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.
Patients Still at Risk: The State of Copay Accumulator Adjustment Policies in 2025
For people living with chronic and serious conditions like HIV, viral hepatitis, or cancer, specialty medications are often the only option for managing their health. However, the high cost of these medications—even for those with insurance—has prompted many to seek assistance from third-party programs to cover copayments and coinsurance. These lifelines are being threatened by health insurance company practices known as "copay accumulator adjustment policies" (CAAPs).
A newly released report from The AIDS Institute (TAI) reveals that more than 40% of individual health plans reviewed for 2025 include CAAPs, which prevent assistance funds from counting toward enrollees' annual deductibles or out-of-pocket maximums. This practice forces patients to pay twice for the same medication—once through the assistance program and again out of pocket—creating substantial financial barriers to necessary treatments.
"Copay accumulator adjustment policies discriminate against people living with chronic illness, interrupting their access to needed treatment and threatening their health," notes Rachel Klein, Deputy Executive Director of The AIDS Institute in their 2025 press release.
The 2025 TAI National Copay Report: A State-by-State Analysis
The AIDS Institute's comprehensive analysis reveals a troubling picture of copay accumulator policies across the United States. Their review of individual market health plans in all 50 states and D.C. found that in 39 states, at least one insurer maintains a CAAP, with vast differences in prevalence from state to state.
The report grades states based on the percentage of plans implementing these policies. Ten states received failing "F" grades, indicating that 75-100% of their available plans include CAAPs: Florida, Idaho, Iowa, Missouri, Montana, Pennsylvania, South Carolina, Utah, Wisconsin, and Wyoming. At the other end of the spectrum, 11 states, Washington D.C., and Puerto Rico received "A" grades for having zero plans with CAAPs, ensuring patients receive the full benefit of copay assistance.
Perhaps most concerning is the finding that in 11 states (Colorado, Delaware, Georgia, Illinois, Louisiana, North Carolina, Oklahoma, Oregon, Tennessee, Texas, and Washington), at least one insurer continues to include CAAPs "in apparent violation of state law," according to the TAI report. This suggests a significant enforcement gap, with state insurance departments failing to ensure compliance with existing patient protections.
The report also highlights how difficult it is for patients to determine whether their plan includes these policies. Across all states, 18 plans failed to provide policy documents online during open enrollment, forcing prospective enrollees to make lengthy phone calls to learn about copay policies. Unsurprisingly, 13 of these 18 plans that required phone calls have copay accumulator policies.
The Human Impact of Copay Accumulator Policies
Behind the statistics are real people facing impossible choices due to these policies. According to the TAI report, the annual out-of-pocket maximum in 2025 is $9,200 for individuals and $18,400 for families—amounts that exceed what most Americans have in savings. Research cited in the report found that when out-of-pocket costs reach just $75-$125, over 40% of patients leave their prescriptions at the pharmacy counter. When costs hit $250, more than 70% of patients walk away without their medications.
To understand how CAAPs affect patients financially, consider this example of two scenarios for a patient taking a medication costing $1,680 monthly with an annual copay assistance limit of $7,200:
Without a CAAP, the patient's assistance helps meet their deductible and cover coinsurance until July, when assistance runs out. The patient then pays $1,350 out-of-pocket to reach their annual maximum, and the insurer collects $8,550 total.
With a CAAP, the same amount of assistance is used up by June, but none of it counts toward the patient's deductible or out-of-pocket maximum. The patient must then pay $7,960 out-of-pocket—nearly six times more—while the insurer collects $15,160 total, almost double what they would collect without the CAAP.
"These policies undermine important patient protections enacted in the Affordable Care Act (ACA) and make it more difficult for people trying to manage a chronic illness to afford medicine they need," the report states.
Federal Regulation and Legal Battles
The federal regulatory landscape governing copay accumulator policies has been marked by contradiction and uncertainty. In 2019, the Department of Health and Human Services (HHS) finalized the 2020 Notice of Benefit and Payment Parameters (NBPP), which significantly restricted the use of copay accumulator adjustment policies, only permitting them for brand-name drugs with available and medically appropriate generic equivalents.
However, before this patient-friendly rule could take effect, HHS announced it would not implement the provision. In 2020, the agency reversed course entirely with the 2021 NBPP, which allowed insurers and PBMs to adopt CAAPs for all prescription drugs regardless of whether generics were available, as long as state law permitted such practices.
This regulatory whiplash prompted legal action from patient advocates. According to the TAI report, a U.S. District Court for the District of Columbia ruled in late 2023 that HHS could not allow insurers and PBMs to decide whether manufacturer copay assistance must count toward an enrollee's cost-sharing limit. The court declared that insurers must follow the more protective 2020 rule until HHS issues new regulations.
Despite this ruling, HHS has so far declined to enforce the 2020 rule, instead announcing plans to update the cost-sharing rule with new language. This enforcement gap means many insurance plans continue to include CAAPs in 2025, leaving patients exposed to potential financial harm.
State-Level Progress and Challenges
While federal action stalls, states have become the primary battleground for protecting patients from copay accumulator policies. To date, 21 states, the District of Columbia, and Puerto Rico have enacted laws restricting the use of CAAPs.
Nine states and Puerto Rico have adopted comprehensive protections requiring insurers to count all copay assistance toward patients' deductibles and out-of-pocket limits: Connecticut, Delaware, Illinois, Louisiana, New Mexico, New York, Oklahoma, Virginia, and West Virginia. Twelve more states and DC have enacted laws that prohibit CAAPs for drugs without generic alternatives while allowing insurers to exclude assistance for brand-name drugs when generics are available.
Despite this progress, implementation challenges remain significant. The TAI report found that in 11 states with existing laws, at least one insurer continues to include CAAP language in apparent violation of state law. This finding underscores that "laws and regulations are meaningless unless properly enforced."
State efforts to regulate CAAPs are part of a broader trend of PBM reform at the state level. During the 2024 legislative sessions alone, 33 bills related to PBM regulation were enacted in 20 states, addressing issues from spread pricing to patient steering.
A critical limitation is that state laws only apply to health insurance plans regulated at the state level—typically individual and small group plans. This leaves a protection gap for the majority of Americans who receive coverage through large employer plans, which are regulated at the federal level. According to the TAI report, the current state laws only protect an estimated 26 million people, representing just 19% of those enrolled in commercial health insurance plans nationwide.
Congressional Action and Setbacks
Despite broad bipartisan support for addressing PBM practices including copay accumulators, federal legislative efforts have repeatedly fallen short. The Help Ensure Lower Patient (HELP) Copays Act, which would require insurers and PBMs to count copay assistance toward patients' annual cost-sharing requirements, garnered more than 150 cosponsors in the previous Congress but never came to a vote.
The most recent setback came in December 2024, when PBM reform provisions were stripped from a bipartisan Continuing Resolution that would have funded the government. According to Chain Drug Review, the measure collapsed after President-elect Trump and his allies expressed concerns about the scope of the bill, leading to a stripped-down version that excluded most extraneous provisions, including PBM reform.
In February 2025, Senators Chuck Grassley and Maria Cantwell reintroduced two bipartisan bills aimed at increasing PBM transparency and accountability. While neither bill directly addresses copay accumulator policies, they signal ongoing bipartisan interest in PBM reform.
The New Administration's Position and FTC Scrutiny
The Trump administration has signaled that PBM reform will be a priority. At a December 2024 press conference, Trump stated: "We are going to knock out the middleman." Health and Human Services Secretary Robert F. Kennedy Jr. echoed this during his confirmation hearing: "Trump is absolutely committed to fixing the PBMs. Trump wants to get the excess profits away from the PBMs and send it back to primary care, to patients in this country."
This political momentum builds on the Federal Trade Commission's ongoing investigation of PBM practices. As we covered in a previous CANN blog post, the FTC's January 2025 report provided substantial evidence of PBMs marking up specialty drugs—including HIV medications—by hundreds or thousands of percent, generating billions in excess revenue. The report's unanimous approval by all five FTC commissioners adds significant weight to arguments for comprehensive reform.
Next Steps
The 2025 TAI National Copay Report confirms that despite progress in some states, copay accumulator adjustment policies continue to threaten access to essential medications for people living with chronic conditions. The patchwork of state laws, inconsistent enforcement, and limitations of existing federal regulations leave millions of Americans vulnerable to financial harm when seeking necessary treatment.
Several actions are needed to address this ongoing challenge:
For policymakers:
Congress should pass comprehensive federal legislation like the HELP Copays Act to ensure all patients, including those with employer-sponsored insurance, are protected from copay accumulator policies.
State insurance commissioners must prioritize enforcement of existing laws that restrict CAAPs, closing the implementation gap identified in the TAI report.
For patient advocates:
Focus advocacy efforts on states with "F" grades in the TAI report, where the greatest number of patients are at risk.
Document and report instances where insurers violate state laws restricting CAAPs to appropriate regulatory authorities.
Build coalitions that include both patient groups and pharmacy advocates to strengthen the case for reform.
For patients:
Check whether your state has laws protecting against CAAPs and understand how your specific insurance plan handles copay assistance.
When selecting insurance plans, directly ask customer service representatives about copay accumulator policies if this information is not clearly stated in plan documents.
If denied the ability to count assistance toward your deductible, appeal the decision and report potential violations to your state insurance department.
As Congress continues to flirt with PBM reform, the FTC intensifies its scrutiny, and the new administration signals interest in "knocking out the middleman," a rare window of opportunity exists to finally address these harmful policies. The key will be translating bipartisan rhetoric and mounting evidence into concrete action that protects all patients, regardless of where they live or how they receive their health insurance. Without such action, millions of people living with chronic conditions will continue to face financial barriers to the medications they need to survive and thrive.