PBMs are private businesses that manage prescription drug benefits on behalf of insurance-plan sponsors. They negotiate with drug manufacturers and pharmacies. Manufacturers trade lower prices for formulary access and more sales. Pharmacies trade discounts and increased retailing requirements for favorable placement in plan networks and more customers. This selective contracting allows PBMs to obtain rebates and discounts that lower drug costs. It also allows them to encourage the use of drugs that are cheaper (such as generics), more effective, or both. While plan sponsors aren’t required to contract with PBMs, most do, suggesting they value PBMs’ services.
My own study for the Competitive Enterprise Institute, as well as studies by University of Chicago economist Casey Mulligan, found that PBMs foster competition that lowers drug costs. Mr. Mulligan estimates that PBMs produce at least $145 billion in annual value to society beyond their resource costs.
Here’s GMU Econ alum Dominic Pino on Kamala Harris.
Joe Lancaster writes that “Biden’s act is not heroic.”
Arnold Kling likes the gist of what Eric Kaufmann says, but not at all the way that Kaufmann says it.
Art Carden asks: Where will the new jobs come from?
GMU Econ alum Dominic Pino talks with Scott Lincicome about jobs and labor unions.
Chelsea Follett offers “Smithian insights into shrinking global inequality.” A slice:
Furthermore, the majority of people have no objection to inequality arrived at by merit, and there is no evidence of widespread inequality-induced unhappiness. In developing countries, increased economic inequality that arises as part of the population escapes poverty is often seen as heartening—proof that upward mobility is possible—and can coincide with greater average happiness. Research has similarly found “a complete lack of any effect of inequality on the happiness of the American poor.”
Of course, when the rich are protected through privileged status in law, inequality seems far more troubling. Smith recognized that incumbent businesses sometimes gain unfair privileges from the government—in the form of regulations that strangle competition, for example.
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