WASHINGTON—House Committee on Oversight and Reform Ranking Member James Comer (R-Ky.) opened today’s forum on “Reviewing the Role of Pharmacy Benefit Managers in Pharmaceutical Markets” by emphasizing congressional oversight of rising prescription drugs must include an examination of pharmacy benefit managers’ (PBMs) role.
In his opening remarks, Ranking Member Comer outlined how PBMs’ consolidation has negatively affected competition in the marketplace, leading to higher drug prices for Americans. He concluded his remarks by calling on PBMs to provide greater transparency about their practices and urged further review of proposed legislation to determine any changes needed to decrease the costs of prescription drugs and benefit patients.
Americans spend more on prescription drugs—about $1,200 per person—than any other country.
While prescription drugs account for approximately 10% of overall healthcare spending, Americans pay more out-of-pocket for prescription drugs than for hospital care or health insurance.
For years Democrats have attacked pharmaceutical companies—companies that bring innovative and life-saving medications to market, including three incredibly successful COVID-19 vaccines thanks to Operation Warp Speed.
Instead of highlighting successful pharmaceutical innovation that leads to treatments and cures for disease, Democrats have demonized these companies for high list prices without regard to the fact that patients do not pay the list price and patients can still access the medication.
All the while, Democrats have given a free pass to Pharmacy Benefit Managers even though they play an outsized role in driving rebates and list prices of prescription drugs.
Despite my request to Chairwoman Maloney to hold a hearing to examine the role of PBMs, Democrats have decided to limit their drug pricing investigation to only pharmaceutical companies leaving a significant void in in the Oversight Committee’s review of drug pricing and many unanswered questions.
Today, I am pleased to hold this forum to examine the role PBMs play in pharmaceutical markets.
PBMs were intended to be intermediaries to negotiate with pharmaceutical manufacturers, insurers, and pharmacies on behalf of public and private payers such as Medicaid and Coca-Cola for example.
Over the past decade PBMs have consolidated from more than 20 regional and national players, to 3 that control roughly 80% of the market.
The consolidation in the market has enabled PBMs to exercise significant negotiating power with pharmaceutical manufacturers and led to increases in the use of generic medications and savings for patients.
However, PBMs have not only consolidated horizontally, they have also done so vertically.
As of today, every major PBM owns or is owned by a major health insurer.
Furthermore, every major PBM owns or is owned by a specialty, mail-order, or retail pharmacy, or all three.
This means that when PBMs negotiate with a pharmacy or a health insurer, they are either negotiating with themselves or one of their direct competitors.
Their position as the middlemen, negotiating and engaging with all the players in the pharmaceutical market has enabled PBMs to grow exponentially, and snuff out their competition.
PBMs audit competing pharmacies viewing data including the pharmacies acquisition costs and patient data and then use that data to steer commercial patients to their own pharmacies and reimburse competing pharmacies at lower rates.
In Ohio two of the largest PBMs, CVS Caremark and OptumRx, charged Ohio Medicaid $223.7 million more than it had paid competing pharmacies.
In my home state of Kentucky, PBMs paid competing pharmacies $123.5 million less than was charged to the state Medicaid program in 2018, alone.
This is only one example of how PBMs negatively affect competition.
In the Medicare program, PBMs use a tactic known as direct and indirect remuneration, or DIR, to claw back billions of reimbursements paid to pharmacies.
In 2019, DIR clawbacks rose to over $9 billion, more than 18% of the Medicare drug spending.
While these clawbacks were originally intended to enable PBMs to accurately report pharmacy rebates and price concessions, they have grown dramatically, enabling PBMs to create a negative reimbursement in certain cases.
This means a PBM is not only taking back all of what the PBM paid the pharmacy for the prescription, but also clawing back all or a portion of the patient’s copay.
PBMs also exert immense control over patient formularies, allowing them to steer patients to high-cost medications because these medications give them higher rebates.
By steering patients to higher-cost medications, PBMs increase patients’ copays and force manufacturers to increase list prices to pay PBMs higher rebate demands.
While PBMs pass on a portion of rebates they receive to payers, their lack of transparency makes it nearly impossible to determine whether these rebates are truly benefiting patients, or simply increasing PBM profits.
Without greater transparency of PBMs it is difficult to see how these tactics are benefitting patients at all. If the value for consumers is so great, it shouldn’t be a stretch for PBMs to prove their worth and have an open discussion about their practices.
That is why this forum is so important.
Today, we take a first step to reviewing the role of PBMs in pharmaceutical markets to determine what, if any, changes need to be made and how proposed legislation could decrease the costs of prescription drugs and benefit patients.