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.
Biden’s Inaction Leaves Copay Assistance in Limbo
Inflated prescription drug costs in the United States continue to place a significant burden on people living with chronic conditions. Copay assistance programs, designed to help people afford their medications, have become essential. Yet recent policy decisions and industry practices have put these programs at risk, potentially jeopardizing access to necessary treatments.
The Biden Administration's recently proposed 2026 Notice of Benefit and Payment Parameters (NBPP) rule omits crucial regulations that patient advocates have long been demanding. This inaction allows insurers and pharmacy benefit managers (PBMs) to continue profiting from billions of dollars of drug manufacturer copay assistance intended for patients.
The State of Copay Assistance
Copay assistance programs, primarily offered by pharmaceutical manufacturers, provide financial support to help cover out-of-pocket costs for prescription medications. As health insurance plans increasingly shift costs to patients through higher deductibles and copayments, these programs have become crucial.
According to the latest data from The IQVIA Institute, manufacturer copay assistance offset patient costs by $23 billion in 2023, a $5 billion increase from the previous year. This figure represents 25% of what retail prescription costs would have been without such assistance. Over the past five years, copay assistance has totaled $84 billion, highlighting its importance in maintaining access to medications.
Despite the significance of copay assistance, copay accumulator and maximizer programs accounted for $4.8 billion of copay assistance in 2023—more than double the amount in 2019. Implemented primarily by pharmacy benefit managers (PBMs) and insurers, these programs prevent assistance from counting towards patients' deductibles and out-of-pocket maximums. This practice effectively nullifies the intended benefit of copay assistance, leaving people to face unexpected and often unaffordable costs later in the year.
Recent scrutiny of PBMs has brought attention to these practices. As discussed in our recent article on PBMs, the Federal Trade Commission (FTC) has filed a lawsuit against the largest PBMs for alleged anticompetitive practices that inflate drug costs and limit access to medications. These developments underscore concerns about how PBM practices, including the implementation of copay accumulator programs, impact medication affordability and access.
The impact on access is serious. IQVIA reports that in 2023, patients abandoned 98 million new therapy prescriptions at pharmacies, with abandonment rates rising as out-of-pocket costs increase. This trend highlights the critical role copay assistance plays in helping people not only initiate but also maintain their prescribed treatments.
Public opinion strongly supports action on this issue. A Kaiser Family Foundation survey found that 80% of adults believe prescription drug costs are unreasonable, with broad support for various policy proposals to lower drug costs. This sentiment reflects the public's recognition of the financial challenges faced in accessing necessary medications.
The Legal and Regulatory Landscape
The regulatory environment surrounding copay assistance programs has been in flux, with significant developments in recent years. On September 29, 2023, a federal court struck down a rule that allowed insurers to decide whether copay assistance would count towards patients' out-of-pocket maximums. This ruling reinstated the 2020 NBPP rule, which required insurers to count copay assistance towards patient cost-sharing, except for brand-name drugs with available generic equivalents.
Despite this, the federal government declared that it would not enforce the court's decision or the 2020 NBPP rule until new regulations are issued. This inaction has left patients facing continued uncertainty about the status of their copay assistance.
On January 16, 2024, the Biden Administration dropped its appeal of the court decision. While this action confirms that the 2020 NBPP rule will generally apply until new rules are issued, the lack of enforcement leaves plans and insurers in a gray area regarding their copay accumulator programs.
At the state level, there has been a growing movement to address copay accumulator programs. As of 2024, 21 states, the District of Columbia, and Puerto Rico have enacted laws addressing the use of these programs by insurers or PBMs. These laws generally require any payments made by or on behalf of the patient to be applied to their annual out-of-pocket cost-sharing requirement. While these state actions provide important protections, they do not cover all insurance plans, particularly those regulated at the federal level.
The 2026 Notice of Benefit and Payment Parameters Proposal
The proposed 2026 NBPP rule, released by the Centers for Medicare & Medicaid Services (CMS), has drawn criticism from patient advocacy groups for significant omissions related to copay assistance and essential health benefits (EHB).
Notably absent from the proposed rule are regulations clarifying whether copay assistance will count toward patient cost-sharing. This omission perpetuates uncertainty created by previous conflicting rules and court decisions, allowing insurers and PBMs to continue implementing copay accumulator programs that can leave people with unexpected and unaffordable out-of-pocket costs.
The proposal also fails to include a provision to ensure that all drugs covered by large group and self-funded plans are considered essential health benefits, despite previous indications that such a provision would be forthcoming. This failure to close the EHB loophole allows employers, in collaboration with PBMs and third-party vendors, to designate certain covered drugs as "non-essential," circumventing Affordable Care Act (ACA) cost-sharing limits designed to protect people from excessive expenses.
By exploiting this loophole, plan sponsors can collect copay assistance provided by manufacturers without applying it to beneficiaries' cost-sharing requirements. This practice effectively doubles the financial burden on patients: first, by accepting the copay assistance, and second, by requiring them to pay their full out-of-pocket costs as if no assistance had been provided.
Recent research by the HIV+Hepatitis Policy Institute has revealed that over 150 employers and insurers are taking advantage of the EHB loophole. This list includes:
Major companies such as Chevron, Citibank, Home Depot, Target, and United Airlines
Universities including Harvard, Yale, and New York University
Unions like the New York Teamsters and the Screen Actors Guild
States such as Connecticut and Delaware
Insurers, including several Blue Cross/Blue Shield plans
Patient advocacy groups have reacted strongly to these omissions. Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, stated, "Every day these rules are delayed is another day that insurers and PBMs are pocketing billions of dollars meant for patients who are struggling to afford their drugs." This sentiment reflects the frustration of many who have long advocated for stronger protections.
The widespread exploitation of the EHB loophole underscores the urgent need for federal action to protect patients from these practices. The failure to address these critical issues in the 2026 NBPP proposed rule highlights a significant setback in efforts to improve medication affordability and access for people living with chronic conditions.
The Impact on Patients: Data and Experiences
The real-world impact of copay accumulator programs and the EHB loophole is reflected in both data and personal experiences. IQVIA reports that patient out-of-pocket costs reached $91 billion in 2023, an increase of $5 billion from the previous year. This rise in costs comes despite the $23 billion in copay assistance provided by manufacturers, highlighting the growing financial burden on patients.
Prescription abandonment is particularly concerning. Patients abandoned 98 million new therapy prescriptions at pharmacies in 2023, with abandonment rates increasing as out-of-pocket costs rise. More than half of new prescriptions for novel medicines go unfilled, and only 31% of patients remained on therapy for a year. These statistics highlight the direct link between cost and medication adherence.
People across the country are facing these challenges. For example, a mother whose daughter lives with cystic fibrosis shared her experience with a copay accumulator program. In early 2019, her family's out-of-pocket cost for her daughter's medication suddenly jumped from $30 to $3,500 per month when their insurance plan stopped applying copay assistance to their deductible. This unexpected change forced the family to put the cost on credit cards, creating significant financial strain and unnecessary medical debt.
Similarly, a person living with psoriasis faced steep increases in medication costs when their insurance company stopped counting copay assistance towards their deductible. The copay rose from $35 to $1,250 monthly, leaving them with only $26 from their disability payment after covering the copay.
These stories are not isolated incidents. People living with conditions such as HIV, hepatitis, multiple sclerosis, and hemophilia are facing similar challenges. The impact extends beyond financial stress, affecting medication adherence and, ultimately, health outcomes. For many, the choice becomes one between essential medications and other basic needs such as food and shelter—a decision no one should have to make.
Policy Recommendations and Advocacy Efforts
Patient advocacy groups are intensifying efforts for policy changes at both the federal and state levels. The All Copays Count Coalition, comprising over 80 organizations representing people living with serious and chronic illnesses, has been at the forefront of these efforts. In a letter to federal officials, the coalition urged for a revision of the cost-sharing rule to include clear protections ensuring that copayments made by or on behalf of a patient are counted towards their annual cost-sharing contributions. Specific recommendations include:
Maintaining the protections included in the 2020 Notice of Benefit and Payment Parameters.
Ensuring that copay assistance counts for medically appropriate medications, even when generic alternatives are available.
Limiting Health Savings Account-High Deductible Health Plan (HSA-HDHP) carve-outs to situations where using copay assistance would result in HSA ineligibility.
At the state level, advocacy efforts have led to the passage of laws restricting copay accumulator programs in 20 states, the District of Columbia, and Puerto Rico as of summer 2023. However, these state-level protections do not cover all insurance plans, particularly those regulated at the federal level, highlighting the need for comprehensive federal action.
Advocates are calling for:
Immediate enforcement of the 2020 NBPP rule, requiring insurers to count copay assistance towards patient cost-sharing in most cases.
Swift action to close the essential health benefits loophole for all plans, including large group and self-funded plans.
Increased oversight and regulation of PBM practices, particularly regarding copay accumulator and maximizer programs.
Passage of comprehensive federal legislation to protect those relying on copay assistance.
As Carl Schmid emphasized, "While they have gone on record that they will issue these rules, the clock is ticking and there isn't much time left." This reflects the growing frustration among patient advocates with the administration's delays in addressing these issues.
Policymakers must act swiftly to close the essential health benefits loophole and ensure that all copay assistance counts towards patients' out-of-pocket costs. Stakeholders across the healthcare ecosystem—from insurers and PBMs to pharmaceutical companies and patient advocacy groups—must collaborate to develop solutions that prioritize access and affordability. The health and well-being of millions depend on these critical policy changes.