Senate Hearing on Drug Pricing Focuses on Pharmacy Benefit Managers

A hearing of the US Senate’s Finance Committee on Tuesday addressed drug pricing and the role pharmacy benefit managers (PBMs) play in determining cost to patients.

The hearing, “Drug Pricing in America: A Prescription for Change, Part III,” gave PBMs an opportunity to testify about the issue and provide insight into what the role entails. The Senate previously addressed the issue with patient advocates and pharmaceutical company executives providing testimony.

In his opening statement, committee chairman Sen. Chuck Grassley (R-Iowa) said that Medicare prescription drug plans hire PBMs to manage Part D benefits.

PBMs are responsible for negotiating with drug companies and pharmacies to arrive at a product’s cost, deciding how much patients will pay out of pocket and what drugs are included in their health care plans, he said.

“I still believe that this is absolutely the right approach,” Grassley said.

The hearing was intended to answer questions surrounding PBMs, he said.

Among the questions Grassley posed was, “Are PBMs focused more on patients or their own bottom lines?”

He also questioned whether having PBMs integrated with insurance companies or pharmacies helps patients or closes the door to competition.

“Many consumers have very little insight into the workings of PBMs,” Grassley said.

“More transparency is needed," he said. "The current system is so opaque that it’s easy to see why there are many questions about PBMs’ motives and practices.”

Sen. Ron Wyden [D-OR] indicated that the hearing was an opportunity for the committee to examine the role and purpose of PBMs.

“[PBMs] are among the most profitable companies in the nation. What PBMs do to earn all those profits is a mystery," Wyden said in his initial statement.

"The deals they strike with drug makers and insurers are a mystery. How much they’re pocketing out of the rebates they negotiate is a mystery," Wyden said.

With Americans learning about schemes like “spread pricing” in Medicaid, whether PBMs bring any real value to taxpayers is a mystery,” Wyden said.

Testimony representing PBMs was given by William Fleming, PharmD, segment president of health care services for Humana; Mike Kolar, JD, interim president and chief executive officer (CEO), senior vice president, and general counsel for Prime Therapeutics; Steve Miller, MD, executive vice president and chief clinical officer at Cigna Corporation; John Prince, CEO of OptumRx; and Derica Rice, executive vice president and president at CVS Health and CVS Caremark. In their statements, these witnesses spoke about how each of their companies is working to help make medications more affordable to consumers.

Cigna and Express Scripts, which are affiliated, have been making progress in bringing down drug spending at the consumer level, despite an increase in prices from manufacturers, Miller said.

“We guide patients to effective, lower-cost therapies, and secure deep discounts from manufacturers and pharmacies,” he said.

CVS is encouraging the use of generics and cheaper biosimilars to improve adherence and outcomes, which in turn lowers costs, Rice said.

The company also helps to reduce drug prices by providing information to prescribers about the most cost-effective and clinically appropriate medications and by offering a pricing option that provides clients with a guaranteed price for mail, retail, and specialty drug products, regardless of product or price inflation, he said.

“We believe strongly that our PBM tools bring tremendous savings and value to the clients we serve,” said Rice.

In his statement, Miller, a former transplant nephrologist, spoke to the value of pharmaceuticals, saying that pharmacy is the most frequently consumed aspect of health care and spending is growing as more patients are being treated with medications, rather than surgical procedures options.

“Innovation can yield exciting and life-changing new therapies and treatments. But innovation often comes with a high price tag, especially in the pharmaceutical sector,” Miller said.

In a press release, B. Douglas Hoey, CEO for the National Community Pharmacists Association (NCPA), urged the committee to question why profits are increasing for PBMs, but little savings are being passed on to patients.

"PBMs were originally created to control the cost of prescription drugs. If that ever was happening, it's not happening anymore," Hoey said. "We have no doubt that these large corporations and the outrageous fees they charge are driving higher prescription drug costs and killing small-business pharmacies."

Several witnesses at the hearing testified that drug manufacturers are solely responsible for setting list prices on medications. In addition, Fleming addressed a drug manufacturer practice for “blocking entry of generic competitors.”

One tactic for blocking competition is the practice commonly known as patent “evergreening” or “product hopping” where drug manufacturers extend a brand drug’s patent exclusivity through the development of new formulations or products that offer clinically insignificant additional benefits, he said.

"This practice is inherently anti-competitive and is designed to outright block or challenge the legitimate market entry of generic competitors, raising drug costs for seniors,” Fleming said in his statement.

In the absence of competition, manufacturers often set exceptionally high prices, Prince said

“There is a vital role for Congress and the administration to play in addressing this important issue,” he told the committee.

In his testimony, Kolar told the committee that he agrees that drug prices present a problem for society and individuals but PBMs play a role in cost control, as well as patient safety.

“PBMs are the entities in the health care system that are best situated to know and to coordinate all the medications that a patient takes. Neither pharmacies nor physicians are currently guaranteed to see the entire spectrum of a patient’s prescriptions,” he said.

According to the NCPA, community pharmacists are eagerly awaiting release of a drug pricing rule proposed by the Centers for Medicare & Medicaid Services that, if finalized as proposed, would move pharmacy price concessions to point-of-sale, eliminating the retroactive nature of pharmacy direct and indirect remuneration (DIR) fees.

"The current pharmacy DIR system isn't transparent, isn't efficient, and isn't fair to patients or pharmacies," said Hoey, a pharmacist. "It's a one-sided system that leaves other parties at the mercy of PBMs and plans. ... We've experienced a skyrocketing increase in the amount of pharmacy DIR, which grew an eye-popping 45,000 percent between 2010 and 2017. We're hopeful that the new rule fixes the inappropriate way pharmacy DIR has been abused."

Sen. John Thune (R-SD) said that he would like to see the industry take the initiative in providing more transparency with drug pricing.

People better understand pricing when they can see it, much like in a grocery store, where a cost is listed and a discount may be shown underneath it, he said.

"People understand that. In a free market, they can make very informed decisions," Thune said.

Wyden also expressed a sense of urgency for industry experts and policymakers to move swiftly to act on reducing drug costs.

“2019 is the year to get this done,” he said.