Half of every dollar spent on medicines goes to entities that don’t make medicine—like pharmacy benefit managers (PBMs) and insurers who are aggressively consolidating their control over health care and hospitals, clinics and for-profit pharmacies in the 340B markup program. As entities in the supply chain that don’t make medicine are increasingly using medicines to subsidize other parts of their business, patients and employers face increasing costs and barriers to accessing care.
A new STAT investigation exposes how UnitedHealth Group, one of the three largest vertically integrated health care conglomerates, acquired more than 250 subsidiaries in 2024 and is expanding its reach further into physician practices, surgery centers and specialty pharmacies—which likely will result in tightening its grip on how patients access care. This is just one example of the growing problem of how a few, vertically integrated health care conglomerates are increasing their power over patients.
Here are three ways skyrocketing vertical integration hurts patients:
- Creates barriers to care
Just three PBMs control 80% of all prescriptions in the U.S. These PBMs are owned by the same corporate giants that also own insurers and pharmacies and are buying up doctor’s officers. They regularly steer patients towards medicines and pharmacies that make them more money, regardless of what’s best for the patient. In fact, the Federal Trade Commission (FTC) found that these three PBMs marked up specialty generic drugs, including medications used to treat heart disease and cancer by thousands of percent at their affiliated pharmacies, resulting in more than $7.3 billion in revenue between 2017 and 2022. These vertically integrated middlemen also often exclude generics, biosimilars and lower list-priced versions of products from their formularies. This forces patients to pay more than they should and makes it harder to access the medicines they need. - Increases costs for patients
Insurers and PBMs receive significant rebates and discounts that can lower what they pay for medicines by 50% or more, but patients rarely benefit directly from these savings. Middlemen are also increasingly shifting costs to patients through high deductibles and coinsurance. Unfortunately, this drives up out-of-pocket costs—and when patient costs go up, so does the likelihood that they will abandon treatment and experience worse health outcomes. - Fuels 340B hospital markups
These health care giants are gaming the system even further by fueling the 340B hospital markup program by buying companies that advise hospitals and PBMs how to mark up more 340B medicines. More 340B medicine markups mean increased costs for patients, employers and taxpayers. These big, tax exempt hospitals and clinics contract with pharmacies to dispense the marked-up medicines but PBMs now own the majority of pharmacies nationwide. There are more than 94,000 contracts between a 340B provider and a pharmacy with financial ties to one of the three largest PBMs, and yet there is no oversight to prevent these entities from inflating drug prices to maximize their profits.
Where do we go from here? The STAT investigation confirms what we already know: Our health care system is broken and while middlemen gain significant profit at nearly every point in the health care supply chain, patients and employers pay the price.
Policymakers should take a closer look at how vertical integration impacts the delivery and affordability of care. If policymakers are serious about lowering health care costs, they should pass bipartisan PBM reforms and fix the 340B hospital markup program.
Molly Jenkins
Molly Jenkins is a senior director of Public Affairs at PhRMA, where she leads communications on the 340B hospital markup program. Before joining PhRMA, she led issue advocacy and reputation campaigns at Purple Strategies. She also worked on Capitol Hill in serval different capacities, including leading communications for Rep. Greg Walden and as press secretary for the Energy and Commerce Committee. Molly has an M.A. in Health Communication and Media Relations from Johns Hopkins University and a B.A. in journalism from Texas Christian University.
Molly Jenkins
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PBMs/Insurance
340B
A closer look at how health care consolidation drives up patient costs, creates barriers to care
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