Biden-Harris administration destroyed Medicare's prescription drug benefit, also known as "Part D." The policy failure has cost taxpayers tens of billions of their hard-earned dollars.
Price controls on certain drugs and other regulations mandated by President Joe Biden's Inflation Reduction Act (IRA) left seniors without access to about 100 different Part D plans. They were removed from the market because the IRA rendered them financially unviable.
Even worse, Medicare Part D premiums increased by 21% this year and would have tripled by this time next year if the Biden-Harris administration hadn't approved a $10 billion taxpayer-funded bailout to hide the IRA's disastrous repercussions.
This bailout would likely never have been needed if the PBM crisis had been addressed earlier. Many drug costs would likely have been low enough that the IRA wouldn't have included a socialist-style price cap of common prescriptions to begin with.
By focusing on accountability, Trump can reform PBM practices and extend those reforms to reduce waste and fraud in government programs. Ultimately, this approach will deliver a healthcare system that prioritizes patients, lowers costs, and finally gives American families the relief they've been waiting for.
Drew Johnson is a budget policy analyst and government watchdog who was the Trump-endorsed Republican nominee for Congress in Nevada's 3rd Congressional District in 2024. Read Drew Johnson's Reports — More Here.
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