With the annual bill clocking in at over $18 billion, the cost of prescription drugs in Illinois has become a significant problem. In 2022, 59,000 seniors in this state pad more than $2,000 a year on their prescription drugs. In only four states do residents spend more on drugs than the Land of Lincoln. This affordability crisis is becoming untenable.
I examined this issue while serving in Congress, and I found that the health care industry faces a monopoly problem, not a market problem. Frankly, the major pharmaceutical companies have become too big, and have their hands in too many cookie jars.
Just three companies handle 92% of all pharmaceutical sales in the U.S. Because these companies have become so massive, they have come to control core parts of the drug dispensing process, which effectively allows them to pull the entire industry’s strings.
To local pharmacists’ dismay, these three big drug distributors’ tentacles have even become attached to Illinois’ pharmacy counters through their ownership of the country’s primary pharmacy services administrative organizations (PSAOs). Pharmacies contract with PSAOs to help them get “cheap” drug deals; however, since the drug distributors now own these groups, they seemingly work to increase prices. While that’s bad for pharmacies, it’s even worse for nearly four in five Illinoisans already worried about healthcare affordability.
Thankfully, Illinois’ elected representatives have expressed a keen awareness of this problem, and they are forcefully and vigorously working to tackle these monopolies and resolve the conflicts of interest they present.
For example, Gov. J.B. Pritzker signed legislation in 2021 to increase price transparency at the pharmacy counter. The bill, which was supported by everyone from Assistant Republican Leader Deanne Mazzochi to Democratic Majority Caucus Whip Julie Morrison, requires pharmacies to provide customers with prescription drugs’ retail price before their time of purchase.
Former State Sen. Scott M. Bennett said, “With this new law on the books, consumers will have the ability to make informed decisions about where to buy their prescriptions.” He’s right. By increasing transparency and the ability to shop around for drug prices, the monopolistic pharma distributors now have less room to keep prices high and captive.
Continuing to tackle the problem
Mandating drug price transparency was a step in the right direction, but it will mean little if the major drug companies can still maintain their ability to keep prices high. The state government is working on resolving this issue too. Working with 48 other state attorneys general, Illinois Attorney General Kwame Raoul is suing drug companies for their alleged “widespread conspiracy to artificially inflate and manipulate prices, reduce competition and unreasonably restrain trade for more than 80 different topical generic drugs.”
Perhaps no state or federal prescription drug initiative is more important than this 2020 lawsuit, which is still ongoing. It gets directly to the heart of Illinois’ prescription drug pricing problem — the leading drug wholesalers ostensibly working together rather than competing against each other.
There’s nothing legal about this activity. Section 1 of the Sherman Act, the United States’ foremost antitrust legislation, is clear: companies can’t engage in “a conscious commitment to a common scheme designed to achieve an unlawful objective,” such as price-fixing.
In February, Attorney General Kwame Raoul secured $760 million in opioid settlement money to help reconcile these drug distributors’ bad behavior. The settlement is unrelated to price-fixing, but it’s another example that shows the havoc these three companies’ coordinated monopoly is causing. Fortunately, it appears Raoul is just getting started.
Illinois policymakers couldn’t be taking this issue on at a more pivotal time. With the population aging and chronic illnesses rising, U.S. health care costs are projected to reach an eye-popping $6.2 trillion in five years. If left unchecked, these new health care burdens can cause significant damage to America’s entitlement programs and deficit and its taxpayers’ general welfare.
Kudos to Illinois’ elected and appointed representatives for treating this issue with the severity it deserves. It’s only a matter of time before voters across the ideological spectrum thank them for putting their interests first and for creating a more market-oriented health care system that works for everyone, not just the privileged few.
Michael Flanagan is an attorney and former member of Congress from Illinois’s 5th District from 1995-1997.
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