The House is renewing a push to take on pharmacy benefit managers that play an important role in the cost of prescription drugs that has been heavily scrutinized by lawmakers amid industry consolidation and rising prices.
A subcommittee of the House Energy & Commerce Committee held a hearing on Wednesday focused on possible legislative solutions to reducing prescription drug costs through reducing the power PBMs have in the healthcare system that is increasingly expensive for Americans and the government to navigate.
PBMs have been targeted by Congress and the Federal Trade Commission for their powerful role in determining the cost of prescription drugs, though comprehensive reforms have been a struggle for the government to achieve. The companies negotiate rebates and discounts for insurance plans from drug manufacturers, determining the prices insurances pay and pharmacies receive.
PBMs argue the industry’s stated mission and goals are to lower costs for employers and other health care consumers but have been accused of doing the opposite and driving up costs through vague pricing tactics that steer benefits to preferred pharmacies.
There are also concerns about the heavy concentration of market share between just a handful of conglomerates.
Three companies — CVS Health’s Caremark, Cigna’s Express Scripts and UnitedHealth Group’s OptumRX — control around 80% of prescriptions in the U.S. Each own a PBM and a pharmacy, which lawmakers and critics of the industry argue creates incentive for them to manipulate drug prices to maximize revenue and increases costs for patients.
“They have only created perverse incentives throughout the drug supply chain. Their extensive market control has only grown due to consolidation and vertical integration, leading to less competition and decreased patient choice,” said Rep. Buddy Carter, R-Ga., and chair of the health subcommittee.
Small pharmacies have been warning for years that the discrepancies in pricing paid to their business compared to conglomerate-owned pharmacies is driving them out of business. PBMs have also been accused of steering patients to pharmacies they own and favoring brand-name drugs that are more expensive and result in higher rebates being paid to them by drugmakers.
“If the PBM industry continues to go unchecked, thousands more like Chancy Drugs could go out of business, further reducing access and increasing costs,” said Hugh Chancy, a pharmacist and owner of Chancy Drugs.
With soaring healthcare costs drawing more attention in Washington, the consolidation of the drug marketplace has been a growing concern for lawmakers and regulatory agencies to tackle. A series of reforms for the industry made it through committee and were initially part of a stopgap government funding bill that was ultimately pulled.
“The need to reform the prescription drug system is clear, including cleaning up how PBMs operate and stopping abuses of their market system at the cost of consumers,” said Rep. Diana DeGette, D-Colo.
Much of the attention during the hearing was focused on legislation seeking to tackle two main issues with PBMs, ending a practice known as spread pricing and forcing the industry to pass 100% of drug rebates onto pharmacies so the savings could then be felt by consumers.
The Pharmaceutical Care Management Association, an industry group, said in a statement that it shared the goal of lowering costs for patients.
“That is why PBMs are already rapidly adapting and innovating in the private market to address health plan sponsor demand for more choices, greater transparency, and options that lower out-of-pocket costs for patients. While Big Pharma pushes a self-serving agenda designed to keep prices high by undermining the critical cost-saving role of PBMs, our members are meeting concerns in the market right now,” said Katie Payne, PCMA SVP for public affairs and head of advocacy.
Spread pricing is the difference between a PBM reimburses a pharmacy for a prescription and the amount it charges an insurance plan’s sponsor. Critics of the practice say the PBMs overcharge payers like Medicaid more than they get from the pharmacy and then keep the entirety of the difference as profit.
Rebates are also a subject of significant debate when it comes to lowering healthcare costs. PBMs say their immense purchasing power allows them to reduce prices by getting drugmakers to offer discounts through bulk purchasing. But critics of the industry say that rather passing those savings onto consumers, PBMs retain a portion to generate additional revenue.
“The PBMs will tell you they already pass on all, or nearly all, rebates and discounts. If so, then why are they so dogged in opposing a bill mandating they do what they already claim to do?” said Shawn Gremminger, president and CEO of the National Alliance of Healthcare Purchaser Coalitions.
Another effort seeking to break up some of the largest conglomerates with the goal of reducing prescription drug costs through more competition and lower administrative costs. The bill, which would require healthcare companies that own health insurers or PBMs to divest from their pharmacy businesses, had a wide range of bipartisan sponsors across the political spectrum but stalled out at the end of the 118th Congress.
The industry has fiercely resisted legislative pushes in Washington seeking more price transparency, how rebates are structured and reducing the role PBMs play in determining the cost of prescription drugs.
It’s unclear what kind of legislation could make it to President Donald Trump’s desk but he has promised to “knock out” the multibillion-dollar industry.
“We have a thing called the middleman. You know, the middleman, right? The horrible middleman that makes more money, frankly, than the drug companies that they don’t do anything except they’re a middleman,” Trump said before taking office in December. “I don’t know who these, I don’t know who these middlemen are, but they are rich as hell. We’re going to knock out the middlemen.”
Health and Human Services Secretary Robert F. Kennedy Jr. told lawmakers during his confirmation hearings that he would also support tougher rules on PBMs.
“I think that we need to reform the PBMs. I think we need to get rid of all of these vested interests that are draining money from the system,” Kennedy said. “Trump wants to get the excess profits away from the PBMs and send it back to primary care, to patients in this country.”