The High Cost of Middlemen Medicine
For millions of Americans, the promises of modern medicine are starting to sound a lot like a scam. Despite breakthrough treatments and historic R&D investments, every year more and more people can’t actually afford the medications that could save or improve their lives. They’re stuck navigating a labyrinth of AI-powered insurance denials, sky-high out-of-pocket costs, and middlemen who profit precisely because access is so difficult.
The numbers don’t lie. In 2024, Americans spent $98 billion out-of-pocket on prescription drugs—a 25% increase over five years, according to research from the IQVIA Institute. This burden falls hardest on people with chronic illnesses, who are often forced to choose between staying alive and staying solvent.
The Growing Burden of Out-of-Pocket Costs vs. Net Drug Prices
Here lies one of the most troubling contradictions in our prescription drug system: while patients are paying more, manufacturers' net prices have grown at dramatically lower rates. According to IQVIA data, protected brand drug net prices increased by merely 0.1% in 2024, following several years of flat or negative growth. Meanwhile, out-of-pocket costs for patients have risen substantially, with the aggregate burden growing 25% since 2019.
This widening gap between patient costs and manufacturer net prices points directly to a dysfunctional system where middlemen capture an increasing share of value. For brand-name medications—often the only options for certain conditions—commercially insured patients saw their costs rise from $20.02 to $25.07 over five years, while cash-paying patients now face average costs of $130.18 per prescription based.
The difference between list prices (what insurers use to calculate patient cost-sharing) and net prices (what manufacturers actually receive after rebates and discounts) has grown to approximately 52% across all medicines. In diabetes treatments, this gap is particularly stark—net prices are 77.5% below list prices, yet patients pay cost-sharing based on those inflated list prices rather than the heavily discounted prices their insurers actually pay.
The burden of these costs falls heavily on specific populations. Nearly half (46%) of insured Americans report that if diagnosed with a chronic illness or experiencing a major medical event, their out-of-pocket costs would be either "expensive" or "more than they could afford." This concern rises to 59% among Black Americans and 57% among those with government insurance.
PBMs: Profiting at Patients' Expense
The growing disparity between net prices and patient costs can be traced directly to the rise of Pharmacy Benefit Managers (PBMs), who have positioned themselves as essential intermediaries in the prescription drug supply chain. These entities manage prescription drug benefits for health insurers, self-insured employers, and government programs, negotiating with drug manufacturers and pharmacies while setting the terms for patient access.
The PBM market is highly concentrated, with three major companies—CVS Caremark, Express Scripts, and OptumRx—controlling approximately 80% of the market. Their business practices raise serious concerns about whose interests they truly serve.
A particularly troubling practice is how PBMs handle manufacturer rebates. While PBMs negotiate substantial discounts from drug manufacturers—sometimes exceeding 70% of a drug's list price—these savings rarely benefit patients directly. Instead, PBMs often retain a portion of these rebates and pass the remainder to insurers, who may use them to lower premiums slightly across all enrollees rather than reducing costs for the patients actually taking the medications.
According to Federal Trade Commission findings, the "Big 3 PBMs" marked up numerous specialty generic drugs by hundreds or thousands of percent, generating "more than $7.3 billion in revenue from dispensing drugs in excess of estimated acquisition costs from 2017-2022" as documented in Congressional testimony. This practice known as "spread pricing"—charging plan sponsors more than they pay pharmacies for the same drug and pocketing the difference—has drawn increasing scrutiny from regulators and lawmakers.
The public strongly supports reform in this area. Research from the Pharmaceutical Research and Manufacturers of America’s (PhRMA) Patient Experience Survey found that 64% of insured Americans strongly support "cracking down on abusive practices by PBMs and health plans like inappropriate fail first (step therapy) and prior authorization." Additionally, 63% strongly support requiring health insurers and PBMs to pass on any rebates or discounts they receive from pharmaceutical companies to patients at the pharmacy counter.
Insurance Barriers: When Coverage Doesn't Mean Access
Beyond cost concerns, insured Americans face substantial barriers to accessing prescribed medications. In the past year, 41% of people taking prescription drugs encountered at least one insurance-imposed barrier to accessing their medication.
The most common obstacles include:
Prior authorization requirements (22%)
Formulary exclusion (21%)
Quantity limits (10%)
"Fail first" (step therapy) policies (9%)
These barriers have real consequences. Across all payer types, 27% of written prescriptions go unfilled due to a combination of payer rejections and patient abandonment. In Medicaid, this figure rises to 34%, with a significant portion due to prior authorization rejections according to IQVIA research.
The problem is even more pronounced for newer medications. For novel drugs launched in 2022 and 2023, a staggering 56% of new prescriptions went unfilled, with only 29% of patients with chronic conditions remaining on these medications after one year. Among the reasons cited, insurance barriers were the primary factor, with 39% of prescriptions for these drugs rejected by all payers.
The Fleecing of 340B
The 340B Drug Pricing Program was created to help safety-net providers "stretch scarce federal resources" for vulnerable populations, requiring pharmaceutical manufacturers to provide substantial discounts to qualifying healthcare organizations. The program has grown dramatically, reaching $66 billion in total purchases in 2023 according to Drug Channels analysis. What's driven this growth is the explosive expansion of contract pharmacy arrangements—from about 1,300 in 2010 to over 33,000 pharmacy locations today—transforming what was intended as targeted assistance into a revenue source for hospitals and pharmacies, with questionable benefit to vulnerable patients.
In response to perceived abuses, approximately 37 drug manufacturers have imposed restrictions on their participation, specifically limiting 340B pricing through contract pharmacies. The concern is justified: a 2022 analysis by the Alliance for Integrity and Reform of 340B found that many 340B hospitals provide less charity care than non-340B hospitals, despite their safety-net designation as reported in Becker's Hospital Review. Meanwhile, nonprofit hospital systems pursue debt collection against patients who should have qualified for charity care under the hospitals' own policies, according to ProPublica's reporting.
Public sentiment strongly favors reform, with 70% of Americans supporting "requiring hospitals to be more transparent about prescription medicine markups" and 57% supporting requirements that hospitals use 340B discounts to help low-income patients access needed medicines. While manufacturers have responded by limiting distribution to contract pharmacies, patient advocates push for reforms requiring 340B savings to directly benefit vulnerable patients through reduced medication costs or expanded services. Any meaningful reform must address this fundamental disconnect between the program's intent and its current operation.
Recent Policy Developments: Promise or Posturing?
In April 2025, President Trump signed yet another executive order titled "Lowering Drug Prices By Once Again Putting Americans First," which included provisions aimed at reforming the Medicare Drug Price Negotiation Program, improving transparency into PBM fee disclosure, and addressing anti-competitive behavior by drug manufacturers.
However, experts caution that executive orders have limited impact without legislative or regulatory action. As Ted Okon, executive director of the Community Oncology Alliance, noted: "Just so everybody understands the executive order, it doesn't have any authority. It's not statute...but I think it's very much a game plan of what is being signaled to the Congress, and if the Congress doesn't do it, HHS."
The executive order largely focuses on studies and recommendations rather than immediate action. For example, it directs the Secretary of Labor to "propose regulations" on PBM transparency and calls for "joint public listening sessions" on anti-competitive behavior by pharmaceutical manufacturers, with concrete reforms left for future consideration.
What Real Reform Looks Like
If policymakers are serious about fixing this mess, they need to stop nibbling around the edges and go after the structural rot:
Rebate pass-through: If PBMs get a discount, patients should benefit—not just insurers.
Ban spread pricing in all insurance markets. If it’s wrong in Medicaid, it’s wrong everywhere.
Delink PBM profits from drug list prices, so there’s no financial incentive to inflate costs.
Limit prior auths and step therapy, especially for chronic and life-threatening conditions.
Hold 340B entities accountable for how they use discounts to serve vulnerable patients.
Cap out-of-pocket costs for everyone, with special protections for those with chronic conditions.
These aren’t radical ideas. They’re popular, they’re practical, and they’re long overdue. 94% of insured Americans believe policymakers have a responsibility to protect access to affordable care. And 93% say insurance should work for everyone—not just the healthy, wealthy, or well-connected.
Enough Excuses. Patients Deserve Better.
The current system isn’t failing—it’s succeeding exactly as designed. Middlemen make billions. Insurers avoid risk. Hospital systems exploit safety-net programs for profit while vulnerable patients go without. And patients? They’re left panhandling through GoFundMes, skipping doses, or giving up entirely.
This isn’t just an affordability crisis. It’s a moral one. We know how to fix it. The question is whether we have the political will to stop protecting profit margins and start protecting people.
