A Worthy plan to reform prescription drugs.

Here’s why medicine costs so much.

The current system essentially pays everyone in the drug distribution chain a commission on drug sales, like car salespeople getting a percentage of the sale price.

This guarantees that everyone from pharmacies to doctors to hospitals makes money when more expensive drugs are prescribed, regardless of whether or not they’re the best choice for the patient.

Understanding the middle man.

Between health insurance and pharmacies are Pharmacy Benefit Managers (PBMs). They’re supposed to manage your prescription drug benefits and negotiate lower prices, but they often do the opposite. To understand why drug prices are out of control, you need to understand how these companies make money:

Rebates

Drug manufacturers pay PBMs based on the volume and price of drugs sold. So a higher price and more prescriptions means a bigger check for the PBM.

How most industries work:

Company provides a service → charges a flat fee for that service

For example: A delivery company charges $50 to ship a package, regardless of what’s inside.

How most PBMs work:

Company provides a service → gets paid a percentage of the drug’s price

For example: The PBM gets 15-30% of a $10,000 drug. So they make $1,500 to $3,000 even though they’re doing the exact same work they’d do for a $100 drug.

Pay-to-Play

Drug manufacturers pay PBMs to get “preferred” status. The more expensive the drug, the higher the fee.

Markup on the drug itself (spread pricing)

A PBM will buy a drug for $3,800, charge the health plan $9,500, and keep the spread: the $5,700 difference.

Fees to their own companies

In many cases, the same corporations own the PBMs, the specialty pharmacies, mail-order pharmacies, and group purchasing organizations, so they can steer business to their affiliates and pay themselves premium rates.

The problem is systemic.

It’s not just PBMs that profit as drug prices soar. Merck’s CEO has said:

“If you bring a product to the market with a low list price, in this system you get punished financially and you get no uptake because everyone in the supply chain makes money as the result of a higher list price.”

PBMs: Collect rebates based on list price (higher price = higher rebate)

Specialty Pharmacies: Charge fees as percentage of price

Group Purchasing Organizations: Add markups at every step of the supply chain, compounding costs before a drug ever reaches the patient.

Hospitals: Use “spread pricing” and regularly abuse the 340B program. 340B was originally designed to help providers serve vulnerable populations, but it’s become a profit center for large hospitals. Hospital profit margins average 72% on 340B drugs versus 22% on non-340B drugs

Physicians: Profit from the spread between wholesale and retail

There is a solution. And we have a plan.

So many of the issues we’ve detailed come down to one thing: the wrong incentives. Providers aren’t always choosing the best drugs for a patient - they’re choosing the most profitable ones. But if we can delink compensation from the list prices of prescription drugs, Americans could save $95.4 billion annually without affecting pharmaceutical innovation.

There’s a clear path to achieving this goal. Here’s what we need to do:

Federal legislation preventing all these kickbacks

Within a two-year phase-in period, prohibit:

Services charged based on drug prices
Differential payments based on formulary placement or volume
Spread pricing beyond actual service costs
Repeal or radically reform the 340B program

Transparent consumer pricing

Require disclosure of “net price” at prescription time
Tie all copayments to net prices, not list prices
Mandate conflict-of-interest disclosure during the transition period
Require modest administrative costs to be fully disclosed

Eliminate preferential treatment

Require PBMs to pay affiliates the same rates as independent entities
Publish affiliate reimbursement rates publicly
Prohibit exclusive distribution through affiliated pharmacies
Maintain healthcare provider compensation through alternative payment models

New legislation in progress.

On Feb 4, 2026 the House passed Pharmacy Benefit Manager (PBM) reform, as part of a $1.2 trillion funding bill. This legislation, which passed with a 217-214 vote, includes transparency requirements for PBMs and prohibits them from linking pay to drug list prices in Medicare Part D.