Warren and Hawley Are Right to Rein in PBMs and Insurers, but Must Avoid Undermining Biopharmaceutical Innovation, Says ITIF

WASHINGTON—In response to the introduction of the Break Up Big Medicine Act by Sens. Josh Hawley (R-MO) and Elizabeth Warren (D-MA), which would limit vertical integration in the U.S. health care industry, the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, released the following statement from Stephen Ezell, vice president of global trade policy at ITIF:

Sens. Hawley and Warren are correct that there exists intense concentration in the health insurance and pharmacy benefit manager (PBM) segment of the U.S. health care industry. As the lawmakers note, the three largest PBMs manage 80 percent of prescription drug claims, while just three prescription drug wholesalers control 98 percent of drug distribution.

The growing power of intermediaries such as PBMs explains why, from 2013 to 2020, their share of each dollar spent on drugs increased from 33 percent to 50.5 percent, meaning that less than half of every dollar spent on drugs in the United States goes to the companies actually innovating and manufacturing them. Addressing intermediary concentration can play an important role in managing drug prices.

However, where the lawmakers are incorrect is in suggesting there is significant concentration in America’s innovative biopharmaceutical industry. America’s biopharmaceutical industry has, if anything, gotten less concentrated over time. For instance, in 2006, the top 10 U.S. drug producers accounted for 56 percent of global sales in the industry, while the top 60 U.S. producers accounted for 92 percent. But by 2019, the top 10 U.S. producers accounted for 43 percent, and the top 60 accounted for 86 percent.

Moreover, while it’s true Americans are spending more on health care, they’re not necessarily spending more on drugs. For instance, Americans’ reported expenditures on health insurance increased by over 127 percent from 2006 to 2024, while their total health care expenditures increased 98 percent. While consumers’ expenditures on drugs did increase 35 percent over that time, that was barely more than one-third of the overall increase in total health-care expenditures.

Lastly, while the lawmakers deride “corporate giants [that] put profits over the interest of patients…” the reality is that drug wholesalers, PBMs, and insurers are significantly more economically profitable than U.S. pharmaceutical companies, and especially so on a risk-adjusted basis, as ITIF has extensively written. Moreover, as America’s most R&D-intensive industry, America’s life sciences sector prioritizes foremost creating innovative medicines that improve, extend, and save lives.

Senators Warren and Hawley are correct to target industry concentration in the PBM and health insurance sector, but they’re conflating issues when they include biopharmaceutical companies amongst their targets.

Contact: Austin Slater, [email protected]