As North Carolina legislators enter the 2023 session in January, they may consider policies to address health care costs. But as we’ve often seen, “solutions” that rely on government intervention are often misguided, resulting in price controls and overregulation, which distort the medical marketplace. Free market competition, not government interference, is the best solution to drive down prices in health care and other industries.
Health care costs are not a new issue. Time and time again, failed experiments have shown that government interference with private-sector agreements in health care does not produce any positive outcomes. But a private-sector solution already exists. Today, more than 65 pharmacy benefit managers, or PBMs, serve more than 266 million Americans who obtain their health insurance from employers, unions, state governments, insurers and other groups. This number continues to grow, as inflation and rising costs have made the savings and efficiencies PBMs provide increasingly essential. Research has found that restricting PBMs would cost patients an average of $962 annually.
PBMs provide value by creating pharmacy networks and formularies, helping patients take their medications as prescribed, operating specialty pharmacies, providing home-delivery options, and conducting audits to prevent drug cost hikes and prevent fraud. PBMs also negotiate against the big drug companies that set drug prices, to prevent cost increases for PBM customers. Employers, including small businesses, looking to offer competitive health care benefits to employees and their families choose to use PBMs because of the many benefits and essential cost savings.
Yet, further restrictions on employers’ pharmacy benefits, like imposing pricing requirements, pursuing rate regulation, interfering with private contracts, or restricting options that help employers have more choices and access affordable drug coverage, would limit the ability of employers to provide benefits that work for their employees. This results in higher business costs and higher costs for patients as well. Government interference into these private-sector contractual agreements would make it harder to do business in North Carolina and put power over patients’ health care in the hands of government bureaucrats. This can only hurt patients, families, and taxpayers. The North Carolina legislature should avoid this approach.
Federal efforts have also been made to disrupt the private sector health care market and the success of PBMs. S. 4293, the Pharmacy Benefit Manager Transparency Act of 2022, which would have imposed price controls and unnecessary regulations over pharmacy benefit managers (PBMs), would have increased drug costs, not lowered them, and harmed patients and families. Fortunately, this legislation did not pass in the Senate or House. Efforts to control PBM private-sector negotiations move power away from patients and put it in the hands of the government. Price controls of any kind decrease competition and result in higher costs for all.
As legislators start a new session, they ought to remember their promises to make government more efficient and less intrusive and to protect the constituents they serve. Health care is a personal decision that should be made by individual patients, not the government, and efforts to regulate those decisions and distort the medical marketplace leaves patients and families with fewer options and puts health-care choices in the wrong hands.
Christina Smith is the Director of Health and Science Policy at Citizens Against Government Waste, a non-partisan, non-profit organization representing more than one million members and supporters nationwide with a mission to eliminate waste, mismanagement, and inefficiency in government.