Boston– A new analysis from the Pioneer Institute warns that former President Donald Trump’s “Most Favored Nation” (MFN) drug pricing proposal could lead to higher out-of-pocket costs for seniors, unless the federal government also reins in pharmacy benefit managers (PBMs), who play a major role in the pricing and access of prescription medications.
The MFN proposal, which aims to align U.S. drug prices with those in other developed countries, was intended to reduce costs. But researchers say the current rebate-driven system overseen by PBMs could undermine its goals. A policy brief by Dr. William Smith and Dr. Robert Popovian suggests that even if list prices drop, patients may not see the benefits—especially under Medicare—unless PBMs are subject to structural reform.
PBMs act as intermediaries between drug manufacturers, insurers, and pharmacies. They negotiate rebates and fees in exchange for placing certain drugs on formularies, but these rebates often remain undisclosed and don’t necessarily lead to savings for patients. In fact, the study argues that PBMs may steer patients toward more expensive drugs that offer larger rebates, leaving consumers to absorb the cost difference.
“PBMs are profiting substantially from a system that was designed to create savings,” said Smith, who formerly held senior policy roles in government and at Pfizer. “In reality, this rebate structure can push out-of-pocket costs higher for patients, particularly seniors.”
The study cites new data from the Pioneer Institute’s IRA Tool, which tracks changes in drug affordability following the Inflation Reduction Act (IRA). In examining nine commonly prescribed medications, researchers found that out-of-pocket costs rose an average of 32 percent, with some patients paying as much as $316 more per drug. Seven of the nine drugs analyzed saw cost hikes.
Popovian said the IRA’s price controls reduced the revenue PBMs receive from drugmakers, prompting them to shift the burden to patients. “If we don’t change how PBMs operate, lower drug prices won’t matter—patients will still struggle to afford essential medications,” he said.
The Institute recently launched a Medicare Drug Access Tracker to monitor how price controls are affecting patient access and affordability. The tracker focuses on the four largest PBMs, which collectively control 87 percent of the Medicare drug market.
The full study and tracking tool are available on the Pioneer Institute’s website. The authors are calling for greater transparency in rebate practices and a reassessment of the PBM model, warning that without reform, even well-intended federal policies could end up harming the people they’re meant to help.
