House members participating in a Wednesday afternoon subcommittee hearing were in broad, bipartisan agreement that consolidation and other anticompetitive practices are prevalent across the healthcare industry and drive untenable costs for patients and the government.
Based on their grab bag of witness questions and finger-pointing, however, it’s still up for debate which offending camp—pharmacy benefit managers, large health systems, payers or even federal regulators—members of the Ways and Means Subcommittee on Health will likely be prioritizing for legislative reform.
“There seems to be a great deal of agreement about problems, and there seems to be some assessment of solution,” Rep. Earl Blumenauer, D-Oregon, said during Wednesday’s hearing. “I’m mystified that it is as hard as it has been for us to be able to move forward.”
Certain areas previously addressed by the lawmakers’ colleagues in other House and Senate committees received the lion’s share of scrutiny during the hearing. PBMs, for instance, were frequently taken to task by lawmakers and expert witnesses over their size, limited competition and limited transparency—all of which they said have been enabled by vertical integration.
Subcommittee Chairman Vern Buchanan, R-Florida, noted in his opening statement that the combination of PBMs, pharmacies and their parent insurers creates “a huge monopoly, which decreases patient access and increases prices. While the FTC allows these mergers to occur since they’re in different areas of healthcare, they’re no less problematic—they result in fewer options for patients and reduced competition.”
“It’s a game, it’s an absolute shell game that’s happening,” Rep. Greg Murphy, M.D., D-Pennsylvania, said in reference to PBMs’ drug rebate aggregation process. “Personally, Mark Cuban came to visit us at the Doctor’s Caucus the other day. He just put PBMs to the side and is going straight to the pharmaceutical companies. I think that’s what we’re going to have to do. The PBMs started out with a great idea, but they’ve absolutely extorted the American public with their actions.”
Still, not all of the subcommittee’s members were quick to toss PBMs under the bus. Ranking Member Lloyd Doggett, D-Texas, said that recent PBM scrutiny is a result of a “boogeyman” narrative promoted by pharmaceutical industry lobbyists hoping to avoid reform.
“PBMs are the only part of the supply chain that are pushing back on monopoly drug prices,” he said. “Though I’m certainly not a defender of some PBM anticompetitive behavior, these so-called middlemen are one of the few tools available to contain outrageous manufacturer prices.”
Doggett later questioned whether proposed policy interventions, such as a requirement that 100% of rebates be passed along, could inadvertently strengthen drugmakers’ negotiating positions if imposed haphazardly.
Additional restrictions on PBMs’ ability to negotiate rebates would bring a risk of increased prices, “but, ultimately, they’re negotiating off of prices set by the manufacturers, so you should be tackling both problems at the same time,” Benjamin Rome, M.D., a Harvard Medical School instructor and researcher who testified as a witness, told Doggett. “The Inflation Reduction Act does both: it addresses high prices by manufacturers and it redesigns Medicare Part D to make it more effective and more generous coverage for patients. That’s the type of policy that, when you combine those things together, can be very powerful.”
Among the various policy recommendations floated by the expert witnesses with independent pharmacy, state insurance agency, policy research and patient advocacy backgrounds, greater insight into PBMs’ negotiations saw the greatest consensus. The witnesses noted that there is currently very little insight into just how much of a discount PBMs are able to secure and how much more they are charging independent pharmacies, patients or other purchasers.
“If there’s one thing that the committee can do—I agree with the recommendations here from the panel, as a researcher and for people who purchase healthcare—we just need more transparency on the prices,” Rome said. “The rebates that are negotiated by PBMs are completely confidential. Both the PBMs and the manufacturers seem to argue in favor of confidentiality.
“Shining some light on the prices that are actually being paid and making it clear where the problems are in the PBM business model would be extraordinarily helpful as a first step as you consider some of these proposals,” he said.
The comments came shortly after another House healthcare subcommittee voted unanimously to advance a bill imposing transparency requirements on PBMs, called the Transparent PRICE Act of 2023.
Health system megamergers, physician employment earn sharp rebukes
PBMs weren’t the only players in the spotlight. Lawmakers and witnesses also focused on large health systems and the consolidation of hospitals and practices during Wednesday’s hearing.
Barak Richman, Ph.D., a healthcare economics policy researcher and professor at Duke Law School, frequently pointed to health systems’ accumulation of hospitals and physician practices as a detriment to costs, quality and to the execution of efficiency-focused care models, such as value-based care.
Though he commended the Federal Trade Commission on recent successes in blocking hospital purchases and mergers of concern, he encouraged the lawmakers to expand regulators’ antitrust scope to include cross-market health system “megamergers” that “do not create benefits for patients, but do create significant harm on markets.”
Additionally, he petitioned the lawmakers to “confront the growing trend” of individual states permitting anticompetitive provider mergers, such as through the use of Certificates of Public Advantage. Here, the North Carolina native specifically highlighted “with enormous dismay” his state Senate’s recent advancement of a bill that would waive UNC Health from state and federal antitrust enforcement.
“This problem is not specific to North Carolina, but North Carolina is the most recent and in many ways the most brazen instance of this trend,” he said. “We cannot make any progress on competition policy if state legislatures block the antitrust laws at square one.”
Murphy, who represents North Carolina and is a UNC School of Medicine alum, was receptive to Richman’s concerns over health system consolidation but noted that “the only time I ever see that being appropriate” is for rural systems where a single, profitable center is supporting other unprofitable centers.
He, along with fellow Republican Rep. Blake Moore of Utah, extended their scrutiny of hospitals and health systems’ anticompetitive practices to the purchase of medical groups and now-widespread employment of physicians by hospitals.
In response to both, Richman warned that physician employment works against healthcare cost efficiency models (such as value-based care) due to market control and hospitals’ inherent reimbursement incentives.
“I do think that the consolidation phase, which of course has been fueled by private equity, really is creating a crisis for the medical profession,” “Physicians … have been independent and we’ve relied heavily on that physician independence. And now very, very recently, three-quarters of physicians are now employed. That’s something I think the healthcare sector hasn’t fully absorbed yet and it’s going to have some very significant long-term consequences.”
Though lawmakers took time during the hearing to re-air political disagreements over whether partisan legislation such as the Inflation Reduction Act, the Affordable Care Act and the Medicare Prescription Drug, Improvement and Modernization Act were fueling or harming competition, ideological differences mainly came to light in discussions of whether potential policy interventions should be installing new guardrails or removing barriers to competition.
Rep. Kevin Hern, R-Oklahoma, was among the champions of the latter, saying that Congress would be better served by reviewing Medicare and Medicaid policies for those that “promote unhealthy consolidation.”
“It concerns me that legislative proposals from other health committees in Congress approach consolidation by finding ways to attack industries, not solve problems,” he said. “This committee should approach this problem by identifying policies that limit the ability for smaller companies to grow and compete.”
Along these lines, Hern said he’d “be remiss not to mention the hospital ban on competition. We are way overdue to repeal the ban on new physician-owned hospitals that offer patients more choices and drive down prices through competition. It’s time for us in Congress to get the courage to take on more than just drug pricing. … We need to look at which government policies are creating a system where 50% of healthcare spending is driven by our doctors and hospitals.”