Congress is Asking the Wrong People About Drug Prices

As Congress prepares for yet another round of hearings and “reforms” focused on prescription drug and healthcare costs, lawmakers should pause and ask a basic but essential question before calling the first witness or marking-up the first bill: who actually sets drug prices in the United States?

The answer is straightforward — and too often obscured.

Pharmaceutical manufacturers control prescription drug prices. Insurance companies do not. Pharmacy benefit managers (PBMs) do not. Pharmacies and pharmacists do not.

Drugmakers along decide what a new medicine will cost when it launches. They alone determine when and by how much prices increase. They alone choose whether Americans will pay 2x, 5x, or 10x more than patients in other developed countries for the exact same drug. Every other participant in the system operates downstream from those decisions.

Congressional oversight should start there.

Yet, hearings routinely focus on insurers and PBMs, as if those entities originate prices rather than respond to them. Asking insurers why a drug is expensive is like asking the cashier why groceries cost more this year. That misdirection may generate headlines, but it does little to lower costs for patients.

To be clear, insurers and PBMs matter — but in a different way. PBMs administer benefits: they process claims, manage formularies, and negotiate rebates off prices that manufacturers have already set. They do not have the legal authority to lower a drug’s list price. Insurers decide how costs are distributed — through premiums, deductibles, and copays — but they cannot force a manufacturer to charge less for a medicine.

Every transaction in the U.S. drug market begins with a price established by the manufacturer. This distinction is not purely academic. It determines where policy actually works.

When drugmakers raise prices, insurers respond predictably: premiums go up, formularies tighten, and more cost is pushed onto patients through higher deductibles and coinsurance. The public feels that pain at the pharmacy counter and understandably blames the insurer. But the inflationary impulse originated upstream, with the company that set the price.

Recent actions by President Donald J. Trump’s administration recognize this reality — and they deserve credit for that. The Administration’s Most Favored Nation (MFN) pricing initiative, direct price negotiation authority for certain drugs, and efforts to tie U.S. prices more closely to international benchmarks all target the source of pricing power: manufacturers. These policies are not about benefit design or insurance administration; they are about price discipline where it belongs.

Congress should align its oversight accordingly.

The uncomfortable truth is that the U.S. market continues to tolerate pricing practices that would not survive scrutiny elsewhere. Manufacturers argue that high prices fund innovation. Yet many of the most expensive drugs were developed with substantial public investment, enjoy long exclusivity periods, and face little discipline even after recouping their research and development costs many times over.

If lawmakers are serious about lowering drug prices — not just redistributing who pays them — hearings and reforms must focus squarely on the companies that control launch prices, list prices, and global pricing strategy. That means asking drug executives hard, specific questions, such as:

• Why do identical medicines cost dramatically less overseas?
• Why do list prices routinely rise faster than inflation?
• Why do launch prices continue to escalate even as development risks decline?
• Why do drugs developed with significant public funding face no meaningful price restraint?
• Why are Americans expected to subsidize global pricing strategies indefinitely?

Transparency alone is not enough. Accountability must follow authority.

Congress should require manufacturers to justify launch prices, disclose international price differentials, and face automatic consequences when prices exceed inflation or global norms. Negotiation authority should expand where market power is concentrated. And MFN-style benchmarks should not be treated as extraordinary — but as standard tools in a market that otherwise lacks discipline.

Until oversight focuses on the entities that actually set prices, hearings and reforms will continue to generate sound bites rather than solutions. Americans will keep paying the highest drug prices in the world — not because insurers demand it, but because manufacturers are allowed to charge it.

If Congress wants to fix drug pricing, it needs the right people in the and at the table — and have the right questions asked of them.