The following content is sponsored by Americans for Limited Government. The Trump administration should set its sights on the middlemen who drive up healthcare costs. In his quest to eliminate wasteful federal spending, President Trump has a Cheesecake Factory-sized menu to choose from when it comes to healthcare. Once the Trump administration turns its attention to this sector, it will quickly discover that foreign aid was a mere appetizer to the fatty center of America’s bloated health apparatus. Take Medicaid, the government health program meant to provide coverage to low-income and disabled Americans. In 2023 alone, the nonpartisan Government Accountability Office found the program lost $50 billion to “improper payments,” a term used to describe waste and fraud. That’s more than USAID’s total budget for the year. Last year, the Federal Trade Commission claimed that Pharmacy Benefit Managers (PBMs) “abused their economic power by rigging pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication. According to the complaint, these PBMs, known as the Big Three, together administer about 80 percent of all prescriptions in the United States.” PBMs’ combined revenue is over $1 trillion. It equals 22 percent of national health expenditures. This begs the question, what makes American healthcare so different than the others – and the answer is clear – American healthcare is plagued by a labyrinth of middlemen insurance intermediaries driven by profits, instead of patient care. In today’s world, providers and patients no longer have control of their healthcare and must constantly navigate the increased red tape stemming from healthcare supply chain middleman meddling. Middlemen continuously claim they are lowering American’s healthcare costs. So, one would think that Americans would get something for all this spending, but patient costs have actually soared. The Biden administration made the problem worse by growing the healthcare system’s bureaucracy through laws like the Inflation Reduction Act (IRA). The IRA raided Medicare to the tune of roughly $273 billion, with part of the savings being funneled to Big Insurance bailouts to mask the high cost of Obamacare plans. But those middlemen just make the system less efficient. A recent study found that increased third-party healthcare spending leads to higher spending and waste. Without control over their dollars, patients lose their ability to make their own choices and shop for better prices. Who thrives on inefficiency, you may ask? Middlemen. Prescription drugs are a great case study. Believing the high cost of certain pharmaceutical products was due to a lack of government involvement, Biden’s IRA put federal bureaucrats in charge of “negotiating” pharmaceutical prices. However, the law willingly ignored a much bigger problem: the presence of pharmacy benefit managers (PBMs) who negotiate rebates with drug manufacturers and quietly pocket most of the resulting savings intended to go to patients. A 2024 U.S. Federal Trade Commission report found that “these powerful middlemen may be profiting by inflating drug costs and squeezing Main Street pharmacies.” The report noted that the three largest PBMs now manage nearly 80 percent of all prescriptions filled in the U.S. “As a result, [PBMs] wield enormous power and influence over patients’ access to drugs and the prices they pay.” The 340B drug pricing program is another inefficiency that empowers middlemen over patients. Under 340B, hospitals can purchase discounted drugs for uninsured and low-income patients. However, 340B has become a hospital markup program. Many 340B hospitals and the PBMs they use to purchase the drugs have figured out how to game the system. CVS, one of the biggest PBMs, disclosed that it takes in massive profits from 340B. The former CEO of a corporate chain pharmacy company said that the size of the 340B program was exploding and that they would “take full advantage.” “340B gross sales across the program are expected to grow from $116B in 2021 to $280B in 2026. We intend to take full advantage of the momentum this sector presents.” Instead of passing the discounted prices down to vulnerable patients, 340B hospitals charge patients or their insurer the full price of the drugs and either pocket the difference or share the proceeds with their PBM. The middleman madness within the American healthcare system must stop. President Trump has an opportunity to expose how much PBMs and 340B abuses drive up U.S. healthcare spending. Congress should pass much-needed reforms that rein in this waste and protect patients. The Trump administration should also find ways to reduce administrative spending in health care. In the way that Trump’s nominee to lead the FDA, Dr. Marty Makary, famously called attention to the wasteful habit of hospitals throwing away clean, single-use medical devices, this administration must blow the whistle on red tape that drives waste. Every dollar spent on administrative overhead is a dollar not being invested in patient care or the next generation of medical innovation. The Trump administration can help patients by diverting resources away from programs that don’t make America healthy. Now is the time. Read More
