These examples illustrate how PBMs use trade secrets to play a shell game with insurers and pharmacies. To be clear, they aren’t the only ways PBMs exact their toll on the pharmaceutical industry — there are ex post facto “direct and indirect remuneration” (or “claw-back”) fees, “administrative fees”, favoring the pharmacies they own with exceptionally low prices, etc.
The problem is that the PBMs are so big and so powerful that they’ve been able to get away with obviously anti-competitive behavior. And the industry has only continued to consolidate, with major mergers between CVS and Aetna and between Express Scripts and Cigna announced last year. It would be no easy task for other industry players to hold PBMs to account in ordinary circumstances. Allowing PBMs to conceal prices in trade secret contracts fundamentally cripples the pharmaceutical drug market’s ability to hold PBMs accountable for their ill-gotten gains.
The Senate recently passed a bill that outlawed “gag orders” by which PBMs kept pharmacists from informing consumers if a cheaper option was available. Concealed prices are a gag order on the entire pharmaceutical industry and must be rejected on the same grounds.
Some organizations, such as ALEC, argue that a market is not truly “free” unless market actors such as PBMs can protect price information as a “trade secret.” We strongly disagree. The purpose of intellectual property law is to allow entrepreneurs to claim ownership over real innovations which improve the lives of human beings in new and beautiful ways, not to allow cartels to secretly price gouge their business partners.
Congress must demand that PBMs disclose rebates on a per-drug basis, administrative fees received from each client, pricing formulas for pharmacies, spread prices, and more. In short, Congress should insist that PBMs disclose every economic transaction they engage in, whether with insurers, manufacturers, pharmacies, wholesalers, or any other possible member of the pharmaceutical industry. The only way to subject PBMs to market discipline is to make every net price available to the public.
One of the few areas that the Trump administration, the Republican Senate, and the Democratic house agree on is the need for more price disclosure in the health care market — and with good reason. As Stanford’s Robin Feldman writes, “markets, like gardens, grow best in the sun. They wither without information.” Forcing sunlight into the dark recesses of the PBM market will empower consumers, health insurers, and others to negotiate better prices and check the power of this questionable oligopoly.
What Congress should not do is heavily regulate the PBM industry by establishing hundreds of rules about how PBMs are allowed to profit from their business. This kind of Soviet, top-down approach is a terrible way to run an economy, and PBMs will inevitably find ways to game the system. Price transparency is a simpler, more American solution.
Republicans should agree that market competition and an informed public are two of our greatest strengths as a civilization. We urge lawmakers to have the courage to insist on them in the areas of our economy where they are needed most.
 D. Andrew Austin and Jane Gravelle, “Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Care Sector,” Congressional Research Service, Order Code RL34101, July 24, 2007, https://fas.org/sgp/crs/secrecy/RL34101.pdf
 Hans B. Cristensen, Eric Floyd, and Mark Maffett, “The Effects of Price Transparency Regulation on Prices in the Healthcare Industry,” Chicago Booth Research Paper №14–33, 2013, https://www.bakerinstitute.org/media/files/event/01ce2e80/HPF-paper-AHEC-Floyd.pdf; See also Mark V. Pauly and Lawton R. Burns, “Price Transparency For Medical Devices,” Health Affairs 27, no. 6 (November/December 2008), https://www.healthaffairs.org/doi/full/10.1377/hlthaff.27.6.1544
 CVS would reimburse pharmacies $6 for a bottle of pills and then charge insurance companies almost $200 for the same bottle of pills, pocketing the difference of $192.49! See: https://www.bloomberg.com/graphics/2018-drug-spread-pricing/
 Bloomberg, ibid.
 Don’t think manufacturers are off the hook; PBMs just extract rents from them with “administrative fees” and in othe
 It’s not clear whether antitrust is an appropriate solution, but price transparency is a crucial first step.
 Our proposal is radically more expansive than the proposal advanced by the National Academy for State Healthcare Policy. It’s important not just to insist that rebates are transparent — PBMs can always devise new business models. Nothing short of comprehensive transparency will fix this broken industry. See: https://nashp.org/wp-content/uploads/2018/08/PBM-Model-Act-FINAL-8_9_2018.pdf
 Stephanie Armour, “Trump Administration Preparing Executive Order on Health-Cost Disclosure,” Wall Street Journal, May 24, 2019, https://www.wsj.com/articles/trump-administration-preparing-executive-order-on-health-cost-disclosure-11558690320