Middlemen and the Dying: How PBMs Turned Insulin Into a Cash Cow While Americans Ration Their Doses

The Invisible Hand Strangling the Insulin Supply Chain

Somewhere between the pharmaceutical manufacturer that produces a vial of insulin and the diabetic patient who desperately needs it, a largely unregulated corporate middleman takes a cut — and then another cut — and then negotiates a rebate that never reaches the pharmacy counter. That middleman is a pharmacy benefit manager, or PBM, and for the estimated 37 million Americans living with diabetes, the decisions made inside these opaque corporate structures can be the difference between a managed condition and a preventable death.

The three dominant PBMs — CVS Caremark, Express Scripts, and OptumRx — together manage drug benefits for roughly 80 percent of Americans with prescription drug coverage, according to the American Pharmacists Association. They negotiate rebates with drug manufacturers, set formulary tiers that determine what patients pay out of pocket, and operate with a degree of financial opacity that would be unacceptable in virtually any other sector that touches public health. And despite years of congressional hearings, bipartisan expressions of outrage, and a Federal Trade Commission investigation launched in 2022, the structural incentives that keep insulin prices artificially elevated remain largely intact.

What PBMs Actually Do — and Why That's the Problem

The industry's defenders argue that PBMs perform a necessary function: aggregating purchasing power, negotiating lower list prices, and managing formularies that steer patients toward cost-effective medications. In theory, that sounds reasonable. In practice, the system has evolved into something far more self-serving.

PBMs profit, in part, from the spread between what they pay pharmacies for drugs and what they charge insurers — a practice known as spread pricing. They also collect rebates from manufacturers in exchange for favorable formulary placement, rebates that critics and the FTC alike have argued are not reliably passed on to patients at the point of sale. The perverse result is that PBMs may actually have a financial incentive to favor higher-list-price drugs that generate larger rebates over lower-cost alternatives — even when the cheaper option would serve the patient better.

For insulin specifically, this dynamic has had lethal consequences. The list price of insulin in the United States is, by virtually every international comparison, grotesque. A 2021 RAND Corporation study found that U.S. insulin prices are roughly ten times higher than in comparable high-income nations. Canada, Germany, and the United Kingdom all pay a fraction of what Americans are charged for the same molecules, manufactured by the same companies. The difference is not innovation cost. It is market structure — and the PBM layer sits at the center of it.

The Human Cost Congress Keeps Refusing to See

The consequences of this system are not abstract. Rationing insulin is not a metaphor. It is a documented, widespread, and dangerous practice among American diabetics who cannot afford their medication. A 2019 survey published in JAMA Internal Medicine found that one in four insulin users reported rationing their doses due to cost. Endocrinologists have a clinical term for what happens next: diabetic ketoacidosis, a life-threatening condition that sends patients to emergency rooms and, in too many cases, to morgues.

Alicia Carbaugh, a 26-year-old from Ohio, died in 2019 after rationing her insulin following her 26th birthday, when she aged off her parents' insurance plan. Josh Wilkerson, a 27-year-old from Texas, died in 2017 under nearly identical circumstances. These are not isolated tragedies. They are predictable outcomes of a pricing architecture that treats a century-old, off-patent medication as a luxury commodity.

The Inflation Reduction Act of 2022 capped insulin costs at $35 per month for Medicare beneficiaries — a genuine, if partial, achievement. But that cap does not extend to the roughly 1.5 million insulin-dependent Americans under 65 who are privately insured or uninsured. Congressional Democrats attempted to include a universal $35 cap in the same legislation; Senate Republicans blocked it, with 43 senators voting against the measure. The cap for private insurance never passed.

The Strongest Case for the Other Side — and Why It Falls Short

PBM advocates and their allies in the pharmaceutical industry argue that without the rebate system, list prices would be even higher, and that the negotiating leverage PBMs exercise actually suppresses costs relative to a fully unregulated market. Some economists support this view, noting that formulary competition does, in some therapeutic categories, drive down net prices over time.

This argument deserves engagement, not dismissal. It is true that net prices — after rebates — are lower than list prices. But net prices are not what uninsured patients pay. They are not what patients in high-deductible plans pay before meeting their deductible. And the opacity of the rebate system means that neither patients nor their physicians can reliably know what a drug will actually cost at the counter. Transparency that exists only for the corporations involved is not transparency — it is concealment dressed in the language of market efficiency.

The FTC's 2024 interim report on PBMs concluded that the largest PBMs are engaging in practices that "may be increasing drug costs and impeding competition" — language that is cautious by regulatory standards but damning in context.

What Accountability Would Actually Look Like

Reform requires confronting PBM market power directly. Mandatory pass-through of rebates to patients at the point of sale, full public disclosure of spread pricing practices, and the prohibition of PBM ownership of specialty pharmacies that create glaring conflicts of interest are all measures that have been proposed in Congress and stalled under lobbying pressure. The PBM industry spent more than $10 million on federal lobbying in 2023 alone, according to OpenSecrets.

Beyond incremental reform, the case for direct government drug price negotiation — expanded far beyond Medicare's current, limited scope — grows stronger with every preventable death. Nations that have implemented reference pricing or direct negotiation consistently achieve lower costs without sacrificing pharmaceutical innovation at the rates the industry claims. The evidence is available. The political will is the variable.

For the millions of Americans managing diabetes daily, the direction of progress is clear, even if the destination remains agonizingly distant: dismantle the middlemen, mandate transparency, and treat insulin as the essential medicine it is — not the revenue stream it has become.

Every day Congress delays PBM reform is a day someone, somewhere in America, is choosing between a full dose of insulin and a full tank of gas — and that is a policy choice this country is making with open eyes.