The “Economic Health” of U.S. Health Care and Role of Middlemen

This article goes through the major components of the health care return-on-investment equation, from spending to outcomes, and attempts to identify major causes for its underperformance compared with other types of enterprise. It also explores the role of "middlemen" in prescription drug pricing (broadly defined as any market participant other than the drug manufacturer and the provider/patient, including-but not limited to-insurance companies, pharmacy benefit managers [PBMs], and health plans) and teases out the mechanisms by which PBMs, in particular, contribute to overall health care costs and the types of risks and returns they endure. Like any economic system, the health care system is a net zero-sum construct, whereby costs and benefits are traded off or exchanged between components of the value chain involuntarily (e.g., by regulatory or legal mandate) or voluntarily (e.g., by economic incentive). Ultimately, the question for policymakers as it relates to health care reform is to determine what combination of such exchanges leads to the best overall outcomes. This question of optimization, however, is undoubtedly challenging and complex, and can bring to bear economic, social, political, and moral dimensions. In light of these considerations, the article concludes by touching upon some perspectives for the future and ideas for reform, including payer reform, delivery disintermediation by technology, and consumer-driven health care.