Insurance in America is a strange business when the only people who reliably win are the middlemen. For years, the political right has rightly warned that government price controls on medicines would choke off innovation and import foreign “socialist” models into the United States.
That concern is now front and center in the debate over President Trump’s “Most Favored Nation” (MFN) drug-pricing concept, which would peg what Americans pay for certain drugs to the government‑controlled prices of European systems. Conservative leaders have urged Congress not to codify MFN, arguing that it would undermine the very market forces that made the U.S. the world leader in new cures. They are right to be worried.
But while Washington obsesses over MFN and battles over whether to copy Europe’s price caps, the real profiteers in our drug system continue to operate largely in the shadows: insurance companies and the pharmacy benefit managers (PBMs) they control. Far from being our allies in lowering costs, these entities have quietly constructed a business model that inflates list prices, hides discounts, and shifts costs onto the very patients they claim to serve. If we are serious about more affordable medicines, the first target of reform should not be MFN; it should be the opaque, rebate‑driven machinery of insurers and PBMs.
The conservative case against MFN is straightforward. By tying U.S. prices to those set by foreign governments, MFN would effectively import international price controls and the foreign “value” metrics that often deny patients access to life‑saving therapies. Analysts have warned that such a regime would make it harder for companies to recoup the enormous research and development costs of bringing a drug to market, which easily run into the billions of dollars. The predictable result: fewer new medicines, delayed access, and potential shortages when manufacturers cannot justify U.S. supply at politically dictated prices. In other words, MFN would attack the very innovation pipeline that patients rely on for better treatments and cures, all for the sake of short‑term price optics.
Yet as troubling as MFN would be, it is a distraction from a more immediate and fixable problem. PBMs were originally sold as expert negotiators who would sit between insurers, drug manufacturers, and pharmacies to get the best deal for patients. In theory, they use their size to demand big discounts and rebates, pass the savings through, and keep premiums and copays affordable. In practice, a growing body of evidence shows they do almost the opposite.
Today, a handful of PBMs—typically owned by the largest health insurance conglomerates—control the prescription benefits for hundreds of millions of Americans. They negotiate secret rebates from drug manufacturers, decide which drugs make it onto insurers’ formularies, and determine how much patients pay out of pocket. The higher a drug’s list price, the more room there is for a large “rebate,” which PBMs and insurers capture and often use to subsidize lower premiums or pad their margins. Because patient cost‑sharing is frequently based on the inflated list price, not the confidential post‑rebate “net” price, the sickest patients—those who actually need expensive medicines—end up paying more, even as overall net prices for many branded drugs have been flat or declining.
This perverse structure incentivizes manufacturers to set list prices as high as possible, only to negotiate them down with PBMs in exchange for favorable placement on formularies. The better the placement, the more prescriptions a drug will capture; the more prescriptions, the more rebate dollars to share between PBM and insurer. At every step, the middlemen are rewarded when sticker prices rise. Patients, on the other hand, are stuck paying coinsurance on a phantom number that no sophisticated player in the system actually pays.
The damage goes beyond out‑of‑pocket costs. PBMs use their control of formularies to steer patients toward drugs that generate the biggest rebates, not necessarily those that are clinically best or cheapest on a net basis. They can block lower‑cost competitors, make patients “fail first” on a preferred product, or move critical drugs into “specialty tiers” where patients must pay a percentage of the inflated list price, sometimes hundreds or thousands of dollars per month. Independent analyses have described a pattern of spread pricing—charging employers and health plans more than PBMs reimburse pharmacies—along with hidden fees and opaque contract terms that siphon off yet more dollars from patients and taxpayers.
When politicians point to “Big Pharma” as the sole villain, they are telling only half the story. Yes, drug development is expensive and profits can be high. But manufacturers also pay out enormous sums—tens of billions of dollars annually—in rebates and discounts to insurers, PBMs, and government programs. Those concessions can reduce the real, net price of a brand‑name drug by 50 percent or more. The tragedy is that those savings too often never reach the person at the pharmacy counter. Insurance companies and PBMs get to present themselves as tough negotiators while quietly ensuring that their own revenue grows fastest when list prices keep rising.
This is where the MFN debate goes off the rails. Instead of confronting the middlemen whose incentives are misaligned with patients, MFN would punish the entities actually inventing medicines. It takes aim at manufacturers’ prices, while leaving untouched the tangled web of contracts, rebates, and spreads that determine what patients really pay. Worse, tying U.S. prices to government‑run systems overseas would legitimize the very price‑control mechanisms that many conservatives have long opposed, while doing nothing to require insurers or PBMs to pass through their existing savings, much less any new ones.
A better path would focus on transparency and alignment. Congress and state legislatures should require clear disclosure of rebates, fees, and spread pricing practices so employers, patients, and policymakers can see where every dollar goes. Plans should be encouraged—or required—to base patient cost‑sharing on the real net price of a drug, not an artificially inflated list price that exists mainly to feed the rebate machine. Rebate structures that reward higher list prices should be phased out or reformed so that manufacturers compete on genuine value—clinical benefit per dollar—not on how much opaque kickback they can provide to a middleman.
We should also empower patients and doctors with more choice. That means curbing formulary games that block lower‑cost alternatives, limiting abusive specialty tiers, and making it harder for PBMs to force patients through “fail first” hoops when effective, affordable options are available. Employers and public programs should be encouraged to explore more transparent pharmacy benefit models that pay PBMs a straightforward administrative fee, rather than allowing them to profit from spreads, rebates, and markups. Some such models already exist and have shown they can lower costs without rationing care.
Conservatives are right to be alarmed by MFN and other efforts to copy Europe’s price‑control regimes. But they miss the mark if they stop there. The real enemies of affordable medicine are the opaque insurance and PBM practices that quietly inflate prices, distort incentives, and turn patients into revenue streams. Capping prices from above while allowing middlemen to continue their games below is not a solution; it is a political talking point wrapped around a broken system.
If we want a market that delivers both innovation and affordability, we should reject MFN‑style controls and go after the places where the market has been deliberately twisted—inside the black box of insurance and PBMs. Shine a light there, realign incentives so that lower prices actually help patients instead of middlemen, and we will be much closer to a system where the miracle of a new drug is matched by the miracle of being able to afford it.
Op-Ed By Mike Essen –Former Talk Radio Personality -The Mike Essen Show and Political Commentator.
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