[Senate Hearing 116-415]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 116-415

                       DRUG PRICING IN AMERICA: 
                  A PRESCRIPTION FOR CHANGE, PART III

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                                HEARING

                               BEFORE THE

                          COMMITTEE ON FINANCE
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 9, 2019

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                     
                                     

            Printed for the use of the Committee on Finance
            
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
43-563 PDF                  WASHINGTON : 2021                     
          
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                          COMMITTEE ON FINANCE

                     CHUCK GRASSLEY, Iowa, Chairman

MIKE CRAPO, Idaho                    RON WYDEN, Oregon
PAT ROBERTS, Kansas                  DEBBIE STABENOW, Michigan
MICHAEL B. ENZI, Wyoming             MARIA CANTWELL, Washington
JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
JOHNNY ISAKSON, Georgia              SHERROD BROWN, Ohio
ROB PORTMAN, Ohio                    MICHAEL F. BENNET, Colorado
PATRICK J. TOOMEY, Pennsylvania      ROBERT P. CASEY, Jr., Pennsylvania
TIM SCOTT, South Carolina            MARK R. WARNER, Virginia
BILL CASSIDY, Louisiana              SHELDON WHITEHOUSE, Rhode Island
JAMES LANKFORD, Oklahoma             MAGGIE HASSAN, New Hampshire
STEVE DAINES, Montana                CATHERINE CORTEZ MASTO, Nevada
TODD YOUNG, Indiana

             Kolan Davis, Staff Director and Chief Counsel

              Joshua Sheinkman, Democratic Staff Director

                                  (ii)
                            
                            
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Grassley, Hon. Chuck, a U.S. Senator from Iowa, chairman, 
  Committee on Finance...........................................     1
Wyden, Hon. Ron, a U.S. Senator from Oregon......................     2

                               WITNESSES

Miller, Steve, M.D., executive vice president and chief clinical 
  officer, Cigna Corporation, Bloomfield, CT.....................     5
Rice, Derica, executive vice president, CVS Health; and 
  president, CVS Caremark, Woonsocket, RI........................     7
Fleming, William K., Pharm.D., segment president, healthcare 
  services, Humana, Inc., Louisville, KY.........................     8
Prince, John M., chief executive officer, OptumRx, Minnetonka, MN    10
Kolar, Mike, interim president and CEO, Prime Therapeutics, LLC, 
  Eagan, MN......................................................    11

               ALPHABETICAL LISTING AND APPENDIX MATERIAL

Fleming, William K., Pharm.D.:
    Testimony....................................................     8
    Prepared statement...........................................    53
    Responses to questions from committee members................    66
Grassley, Hon. Chuck:
    Opening statement............................................     1
    Prepared statement with attachments..........................   102
Kolar, Mike:
    Testimony....................................................    11
    Prepared statement...........................................   106
    Responses to questions from committee members................   115
Miller, Steve, M.D.:
    Testimony....................................................     5
    Prepared statement...........................................   136
    Responses to questions from committee members................   144
Prince, John M.:
    Testimony....................................................    10
    Prepared statement...........................................   170
    Responses to questions from committee members................   176
Rice, Derica:
    Testimony....................................................     7
    Prepared statement...........................................   205
    Responses to questions from committee members................   209
Wyden, Hon. Ron:
    Opening statement............................................     2
    Prepared statement with attachments..........................   232

                             Communications

American Pharmacists Association.................................   237
American Society of Clinical Oncology............................   239
American Society of Health-System Pharmacists....................   248
Campaign for Sustainable Rx Pricing..............................   250
Coalition for Affordable Prescription Drugs......................   256
Kasisky, Christine, RPh..........................................   256
Morning Consult..................................................   259
National Association of Chain Drug Stores........................   260
National Association of Specialty Pharmacy.......................   264
Pharmacists United for Truth and Transparency....................   268
Pharmacists United for Truth and Transparency--Illinois..........   270

 
                       DRUG PRICING IN AMERICA: 
                  A PRESCRIPTION FOR CHANGE, PART III

                              ----------                              


                         TUESDAY, APRIL 9, 2019

                                       U.S. Senate,
                                      Committee on Finance,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:13 
a.m., in room SD-215, Dirksen Senate Office Building, Hon. 
Chuck Grassley (chairman of the committee) presiding.
    Present: Senators Cornyn, Thune, Portman, Scott, Cassidy, 
Lankford, Daines, Young, Wyden, Stabenow, Cantwell, Menendez, 
Carper, Cardin, Brown, Bennet, Casey, Whitehouse, Hassan, and 
Cortez Masto.
    Also present: Republican staff: Brett Baker, Senior Health 
Advisor; Stuart Portman, Health Policy Advisor; and Karen 
Summar, Chief Health Policy Advisor. Democratic staff: Joshua 
Sheinkman, Staff Director; Anne Dwyer, Senior Health-care 
Counsel; Elizabeth Jurinka, Chief Health Advisor; Matt Kazan, 
Senior Health Advisor; and Kristen Lunde, Winston Fellow.

 OPENING STATEMENT OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM 
              IOWA, CHAIRMAN, COMMITTEE ON FINANCE

    The Chairman. Good morning, everybody.
    The committee will come to order. Today the committee 
continues to look at why prescription drug costs are so high 
and what can be done to reduce them.
    I would like to welcome all of our witnesses. Thank you for 
coming. These are top executives for major pharmacy benefit 
managers. Around this town we refer to them as PBMs.
    Medicare prescription drug plans hire PBMs to manage Part D 
benefits. Medicaid State-managed care organizations also employ 
PBMs. We know that drug companies set the list price. Our 
February hearing with CEOs of major manufacturers focused on 
those high prices.
    We now today turn our attention to PBMs. These 
organizations negotiate with the drug companies as well as 
pharmacies to arrive at a price for a drug and its ultimate 
cost.
    This system of private entities negotiating is what I 
envisioned as an author of the Part D program of Medicare. I 
still believe that this is absolutely the right approach. I 
oppose any effort to undo the non-interference clause currently 
in the statute. However, as this hearing indicates, it is our 
duty to understand how the system is working today and what we 
can do to improve it.
    In addition to negotiating prices, PBMs also determine what 
drugs are covered and what patients pay out of pocket. Despite 
this vast influence over what often amounts to life or death, 
many consumers have very little insight into the workings of 
PBMs. PBMs report rebates and other price concessions to the 
Centers for Medicare and Medicaid Services. But the statute 
severely restricts what can be done with that information. More 
transparency is needed. The current system is so opaque that it 
is easy to see why there are many questions about PBMs' motives 
and practices.
    One question we must ask is whether or not PBMs prefer a 
high-cost drug with big rebates over a cheaper drug. Some even 
argue that PBMs force drug companies to raise their list price.
    Senator Wyden and I are investigating pricing and rebating 
practices related to insulin. This will help us more broadly 
determine whether PBMs and manufacturers today are focused on 
patients or their own bottom line.
    Mergers and vertical integration is another area that has 
increasingly prompted concern. All of the PBMs here today are 
owned by or affiliated with an insurance plan. In many cases 
the combined company also owns pharmacies and other players in 
the health industry. It is important to look to see whether 
such integration actually helps patients and consumers, or 
whether it just opens the door for anti-competitive activity.
    Last year, I sent a letter to the Federal Trade Commission, 
a letter on this very issue, and asked them to keep me apprised 
of their work. I am putting my letter and the response in the 
record. Without objection, that will be included.
    [The letters appear in the appendix beginning on p. 103.]
    The Chairman. I realize that I have raised many issues. I 
look forward to hearing what the witnesses have to say, 
providing insight and helping us find solutions.
    Ranking Member Wyden and I are committed to working on a 
bipartisan basis to bring down the cost of drugs. Our next step 
is to work with committee members to develop policies to help 
Medicare and Medicaid patients and to protect the taxpayers.
    Senator Wyden?
    [The prepared statement of Chairman Grassley appears in the 
appendix.]

             OPENING STATEMENT OF HON. RON WYDEN, 
                   A U.S. SENATOR FROM OREGON

    Senator Wyden. Thank you very much, Mr. Chairman. I want to 
pick up right where you left off because, as you have noted, 
this is a bipartisan effort to end this pharmaceutical price-
gouging that does so much harm to American consumers and to our 
taxpayers. And I think we all understand that there is a lot of 
heavy lifting to do in the days ahead.
    And at the same time I want to note that the committee has 
already begun to put some points on the board. Just last week 
the Congress passed our bipartisan legislation, legislation the 
chairman and I worked on for months to stop a blatant rip-off 
where big pharmaceutical companies were fleecing Medicaid and 
taxpayers.
    Now this morning the committee is going to be looking at 
one of the most confounding, gnarled riddles in American health 
care today. Pharmacy benefit managers are among the most 
profitable companies in America. What these pharmacy benefit 
managers actually do to rake in all of these profits is a 
mystery. The deals they strike with drug makers and insurers 
are a mystery. How much they are pocketing out of the rebates 
they negotiate is a mystery. With Americans learning about 
schemes like ``spread pricing'' in Medicaid, whether pharmacy 
benefit managers bring any real value to taxpayers is a 
mystery.
    The pharmacy benefit managers are supposed to be 
negotiators who get a better deal, a fairer shake for the 
consumer on prescription drugs. What they actually are are 
middlemen who are raking in these profits while the drug prices 
soar into the stratosphere.
    As most people will tell you--as I hear at town hall 
meetings continually, most Americans think that there are 
already too many middlemen taking a big juicy cut out of the 
American health-care system.
    Just a little bit of history and some basic facts: pharmacy 
benefit managers first showed up decades ago, back when 
prescription drugs were being utilized more extensively. The 
PBMs told the insurance companies, ``We are the ones who know 
drug pricing. We will handle the negotiations for you.''
    But there is little evidence that these pharmacy benefit 
managers have actually held down the prices in a meaningful 
way. In fact, most of the evidence shows just the opposite. 
Pharmacy benefit managers actually make more money when they 
pick a higher-price drug over a lower-price drug.
    Colleagues, let us remember that all the way through this 
discussion. Benefit managers make more money when they pick a 
higher-price drug over a lower-price drug. The logic on this is 
not exactly complicated graduate-level economics.
    PBM profits are based on taking their slice of the 
prescription drug pie. More expensive drugs mean there is a 
bigger pie. When there is a bigger pie, there are bigger slices 
for the pharmacy benefit managers.
    I have been looking at this issue extensively, as has the 
chairman. And I am of the view that pharmacy benefit managers 
guard their operations with greater secrecy than HBO is 
guarding the ending of ``Game of Thrones.''
    Now we know there has never been more outrage in the 
country over the rising cost of medicine, and I say that 
looking all the way back to my days when I was director of the 
Gray Panthers. If PBMs had clear, hard evidence proving that 
they are getting patients a better deal on prescription drugs, 
they would be leafleting the countryside and shouting it from 
the rooftops. Instead they work overtime to keep patients and 
taxpayers in the dark.
    Today the committee is going to get a thousand different 
versions of the same talking point: ``We are all about getting 
the best possible price for patients.'' But based on what I 
have seen so far, we are not getting actual proof.
    The bottom line is, pharmacy benefit managers are middlemen 
who strike deals with drugmakers in secret. In my experience, 
that kind of negotiation rarely results in an act of charity 
for consumers and taxpayers.
    Now, because of our jurisdiction, I just want to close with 
a few specifics with respect to the Federal health programs.
    First on Medicaid: a PBM scheme known as spread pricing to 
rip off taxpayers through Medicaid has set off alarm bells in 
the States from one end of the country to another. It has 
nothing to do with cream cheese, all this spread pricing. But 
here is how it works. The PBMs pay one set price to pharmacies 
for a particular drug. But then they turn around and charge 
Medicaid and other health-care payers far more for the same 
prescription.
    The chairman and I are digging into this. So this will 
continue our bipartisan efforts. We have asked the Health 
Department Inspector General to take a look. If there are 
changes that can be made to clamp down on this exploitation of 
Medicare, I think it is important we consider it. The chairman 
and I are looking into it. It is as clear a middleman rip-off 
as you are going to find.
    Now with respect to Medicare, some key issues. First, Part 
D is one of the few health benefits in America that does not 
have an out-of-pocket cap. That means seniors with catastrophic 
illnesses can face costs of thousands and thousands of dollars. 
These are folks on fixed incomes. This is a flaw that needs to 
be fixed, and I have introduced the Rx Cap to protect seniors 
in our country from having to pay more and more out of pocket 
for their medicine.
    Next, Medicare Part D encourages drugmakers and PBMs to 
push seniors on to more expensive drugs. That is because, after 
a certain amount of spending on drugs, seniors on Medicare are 
on the hook for 85 percent of the cost. After that point, PBMs 
pay only 15 percent, and drugmakers are just home free. So it 
is good business for the drug industry when seniors cross that 
threshold as fast as possible.
    Second, rebates are working against the seniors who need 
the benefit most. Drug rebates in Part D get sent straight to 
the insurance companies. In theory, they use the rebates to 
lower premiums, which sounds good if you are healthy. It is not 
such a good deal for seniors who battle illnesses. The amounts 
they pay for their prescriptions are based on list prices, not 
on the prices factoring in rebates.
    Again, I have introduced legislation, the C-THRU Act, so 
that patients can finally see whether these rebates are worth 
the trade-off. And my understanding is that there is progress 
on this in the House of Representatives as well.
    The administration has proposed new rules having to do with 
this topic as well. I continue to be concerned that the Trump 
approach could produce a windfall for the drug companies at the 
end, if the administration is unprepared to take the next steps 
to reign in the pharmaceutical companies and bring down list.
    Mr. Chairman, I appreciate very much that we are pursuing 
this in a bipartisan way. You mentioned insulin, mentioned our 
new effort with respect to Medicaid and so-called ``spread 
pricing.''
    Colleagues, we have got to move with urgency. Twenty-
nineteen is the year to get this done. We all know that 2020--
there are going to be a couple of things going on in America in 
2020. So let us continue with a sense of urgency and get this 
done in 2019 and stop the price-gouging.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Wyden.
    [The prepared statement of Senator Wyden appears in the 
appendix.]
    The Chairman. And thank you for your cooperation on this 
and several other issues as we try to do things in a bipartisan 
way.
    So first of all, in the introduction of these witnesses, I 
should not only say ``thank you'' for being here today to 
discuss an important topic, but I want to thank you--as far as 
I know, I have not heard anything negative from staff. You came 
here without a lot of hassle. And we have had some witnesses on 
this subject--it was quite a hassle to get them here. So thank 
you for your cooperation. We are grateful for that.
    First is Dr. Steve Miller, Cigna chief clinical officer, 
who leads all of the company's clinical policies, quality, and 
performance efforts.
    Derica Rice is executive vice president for CVS Health and 
also president of CVS Caremark, the company's pharmacy benefit 
management business.
    Dr. William Fleming is segment president, healthcare 
services, where he is responsible for Humana's clinical and 
pharmacy business.
    John Prince currently serves as chief executive officer of 
OptumRx.
    Finally, Mike Kolar currently serves as interim president 
and CEO of Prime Therapeutics.
    So we will start with Dr. Miller and go from my left to my 
right. I know that all of you have more to say than 5 minutes 
will allow, so for all of you a longer statement will be very 
much appreciated and will be put in the record.
    So go ahead, Dr. Miller.

 STATEMENT OF STEVE MILLER, M.D., EXECUTIVE VICE PRESIDENT AND 
   CHIEF CLINICAL OFFICER, CIGNA CORPORATION, BLOOMFIELD, CT

    Dr. Miller. Chairman Grassley, Ranking Member Wyden, and 
members of the committee, thank you for inviting me to testify 
and for your interest and leadership on these important topics.
    I am Dr. Steve Miller, executive vice president and chief 
clinical officer at Cigna. From 2005 to 2018, I served as 
senior vice president and chief medical officer at Express 
Scripts.
    I am a kidney doctor by training. I work in this industry 
by choice. As a nephrologist, I could help one patient at a 
time. In my current role, I can help over 100 million Americans 
achieve better health with greater choice, affordability, and 
predictability.
    When I started practicing medicine, patients diagnosed with 
cancer were most likely to undergo surgery to treat their 
condition. Since then, pharmaceutical companies have discovered 
and developed innovative medicines that have transformed care, 
leading to cures for previously untreatable conditions.
    Now the preferred treatment for cancer patients and 
patients with many other diagnoses is increasingly prescription 
drug therapy before surgery. Accordingly, prescription drug 
spending has become the fastest-growing portion of total 
medical expenditures.
    Innovations can yield exciting life-changing new therapies 
and treatments that improve or extend life. But innovation in 
the pharmaceutical sector often comes with a high price tag.
    At Cigna, we are focused on accelerating solutions that 
support both innovation and price stability. Express Scripts 
has a range of world-class capabilities that enhance clinical 
quality, reduce costs, and improve or accelerate access to 
therapies. These include specialty pharmacy care and 
distribution, formulary management, medical and drug data 
analytics, and patient care services.
    We employ hundreds of nurses and thousands of pharmacists 
who deliver life-saving drugs to patients, make sure patients 
know how to use them, and ensure that the treatment is working. 
The coordination of care is a huge part of what we do and what 
makes my job so rewarding. Thousands of health plans, unions, 
government plans, and employers, including many pharmaceutical 
companies, trust us to manage the pharmacy and medical benefits 
of millions of Americans. Our clients are sophisticated 
purchasers who demand value and innovation from us every day.
    We deliver safer, more affordable medicine, and provide 
specialized care with tailored solutions, including specialized 
pharmacists with deep understanding of specific disease states. 
We negotiate discounts for prescription drugs so that the 
innovations created by the biopharmaceutical industry can be 
accessed by all.
    For example, 4 years ago our society faced a challenge 
treating patients with hepatitis C. A cure was developed that 
had an extraordinary price tag of $1,000 per tablet for 84 
pills. That meant for the first time a curative treatment was 
going to be reserved for only the sickest patients.
    The situation was unacceptable, and Express Scripts worked 
to solve it. We did this by driving competition between 
clinically similar products and innovating to guarantee 
adherence.
    In the first year, we treated 50,000 patients to cure, 
achieved higher adherence than the drug's clinical trial, and 
saved patients and health systems over $1 billion. But we have 
more work to do. Approximately 90 percent of all prescriptions 
we fill are generics. And there are some cases where generics 
are not an option. The remaining 10 percent are branded drugs 
which represent 70 percent of the spend on prescription drugs.
    We believe there are targeted solutions to address this 70 
percent. We work to do this through sophisticated evidence-
based negotiations for clinically equivalent therapies. For 
example, over 7 million Americans diagnosed with diabetes use 
insulin. For some patients, the increasing price of insulin 
limits access and adherence. When Cigna and Express Scripts 
announced the merger, we clearly stated that we would improve 
choice, affordability, and predictability. Within the first 100 
days of our combination with Cigna, we announced a Patient 
Assurance Program, which will cap the cost at $25 a month for 
patients who take insulin. This is just one example of private-
sector innovations and solutions aligning incentives in the 
financing and delivery of care.
    Cigna is excited to do our part. We look forward to working 
with the committee on solutions ensuring that drugs are 
affordable for all Americans. We have highlighted proposals in 
our submitted testimony, but I will mention a few.
    We recommend improving price transparency tools for 
patients and physicians at the point of prescribing and 
prioritizing public policy that speeds biosimilars and generics 
to market. We recommend the administration move forward with 
proposals to introduce more private-market tools into Medicare 
Part B and Part D programs.
    I welcome the opportunity to discuss these recommendations 
and issues and look forward to your questions.
    The Chairman. Thank you very much.
    [The prepared statement of Dr. Miller appears in the 
appendix.]
    The Chairman. Now, Mr. Rice.

STATEMENT OF DERICA RICE, EXECUTIVE VICE PRESIDENT, CVS HEALTH; 
          AND PRESIDENT, CVS CAREMARK, WOONSOCKET, RI

    Mr. Rice. Chairman Grassley, Ranking Member Wyden, and 
members of the committee, I want to thank you for the 
opportunity to join you today.
    My name is Derica Rice, and I am an executive vice 
president at CVS Health, and also president of CVS Caremark. I 
joined CVS Health because I believe in the company's vision of 
helping patients on their path to better health. We want to 
make health care more accessible, more affordable, and improve 
health outcomes for the communities that we serve.
    Never has our work been more important than today. The 
rising costs of health care and prescription drugs affect every 
household in this Nation and are a critical issue for consumers 
and policymakers. Our job is to work with the employers, 
unions, and government programs we serve to ensure that when 
their members get to the pharmacy counter, they get the 
medicines that they need at the lowest possible cost.
    As drug prices increase and consumers shoulder more of the 
burden, we believe we can and must do more to deliver 
affordable care. In the spirit of our common goal of reducing 
health-care costs for consumers and the overall system, I am 
here to share what we as CVS Caremark are doing to directly 
reduce consumers out-of-
pocket costs at the pharmacy counter and to discuss policies 
that would help further advance that agenda.
    Our goal as a PBM is simple: to reduce costs and improve 
health outcomes. We do this by negotiating discounts with 
manufacturers, designing formularies that encourage the use of 
generics and biosimilars, and creating new tools to help bring 
escalating drug prices under control. Some of the new tools we 
have put to work for our employees and our clients include 
point-of-sale rebates at the pharmacy counter that directly 
lower out-of-pocket costs, in particular during the deductible 
phase. Currently, almost 10 million of our clients' members are 
in plans offering these savings.
    We also offer the first and only Medicare Part D plan 
offering point-of-sale rebates through our SilverScript Allure 
plan, which leaves the choice to the individual beneficiaries 
as to what plan best serves their needs. We provide zero-dollar 
copays on preventive medications for chronic conditions to our 
employees. And we have redoubled our efforts to encourage our 
clients to do the same.
    Our hard work has had a real impact. Over the last 3 years, 
we have saved our clients and their members $141 billion in 
drug costs. At the same time in 2018 alone, 44 percent of our 
clients saw their net prescription drug prices decline. And 85 
percent of our members utilizing their prescription benefit 
spent less than $300 on their prescriptions.
    We recently announced our guaranteed net cost pricing 
model, a new pricing option that provides our clients with a 
guaranteed price for retail, mail, and specialty drug products 
regardless of product or price inflation. This heightens our 
focus on the lowest actual cost of the drug, and 100 percent of 
the rebates are passed through.
    As we have interacted with consumers, they have told us 
that they want to know whether their drug is covered and what 
their out-of-pocket costs are going to be. So we now provide 
member-
specific information in the doctor's office, at the pharmacy 
counter, and directly to consumers on their phones and online.
    We call this ``real-time benefits.'' That means prescribers 
can see the actual cost of the drug to the member or patient 
based on their current coverage and up to five potentially 
lower-cost options, enabling them to make informed decisions 
and help patients save money while improving their care.
    But as much as we have been able to accomplish, we also 
understand that more must be done. We support the FDA's focus 
on bringing more lower-cost alternatives to market faster.
    As I have detailed at length in my written testimony, we 
also support many of the policies authored by members of this 
committee, including Chairman Grassley's and Ranking Member 
Wyden's policies that would bring more competition to the 
market and limit out-of-pocket expenses for seniors.
    Thank you again for the opportunity to testify. I am happy 
to answer any questions.
    The Chairman. Thank you, Mr. Rice.
    [The prepared statement of Mr. Rice appears in the 
appendix.]
    The Chairman. Now it is Dr. Fleming's turn.

 STATEMENT OF WILLIAM K. FLEMING, Pharm.D., SEGMENT PRESIDENT, 
       HEALTHCARE SERVICES, HUMANA, INC., LOUISVILLE, KY

    Dr. Fleming. Good morning, Chairman Grassley, Ranking 
Member Wyden, and members of the committee. Thank you for the 
opportunity to be here and for your leadership in creating and 
advancing Part D. I have spent my career in a variety of 
pharmacists' roles. And today I lead Humana's clinical 
organization including pharmacy, home health, and behavioral 
health.
    We provide Medicare Part D coverage to approximately 8.4 
million seniors. I am passionate about improving health 
outcomes. And I appreciate the committee examining the root 
causes of high drug costs, advancing policy solutions, and 
gaining a deeper understanding of what integrated health plans 
do.
    Today, more than 43 million seniors are covered by Part D. 
The program was designed to leverage market competition to 
provide affordable access to prescription drug coverage. The 
private market has responded to that construct by creating 
competition that has resulted in generic dispensing rates 
greater than 90 percent; stable premiums through 13 years of 
the program, averaging around $30 per month; and beneficiary 
satisfaction rates of nearly 90 percent.
    And our efforts have not just been on the negotiation side. 
The majority of our employees develop and manage patient 
engagement programs as well as advance the interoperability 
between Humana and doctors as well as with pharmacies.
    For example, we have a tool called Intelligent Rx which 
provides actionable information to doctors at the time of 
prescribing. By linking information on formulary coverage and 
cost in the electronic medical record right into the 
physician's workflow, the doctor and her patient can have a 
holistic discussion about the patient's needs.
    Part D is working incredibly well for the majority of 
seniors, but we have a rising tide of high-cost specialty drugs 
driving unsustainable costs for seniors and taxpayers. Fifty 
thousand to $100,000 treatments did not exist in 2003 when Part 
D was signed into law. Today it is common for new innovations.
    In 2018, 2 percent of our members used specialty drugs that 
comprised 36 percent of our total Part D spending. In 2 years, 
we project it could rise to nearly 50 percent. Nearly one of 
every two specialty drugs results in members entering 
catastrophic coverage on their very first fill.
    As we approach the 2020 coverage year, we anticipate the 
Part D rebate model will be changed to one where the rebates 
that manufacturers are willing to offer will be applied at 
point of sale. This regulatory action will have mixed results. 
All beneficiaries will pay higher premiums. While 12 percent 
will see savings of greater than $70 per year, 5 percent will 
see savings of less than $70 per year. Eighty-three percent 
will pay higher total cost, given the premium increases.
    There are numerous moving pieces associated with such a 
tremendous policy change. While we are still reviewing, we are 
encouraged by CMS's announcement last Friday addressing one of 
our key implementation concerns. And we will continue working 
with HHS and CMS to identify additional opportunities to 
minimize beneficiary disruption and to create sustainability 
and competition. The rebate rule does not solve the drug 
affordability problem. To truly protect beneficiaries from high 
drug costs and to ensure sustainability in Part D, we would 
encourage the committee to explore policy ideas modernizing the 
benefit.
    At a high level, this could mean placing limits on out-of-
pocket costs, creating a special funding mechanism for today's 
high-cost specialty drugs, and including new flexibilities for 
Part D plan design such as options for beneficiaries on high-
cost specialty drugs or dually eligible Medicaid/Medicare 
beneficiaries. We also strongly encourage Congress to continue 
evolving FDA and patent policy to create competition.
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, I look forward to your questions. Thank you.
    [The prepared statement of Dr. Fleming appears in the 
appendix.]
    The Chairman. Now, Mr. Prince.

STATEMENT OF JOHN M. PRINCE, CHIEF EXECUTIVE OFFICER, OPTUMRX, 
                         MINNETONKA, MN

    Mr. Prince. Chairman Grassley, Ranking Member Wyden, and 
members of the committee, I am honored to be here today on 
behalf of OptumRx, a pharmacy care services company whose 
dedicated employees work to ensure that the people we serve 
have affordable access to the drugs they need.
    Our team includes 5,000 licensed pharmacists and pharmacy 
technicians who help patients learn how to take their 
medications, avoid harmful drug interactions, and manage their 
chronic conditions. Our nurses infuse life-saving drugs in 
patients' homes. Our pharmacists serve behavioral health 
patients in 450 community mental health centers and Federally 
Qualified Health Centers. Our opioid program is helping lower 
over-prescribing of opioids, promoting compliance with CDC 
prescribing guidelines, and advancing the use of medication-
assisted therapies to reduce opioid dependency.
    OptumRx services increase medication adherence, which in 
turn reduces unnecessary ER visits and hospitalizations and 
improves consumer health. We also manage pharmacy benefits on 
behalf of employer, union, commercial, and government 
customers. We achieve savings by designing drug benefits that 
promote clinically effective drugs at the lowest possible cost, 
as a result reducing annual drug costs on average by $1,600 per 
person per client.
    This starts with a clinical assessment by our Pharmacy and 
Therapeutics Committee comprised of independent pharmacists and 
physicians. They evaluate formula placement based on scientific 
evidence about drugs' efficacy and comparative effectiveness, 
not cost. The meetings are open and transparent to our 
customers.
    Cost only becomes a factor after this independent committee 
has identified clinically effective drugs in a therapeutic 
class. If a lower net cost generic or biosimilar exists, we 
prefer it on our formularies, which is why about 90 percent of 
the prescription claims we administer are for generics.
    If there is no generic or biosimilar option or more than 
one brand or biologic drug in a class, we negotiate meaningful 
discounts for manufacturers and prefer the drug with the lowest 
overall cost on our formularies. Approximately 98 percent of 
the discounts we negotiate go to our customers.
    We know consumers have felt the manufacturers' list price 
increases in the form of higher out-of-pocket cost. We have 
heard the call for action, and we have taken action to make 
sure consumers directly benefit from the savings we are 
negotiating.
    Last year, we dramatically increased the availability of 
the discounts at the pharmacy counter for millions of eligible 
consumers who are now saving on average $130 per eligible 
prescription. In 2020, all new employer-sponsored plans we 
serve will provide discounts to their members at the pharmacy 
counter.
    But more needs to be done. Manufacturers continue to 
increase the list and net prices at unsustainable rates because 
the lack of meaningful competition allows them to. List prices 
have increased on the 20 most prescribed brand drugs for 
seniors by an average of 12 percent for each of the past 5 
years.
    Prices for specialty drugs, in particular, are spiraling 
out of control. Less than 2 percent of Americans take a 
specialty drug, yet those drugs will make up half of the total 
drug spending by 2022.
    Manufacturers also engage in anti-competitive practices 
such as pay-for-delay deals and evergreening their patents. A 
recent study found that 78 percent of drugs associated with new 
patents were not new drugs, but just extensions of existing 
ones. So called ``authorized generics'' are not a solution. 
They are not generics. They are a tactic used by manufacturers 
to give the appearance of competition, but they do not lower 
overall costs.
    Real solutions reform the patent system, promote 
competition, and lower costs. These include passing the CREATES 
Act, prohibiting pay-for-delay deals, restricting evergreening 
of patents, accelerating biosimilar treatment options, and 
reducing the exclusivity period for drugs.
    We also need to drive meaningful value-based payment models 
for drugs, just as is happening throughout the health-care 
system. With reforms that promote competition and value-based 
payments, we will all get far more value for our considerable 
investment in prescription drugs.
    We appreciate the opportunity to be here today. The 28,000 
women and men of OptumRx are committed to doing our part to 
make sure prescription drugs are more affordable.
    I look forward to answering your questions. Thank you.
    The Chairman. Thank you.
    [The prepared statement of Mr. Prince appears in the 
appendix.]
    The Chairman. Now, Mr. Kolar.

   STATEMENT OF MIKE KOLAR, INTERIM PRESIDENT AND CEO, PRIME 
                  THERAPEUTICS, LLC, EAGAN, MN

    Mr. Kolar. Chairman Grassley, Ranking Member Wyden, members 
of the committee, thank you for the opportunity to be here 
today to discuss how pharmacy benefit managers and Prime 
Therapeutics provide value to the health-care system.
    I am Mike Kolar, and I serve as the interim president and 
CEO of Prime. At Prime, we make health care work better by 
helping people get the medicine they need to feel better and 
live well. We do this by ensuring that plan members get the 
medication most appropriate for their condition at a cost that 
is the most affordable in the context of their overall 
insurance benefit.
    Prime is a unique PBM. We are owned and controlled by 18 
not-for-profit Blue plan clients. We are focused on driving 
savings for these plans instead of margins. Our business model 
is based upon delivering the lowest net cost on prescription 
medicines and the lowest overall cost of care for the benefit 
of our plans and ultimately their members. Getting the right 
drug for the right patient at the right time at a cost as 
affordable as possible in the context of their insurance 
benefit helps to ensure sustainability and optimal health 
outcomes.
    We appreciate the committee's efforts to examine the 
problem of high drug prices. We see firsthand the challenges 
that these high costs cause for plans, members, and taxpayers 
every day.
    Prime and PBMs are often misperceived as transactional 
middlemen. This entirely ignores the immense value we bring by 
using deep pharmacy expertise to ensure clinically appropriate 
drug use and to drive improved safety, quality, outcomes, and 
savings.
    While high prices are and should remain a central issue in 
this discussion, it is important to acknowledge the impact of 
our clinical expertise in ensuring appropriate utilization, 
resulting in lower costs for plans and individual members.
    As a client-owned PBM, our business is built upon 
transparency, and we understand the importance of transparency 
in the health-care system. Our model encompasses full client 
transparency and meaningful actionable pharmacy, provider, and 
patient transparency. We believe that transparency to the right 
parties for the right reasons can improve our health-care 
system and lower costs.
    Rebates and the role they play have been key areas of focus 
in the drug cost debate. In our view, rebates are a powerful 
tool to offset high prices which are set by pharmaceutical 
companies and pharmaceutical companies alone. The fact that 
rebates are not offered on many of the highest-cost drugs and 
that studies show no correlation between prices and rebates, 
underscores that rebates are a key to mitigating, rather than 
causing high drug prices.
    We pass rebates through fully to our plans. And we believe 
our plans should be able to choose how to apply these rebates 
in ways that best serve their members and market needs by 
balancing premiums and cost-sharing.
    This is particularly true since the majority of commercial 
members we serve do not face high coinsurance or high 
deductibles. Nevertheless, we are proud to offer our plans a 
commercial point-of-sale rebate solution to provide pricing 
relief where appropriate.
    We are also strong proponents of value-based contracting. 
We use these programs to align the interests of manufacturers, 
payers, and patients by tying reimbursement to quality outcomes 
and value.
    We agree that high drug prices must be addressed, and we 
support necessary inquiry and change. We believe that 
opportunities for meaningful improvement lie in increasing 
competition and in greater use of proven clinical tools to 
drive down costs. Pharmaceutical competition allows us to use 
our clinical expertise to add value and produce savings.
    However, patent abuses and restrictions on formularies and 
utilization management result in less competition and higher 
costs. We support efforts to correct these market imbalances.
    We appreciate the committee's interest in our perspective 
on drug prices, the role that we play in lowering drug costs 
for plans and members, and policy initiatives that can provide 
solutions to the drug cost problem. We believe that all parts 
of the drug supply chain should be carefully studied and 
considered in evaluating possible solutions, and we are 
committed to working with you to help bring lower costs to the 
most important stakeholder in this conversation, the patient.
    We look forward to answering the questions you have 
regarding these issues. Thank you.
    [The prepared statement of Mr. Kolar appears in the 
appendix.]
    The Chairman. I compliment all of you for staying within 
the 5 minutes, and I am sure all of you have put in a longer 
statement. We will take all of that into consideration as well.
    I am picking my first questions for Rice, Prince, and 
Miller for the reason that you are the largest with us.
    We all agree that seniors are sensitive to premium prices. 
When you negotiate drug prices with plans, is a premium impact 
for beneficiaries considered? Start with Mr. Rice.
    Mr. Rice. Yes, Senator.
    The Chairman. Okay, and then Mr. Prince?
    Mr. Prince. When we negotiate, we focus on the lowest net 
cost for that drug.
    The Chairman. Does that say that the consumer is taken into 
consideration or is that one and the same?
    Mr. Prince. Yes, absolutely. The consumer is taken into 
consideration, so they pay the lowest price.
    The Chairman. And Dr. Miller?
    Dr. Miller. Most definitely.
    The Chairman. Yes.
    Now to the same three people. Without rebates--so forget 
rebates--what tools do you have to keep drug prices and 
premiums low? I will start with Mr. Rice.
    Mr. Rice. Senator, we use a number of different tools. As 
you heard me articulate in my opening remarks, we negotiate 
with manufacturers. Putting rebates to the side, we provide 
point-of-sale rebates in order to provide benefits to the 
consumer at the counter to keep their out-of-pocket costs low.
    We provide formulary and clinical program management which 
improves adherence for members, and we know that this 
downstream--through that improved adherence--it saves medical 
costs downstream. And you also heard me reference in my remarks 
that we also provide what we call ``real-time benefits'' to 
bring visibility both to the clinicians and physicians, as well 
as the patient, as to what the lowest possible cost options are 
for them, given their specific plan design, in order to make 
sure health care is affordable and accessible for them.
    The Chairman. Yes.
    So, Mr. Prince, to the extent to which you do some of the 
same things, just say that and then whatever else you do that 
he did not cover.
    Mr. Prince. Sure.
    In terms of the value we deliver, we save our clients about 
$1,600 per person in value each year, and that is driven. Other 
things that we do are the negotiations with retail pharmacies. 
We have 67,000. We negotiate a better price for our consumers.
    We do other types of drug utilization review. But if you 
lost the tool for some type of mechanism for controlling for 
rebates, that would actually take a lot of value out of the 
system and increase cost.
    The Chairman. Okay.
    Dr. Miller?
    Dr. Miller. Much of the same. Remember that we prefer 
generics. So most of the time--in fact 90 percent of the 
dispenses we have are for generic products. And that is one of 
the greatest tools to help lower costs.
    But really important is the coordination of care. If the 
patient is not taking the drug, we are not getting the medical 
benefit. And so helping those patients identify gaps in care, 
fill those gaps and be able to make sure their drugs are 
working appropriately, is crucial to the success of treating 
the patient.
    The Chairman. Okay.
    And on the next question, I am going to concentrate on the 
same three people.
    I would like to talk about consolidation, including the 
recent integration of PBMs with insurance companies. Last year 
I wrote the Justice Department on the issues. It reported that 
the three largest PBMs--who are before us today--now cover 71 
percent of Medicare Part D enrollees and 86 percent of stand-
alone drug plan enrollees.
    Such market power raises questions. So the first question--
I want to hear briefly from each of you whether the PBM 
industry is competitive. For example, are there high barriers 
to entry for new competitors? And I think that is an important 
point, but you do not have to just concentrate on high 
barriers.
    Let us go with Dr. Miller.
    Dr. Miller. Thank you. So the consolidation in the industry 
is actually in an effort to really take better care of 
patients. By looking at total cost of care across medical and 
pharmacy, we believe we can do an even better job of 
controlling costs and improving care.
    As far as barrier to entry, this is actually a wildly 
competitive marketplace with over 60 players. People buy based 
on their needs. Some people want to use a regional player or a 
local player. Some people want to use a national player. And 
there is plenty of selection of all.
    The Chairman. Mr. Rice?
    Mr. Rice. Senator, this is a highly competitive space. In 
addition to the three that you have pointed out here, there 
is--I think CMS has noted there are over 60 PBMs across the 
U.S. So therefore, the competition there is more than--there 
are many options for the employers that are out there, 
government entities as well as unions, to choose from, given 
their specific needs.
    And we have seen that play out in terms of each of us 
trying to get to--for our clients and their members, their 
patients--the lowest possible cost we can to keep premiums low 
and out-of-pocket cost burdens low as well.
    The Chairman. And then, Mr. Prince?
    Mr. Prince. Senator, I would say the market is very 
competitive. Every time we go out to a bid, there are at least 
three to five other competitors in the market.
    Our clients are very sophisticated. They use complicated 
spreadsheets to evaluate the clinical value and the cost-
effectiveness of proposals. They have outside advisors that 
help them in that process.
    When you get to the broader market, there are dozens of 
other competitors, especially as you get into the mid-size 
employers. So it is a very competitive market with a lot of 
pricing pressure.
    The Chairman. Senator Wyden?
    Senator Wyden. Thank you.
    Gentlemen, when I am home, what Oregonians tell me is that 
the whole system is just rigged against them. And they look at 
the drug companies, the middlemen, the insurance companies, and 
they say they are just a bunch of health-care corporations 
scratching each other's backs and keeping our prices up and 
taking advantage of us.
    And all of you as pharmacy benefit managers consistently 
say--this is your message: you bring value and fight for the 
lowest price.
    So I am going to use a couple of examples to try to see how 
that works in the real world. Amgen manufactures a brand-name 
cholesterol drug that is very expensive. I have covered my 
concerns with high list prices with them.
    They recently launched an identical version of the drug 
that cost 60 percent less than the original. Now here is a copy 
of a prior authorization form that CVS requires doctors to fill 
out if the doctor wants to prescribe a cheaper version of this 
cholesterol drug. I am going to ask unanimous consent to enter 
this document into the record.
    [The form appears in the appendix on p. 234.]
    Senator Wyden. The CVS forms says, and I quote: ``The two 
products are the exact same, and they are made in the same 
manufacturing facility.'' But they ask the doctor to answer 
detailed questions about the patient's medical history.
    Mr. Rice, why is CVS--based on this form--putting arbitrary 
barriers between patients and cheaper medicine? Is it because 
you get a bigger rebate on a more expensive drug?
    Mr. Rice. Senator, I understand your question, and the 
short answer is, absolutely not. What you may find is that, in 
many cases, the highest list price drug, or the lowest list 
price drug in the particular example you cite, may not be the 
absolute lowest-cost drug.
    So what we tend to do is, we look at the drug's cost after 
all discounts have been taken into account, because that then 
is what allows members to keep out-of-pocket costs low as well 
as the plans to keep their premiums low for their members. And 
in that particular scenario, the branded drug was still the 
lowest cost for----
    Senator Wyden. You are making the argument the consumer 
somehow, by your analysis, wins on net price. Is that the 
argument you are making?
    Mr. Rice. Yes, Senator.
    Senator Wyden. Okay.
    To me that answer is a prime example of our broken drug 
system favoring the big corporations rather than patients. At 
the pharmacy counter anywhere in America, patients pay cost-
sharing based off the list price.
    And my view is--we will talk to you some more about it--
when I use that form and I hear your answer, it sure looks to 
me like you all are taking deliberate actions to pad your 
bottom line at the expense of patients.
    Now, Mr. Prince, a question for you, because time is short. 
A February 11, 2019 article describes letters United sent to 
several drug manufacturers late last year and early this year--
Mr. Chairman, I would ask unanimous consent to enter that 
article into the record.
    The Chairman. Without objection, so ordered.
    [The article appears in the appendix on p. 235.]
    Senator Wyden. Mr. Prince, the letters demanded that drug 
manufacturers give United almost 2 years' notice if they intend 
to lower prices, giving manufacturers, again, an easy excuse to 
keep list prices high. Even more galling, United demanded that 
these lower prices would not diminish the rebates United 
receives. The letters say United should receive equivalent 
rebates off the lower prices.
    So, Mr. Prince, you all argue, PBMs, that drug prices set 
by manufacturers need to come down. But in private, United 
seems only to care about the size of their rebate and when 
their bottom line might take a hit.
    Mr. Prince, do you have any agreements with drug 
manufacturers, similar to this letter, that penalize the drug 
manufacturers if they choose to lower their price?
    Mr. Prince. So, Senator, regarding that letter that was 
sent out in December of last year, it was intended to make sure 
that our clients we work with--Part D plans--we wanted to make 
sure that when they put in their bids, they understood what 
would be the rebate amounts so that they could enter a bid 
accurately.
    And you know how the part D program works: you have to 
submit your bid in June of one year for the next 7 months.
    Senator Wyden. My time is short.
    The question was, do you have any agreements with the drug 
manufacturers, similar to this letter, that penalize the drug 
manufacturers if they choose to lower their prices? ``Yes'' or 
``no''?
    Mr. Rice. We strongly encourage people to lower list price. 
We support----
    Senator Wyden. I would like to see any agreements.
    My time is up. Thank you, Mr. Chairman.
    The Chairman. Senator Cornyn?
    Before Senator Cornyn's time starts, there is going to be a 
vote. I thought it started right now. So we are going to keep 
this meeting going. And while I am gone, Senator Cassidy is 
going to control the time.
    Senator Cornyn?
    Senator Cornyn. Gentlemen, in our meetings in my office and 
elsewhere, I told you we are trying to understand the basic 
features of the contracts between the manufacturers and the 
PBMs and how those relate to the consumer.
    So I would like to ask five questions to establish some 
basic facts about how your companies operate. And if possible, 
I would like for you to answer ``yes'' or ``no'' just so we can 
establish some basic facts. We can come back for further 
explanation in some format or another. I am not trying to cut 
you off, but I am trying to work within the guidelines and the 
time we have today.
    So, does your company structure an agreement where rebates 
and fees are a percentage of list price? Dr. Miller?
    Dr. Miller. Yes.
    Senator Cornyn. Mr. Rice?
    Mr. Rice. Yes.
    Senator Cornyn. Dr. Fleming?
    Dr. Fleming. Yes. It is wholesale acquisition cost.
    Senator Cornyn. Mr. Prince?
    Mr. Prince. No, for Medicare. No, for Medicaid. No, for 
generics. And we pass on 98 percent in the commercial.
    Senator Cornyn. Mr. Kolar?
    Mr. Kolar. Yes.
    Senator Cornyn. The second question is, has your company 
proposed in a contract or otherwise prohibited or penalized a 
manufacturer from decreasing the price of a drug?
    Dr. Miller?
    Dr. Miller. No.
    Senator Cornyn. Mr. Rice?
    Mr. Rice. Absolutely not.
    Senator Cornyn. Dr. Fleming?
    Dr. Fleming. Absolutely not.
    Senator Cornyn. Mr. Prince?
    Mr. Prince. No.
    Senator Cornyn. Mr. Kolar?
    Mr. Kolar. No. We welcome lower prices.
    Senator Cornyn. Third question: has your company proposed 
in a contract or otherwise demanded that manufacturers give 
advance notice of a price decrease? I think this may relate to 
some of what the ranking member was asking.
    Let me ask that again. Has your company proposed in a 
contract or otherwise demanded that manufacturers give advance 
notice of a price decrease? Dr. Miller?
    Dr. Miller. No.
    Senator Cornyn. Mr. Rice?
    Mr. Rice. No.
    Senator Cornyn. Dr. Fleming?
    Dr. Fleming. No.
    Senator Cornyn. Mr. Prince?
    Mr. Prince. Yes.
    Senator Cornyn. Mr. Kolar?
    Mr. Kolar. No.
    Senator Cornyn. Fourth question: has your company proposed 
in a contract or otherwise demanded that manufacturers pay a 
higher fee or rebate if list prices do not increase above a 
certain percentage in that contract year?
    Dr. Miller?
    Dr. Miller. No.
    Senator Cornyn. Mr. Rice?
    Mr. Rice. No.
    Senator Cornyn. Dr. Fleming?
    Dr. Fleming. No.
    Senator Cornyn. Mr. Prince?
    Mr. Prince. No.
    Senator Cornyn. Mr. Kolar?
    Mr. Kolar. No.
    Senator Cornyn. Finally, has your company proposed in a 
contract or otherwise demanded that manufacturers pay a certain 
rebate amount even if they decrease--decrease--their list 
price?
    Dr. Miller?
    Dr. Miller. The manufacturer is required to continue to pay 
the rebate until renegotiation.
    Senator Cornyn. So that would be a ``yes''?
    Dr. Miller. Yes.
    Senator Cornyn. Mr. Rice?
    Mr. Rice. We focus on, with the manufacturers, getting to 
the lowest possible cost, whether it is rebate or if they can 
reduce the list even further below the fully discounted value.
    Senator Cornyn. Is that a ``yes'' or ``no''? Has your 
company proposed in a contract or otherwise demanded that 
manufacturers pay a certain rebate amount even if they decrease 
their list price?
    Mr. Rice. Not that I am aware of.
    Senator Cornyn. Dr. Fleming?
    Dr. Fleming. Not that I am aware of. Most of our discounts 
are a percentage of wholesale acquisition cost.
    Senator Cornyn. Mr. Prince?
    Mr. Prince. For the specific case that was referenced, yes. 
But in general, 100 percent--it was only for the Part D 
program, and 100 percent of those rebates were passed on to CMS 
and to our consumers.
    Senator Cornyn. Mr. Kolar?
    Mr. Kolar. No, Senator. Not that I am aware of.
    Senator Cornyn. Mr. Chairman, I would like to submit a 
question for the record. I will do it in writing to each of 
these gentlemen. But I want to give you warning ahead of time 
of what is coming so you can prepare.
    I would like to know from each of you the total dollar 
amount that you obtain from pharmaceutical manufacturers in any 
form, such as rebates, fees, and the like, and secondly, what 
the total dollar amount that you remit to health plans is.
    We will give you a chance to respond in writing, but I 
wanted to give you a fair notice at this hearing.
    Thank you, Mr. Chairman.
    The Chairman. Senator Stabenow?
    Senator Stabenow. Thank you, Mr. Chairman.
    And welcome to each of you. Obviously, this is an 
incredibly important topic. You have each indicated this is the 
fastest driver of health-care costs, and certainly for 
families, for seniors, for individuals there is deep, deep 
concern.
    There was an issue that Michigan pharmacists brought to me 
a little over a year ago that we were able to successfully 
address on a bipartisan basis. My Know the Lowest Price Act was 
signed into law after it was clear that pharmacists were 
extremely concerned that people were walking into a pharmacy, 
handing over their insurance card, paying the copay, assuming 
it was the lowest price, and sometimes--in fact, the report 
showed 23 percent of the time the person could have gotten a 
lower price paying cash out of pocket. And yet, the pharmacists 
could not tell people.
    So when we raised that, we heard basically from everybody 
that nobody did it. It was just a few bad guys. Nobody did it, 
and in fact, it was just a couple of bad actors, not a common 
practice. And so we were able to fix that.
    So my first question is, can you tell me if there are any 
other egregious anti-consumer PBM practices taking place 
anywhere in your industry like this that you would want to 
highlight today?
    [No response.]
    Senator Stabenow. Okay, so let me go on to the next 
question. So I am assuming that is a ``no'' because no one 
responded.
    So let me go on then and talk about negotiation, talk about 
the various tools that you have to be able to bring down costs 
for people. And one of the main tools is negotiating. I am 
assuming when you look at the number of customers, it is about 
bulk purchase, being able to secure the best price; right?
    So when we look at it, Express Scripts has 100 million 
Americans covered, CVS 90 million, OptumRx 65 million, Prime 
Therapeutics 27 million, Humana 21 million. And yet we still, 
Americans still pay the highest prices in the world even though 
you are negotiating for millions of people.
    And so my question is, the VA has its own pharmacy benefit 
manager service. They negotiate for 9 million people, 9 million 
veterans. And they pay on average 40 percent less for the same 
drugs that the rest of the health-care system pays.
    Despite greater volume, you are unable to secure these 
kinds of low prices. With all due respect, you guys are pretty 
bad negotiators, given the fact that the VA can get 40 percent 
less.
    And so, I would like to know from each of you why that is 
the case. Dr. Miller?
    Dr. Miller. Yes, so part of the equation is giving patients 
choice. And so at the VA, they actually limit their formulary 
more than any of us at this table do.
    And so oftentimes they will have one beta blocker, one ACE 
inhibitor. And so if it is going to get to that level of 
choice, then we could get better prices also.
    Senator Stabenow. But let me also just jump in in the 
interest of time. I know you create nationwide drug 
formularies, you have pre-authorization, you give preferred 
status to certain medications.
    So you do not use any of those tools that the VA is using? 
Because you do.
    Dr. Miller. We definitely use those tools. But we also give 
people choice. It is crucial for both physicians and patients 
to have the choice of the products they want to be able to 
access. So many of our plans want us to have broad formularies. 
And so when you have more products, it means you move less 
market share. You cannot get----
    Senator Stabenow. And so they get 40 percent more--so 
basically 40-percent premium, you are saying? It gives them 
more choice.
    I mean, I would like to ask people how much they would 
think that is a good trade-off given the cost of medicine 
today. And I would welcome the opportunity to look at the tools 
in detail that each of you have, versus the VA. Because when I 
look at it, it does not look to be that much different.
    But in the interest of time--Mr. Rice?
    Mr. Rice. Yes, Senator.
    Senator Stabenow. Any comments?
    Mr. Rice. Yes, Senator. What we have seen is that when we 
are able to manage a more tight formulary versus an unmanaged 
formulary, we can actually drive lower costs for the patients 
as well as for the cost of the plans.
    And we have seen through our own data that an unmanaged 
plan--which means it has an open formulary, as was being 
referenced--may have an average cost of $108 versus a managed 
plan that may have a cost on average closer to $80.
    Senator Stabenow. So would you support doing something like 
what the VA does in terms of how they manage their plans, then? 
Is that what you are suggesting, that they have a more narrow 
focus and that that would be better for consumers?
    Mr. Rice. What I would support, Senator, is choice and 
optionality. And with our members and their respective clients, 
that is what we have provided such that in our own case, if you 
take the example of our Med D plan for seniors, we provide a 
plan that can be as cheap as a premium of $30 all the way to a 
premium of $80 depending upon which choices those members think 
best meet their specific needs.
    And that $80 premium begins to contemplate things like 
point-of-sale rebates.
    Senator Stabenow. Yes. No, I understand that.
    Mr. Chairman, I know that--I would like to hear from 
everyone else, but I do recognize that I am out of time. So I 
will follow up in writing with each of you.
    I do want to say, though, that Medicare does have 59 
million beneficiaries, much less than many of you have as well. 
And I do not understand why they are not allowed to negotiate 
best price in terms of what is best for consumers.
    Thank you, Mr. Chairman.
    Senator Cassidy [presiding]. Ms. Cantwell?
    Senator Cantwell. Thank you, Mr. Chairman.
    And I want to thank the chairman and ranking member for 
holding this briefing. I want to emphasize that, obviously, one 
of the themes of today is the lack of transparency, and in the 
2009 legislation, I authored a PBM transparency provision that 
is current law. This provision requires the PBMs to 
confidentially report information to the Secretary of Health 
and Human Services, including the total amount and types of 
rebates, discounts, and price concessions that PBMs negotiate 
on behalf of insurance plans.
    So, that information is somewhere in this government. And I 
would suggest that we work with Secretary Azar on that 
information, not that it can be made public, but that it will 
give us what we need to see today, that we have a lack of 
direct negotiating ability, in my opinion, by States and other 
jurisdictions. I personally would give States better 
negotiating authority.
    I get that this is a business model for PBMs. But there is 
no reason why that business model has to exclude having other 
market competition.
    When I look at the fact that three PBMs have 85 percent of 
the market or that the CVS-Aetna merger was opposed by the 
American Medical Association because it raised concerns about 
reduced competition, then my question is, why can we not induce 
more competition into this marketplace by allowing States to 
negotiate on behalf of various plans within their State?
    So I am not asking for an answer that I already asked the 
drug companies. They think that is unfair. I am pretty sure you 
are going to say the same thing. So I do not need to hear that 
answer.
    What we need to do is get the answers from Secretary Azar 
about what is currently happening in the marketplace and move 
forward with giving States the ability, or the Federal 
Government, to negotiate on price.
    Thank you, Mr. Chairman.
    Senator Cassidy. Thank you.
    The chair calls on himself. There is no one else to call 
on.
    Now, I have thought a lot about your business model. And 
multiple times it was said that if you do a point-of-sale 
rebate, premiums will rise. Now if you think about that, what 
that is saying is that those patients who actually need 
medications are the ones who are lowering the premiums for 
those who do not.
    Now, it is kind of a reverse Robin Hood. We are going to 
take from the sick and give to the well. Now on the one hand, 
you could say that is just a business decision. But you could 
imagine that this could be manipulated, that the way to keep 
somebody requiring expensive drugs off of your plan, maybe to 
get on their spouses' plan, would be to make them pay more.
    Now I say that--I am not accusing. I just cannot help but 
reflect upon that. And so I want to then--can we show that 
second poster, please? This one.
    Now, one thing I have noted is, we have heard several times 
that the amount of PBM retained revenue on retail prescription 
drugs by source is--and this would be the maroon that would be 
related to rebates. And this would be related to fees. 
[Indicating.]
    And so the amount related to fees is increasing 
dramatically. And the amount related to rebates is decreasing.
    So what it tells me is that you seem to be passing more of 
these rebates on, or else getting fewer, less rebates. I 
suspect that more are being passed on.
    But this is what concerns me, that $16.6 billion. I think 
it was you, Mr. Rice, who said that the amount paid for drugs 
is flat or decreasing.
    Does that also include these other fees that might be 
related to the filling of the prescription? Is the fee--put 
differently, you probably understand what I am asking, but just 
for the record--put differently, when you say ``the drug cost 
is remaining flat,'' is that everything included, including 
that which is charged at the pharmacy as a dispensing fee or 
any other fee which may be included? Or is it merely the price 
of the medication itself?
    Mr. Rice. It is all-inclusive, Senator. We pass through 100 
percent of all rebates----
    Senator Cassidy. Now, not related to the rebates----
    Mr. Rice [continuing]. And fees to our clients on behalf of 
their members.
    Senator Cassidy. So if there is a DIR fee collected from 
the pharmacist, then that is rebated to the payer even if not 
to the patient? So when you say--and the flat cost to the 
patient includes this increased amount of fees that are going 
into your business model?
    Mr. Rice. Yes, Senator. In many of our cases with our 
clients today, they have progressed to what we call a 
``transparent arrangement,'' which is, there is no spread 
between the two.
    Senator Cassidy. Now is this the same for each of you, that 
when you say the cost of the drug has remained flat, that you 
are including the cost of the ancillary fees?
    I will just go down, Mr. Kolar, and go this way.
    Mr. Kolar. So, Senator, when we negotiate with 
pharmaceutical companies, we are fully transparent with our 
clients about the amounts we receive. We pass those back to the 
plans.
    Senator Cassidy. So is that 100-percent pass-through?
    Mr. Kolar. It is. We do--there are----
    Senator Cassidy. On the fees?
    Mr. Kolar. There are elements of fees that we retain, but 
we retain them in lieu of charging our clients administrative 
fees.
    Senator Cassidy. I am almost out of time, so I will not ask 
the others.
    So I have also thought about the retained fees--because I 
have had several good meetings with you guys.
    But one of the things that was raised with me was that 
sometimes clients would rather have a fee retained, as opposed 
to paying a fee. And I have read that that is a way to 
circumvent the Obamacare MLR rule. And I say that not to ask 
your comment, because it is not your decision, it is the payer 
or the insurance company. But for the record, it has been at 
least labeled as that way.
    Next, I once went to a site of a pharmacy benefit manager, 
and I was very impressed with much of what you do. But one 
thing I saw was bottles being emptied, and then the same pill 
that had formerly been in one bottle was then placed in another 
bottle. And the second bottle is that which was sent.
    And I did not understand that for the life of me. But at 
one point I was told that that allows it to be billed at a 
higher NDC code, that, sure we acquire, but because we empty 
one bottle and fill another, we can now even as much as triple 
the cost of the basis of the drug being shipped out to the 
patients.
    So let me just ask you, ``yes'' or ``no,'' if your company 
does that. Dr. Miller?
    Dr. Miller. No.
    Senator Cassidy. Okay.
    Mr. Rice. No.
    Dr. Fleming. No.
    Mr. Prince. No.
    Mr. Kolar. No.
    Senator Cassidy. Now it was, I think, Express Scripts that 
I toured and saw that. And I kind of lose track of who is who. 
Who now would be the recipient of Express Scripts?
    Dr. Miller. I am Express Scripts.
    Senator Cassidy. So I did remember seeing that. Is this, 
therefor, a practice that has been discontinued?
    Dr. Miller. What you probably remember is, in our high-
volume filler, we take--to make sure we have accuracy, we put 
the pills into these containers. When they are moved from the 
pill bottle--we can only buy the largest volume that the 
manufacturer makes. We use the high-volume fillers for mail 
order pharmacy. We move them from the small containers into a 
larger container. The NDC does not change, and that does not 
change the price.
    Senator Cassidy. The NDC does not change. That is my key 
point.
    Okay, I yield back. Thank you. And I will have some QFRs, 
but thank you very much.
    Senator Brown?
    Senator Brown. You always call on me when nobody else is 
sitting here. [Laughter.] Thank you.
    Thanks to all five of you for joining us. It is not exactly 
breaking news that Ohioans do not trust pharmacy benefit 
managers. Between repeated reports on the egregious use of 
spread pricing, alleged breaches of contract, accusations of 
anti-competitive behavior, a misuse of taxpayer dollars, a 
general lack of transparency, I cannot say that I blame them.
    Several of you, I understand, are making a conscious effort 
to rebuild trust with Ohio pharmacies, and consumers and 
taxpayers. I appreciate that, but I need you to do that better, 
and we need you to do that faster.
    Part of that means changing the way you think about your 
business, and it means considering models that benefit the 
Ohioan at the pharmacy counter, as much as it benefits your 
direct client or the other half of your business. It is past 
time to put patients ahead of profits and Ohio taxpayers before 
shareholders. So I ask you to do that.
    I want to ask a few ``yes'' or ``no'' questions, starting 
with you, Mr. Kolar, and if you really would answer ``yes'' or 
``no'' just right to left. Does your company play a role in 
setting list prices of any drugs?
    Mr. Kolar. No, we do not.
    Mr. Prince. No.
    Dr. Fleming. No.
    Mr. Rice. No.
    Dr. Miller. No.
    Senator Brown. Okay. Thank you.
    If the administration's rebate rule were finalized as 
proposed, would you in some way be required to change the way 
you do business?
    Mr. Kolar. Yes, Senator, we would.
    Mr. Prince. Yes.
    Dr. Fleming. Yes.
    Mr. Rice. Yes.
    Dr. Miller. Yes.
    Senator Brown. Okay. Thank you.
    If the administration's rebate rule were finalized as 
proposed, do you believe any pharma company would be required 
to change the way it does business?
    Mr. Kolar. No, Senator.
    Mr. Prince. No.
    Dr. Fleming. No.
    Mr. Rice. No.
    Dr. Miller. No.
    Senator Brown. Okay. Last--this question is a short answer 
if you can. And thank you for your cooperation.
    What percentage of prescriptions that you fill across Part 
D actually receive a rebate? Roughly what percentage?
    Mr. Kolar. So, Senator, approximately 8 percent of the 
prescriptions that we cover in Part D are associated with a 
rebate.
    Senator Brown. Okay.
    Mr. Prince?
    Mr. Prince. Senator, I do not know the exact number. I know 
overall business, about 7 percent.
    Senator Brown. Okay. Thank you.
    Dr. Fleming. About 7 to 8 percent.
    Senator Brown. Okay.
    Mr. Rice. Senator, I do not know the exact number, but we 
pass through 100 percent of all rebates and discounts.
    Senator Brown. Okay.
    Dr. Miller. Ninety percent of the prescriptions will be 
generic. Of the 10 percent that are branded, about two-thirds 
have rebates. So it is about 7----
    Senator Brown. Seven or 8 percent like the others. Okay.
    To recap, PBMs do not set drug prices, forcing you to 
change the way you do business as the administration's rule 
would not change that fact. And while the rule might impact a 
small percentage of drugs in Part D that receive a rebate, it 
does nothing to lower costs, as your answer suggests, for the 
other 90 percent of prescriptions you fill.
    Most importantly, absolutely nothing in the proposed rule 
would require Secretary Azar's former employer, or any other 
pharma company, to lower the price of insulin or any other 
drug. It is important to establish that. So, thank you for 
that.
    In fact, no pharma company is willing to commit to lowering 
the price of their drugs if this rule goes into effect. Instead 
of relying on the administration's claims that the proposed 
rebate rule will solve the drug pricing problem, we should be 
focusing on solutions that are sure to result in lower drug 
prices, like my legislation to allow Medicare to negotiate on 
behalf of all Part D drugs and to prohibit manufacturers from 
price-gouging.
    In the last couple of minutes--many of you acknowledge in 
your testimony the fact that biosimilars have enormous 
potential to help lower drug prices for all Americans. As you 
know, biosimilars are approved by the FDA based on safety and 
efficacy. And in every circumstance that I am aware of, they 
have a lower list price than their innovator product, not 
surprisingly.
    I understand that many of your plans sometimes require the 
use of higher list price innovator brand-name products over the 
use of a cheaper therapeutically equivalent FDA-approved 
biosimilar or generic. This is short-sighted. It is already 
having a chilling effect on the potential for a robust 
biosimilar market in the U.S.
    My time is about to expire, but I would like to ask each of 
you to answer for the record what more your company can and 
will do and what more Congress should do to ensure the U.S. 
develops a robust biosimilar product.
    Why don't we start with you, Dr. Miller, if you would?
    Dr. Miller. So one of the biggest problems facing the 
industry is the lack of biosimilars. They have come to the 
marketplace. The FDA has approved many biosimilars that still 
are not in the marketplace. They are caught up in law in the 
legal actions. And so, shortening the period of exclusivity 
could make a huge difference in bringing these biosimilars to 
the marketplace.
    And so we are strongly supportive, and have been for over a 
decade, to get biosimilars out there. And when they are there, 
we often take great advantage of them to lower the cost for our 
plans.
    Senator Brown. Thank you.
    And, Mr. Rice, as you answer the same question, include in 
it any pushback ideas on manufacturers' tactics like bundling 
rebates and rebate blocking.
    So go ahead. Thank you, Mr. Rice.
    Mr. Rice. Yes, Senator. As you have heard previously from 
my counterpart here, we absolutely are supportive of bringing 
more competition into the marketplace. We have seen, even in 
the space of insulin, when we have been able to have that 
competition, a biosimilar introduction, we were actually able 
to reduce the out-of-pocket burden for the members by 9 
percent.
    And so having more competition like that on the market 
would be extremely beneficial. And we know today that the U.S. 
still lags Europe in the availability of biosimilars.
    Senator Brown. Thank you.
    Dr. Fleming?
    The Chairman. Senator Hassan?
    Senator Brown. Could they answer the question?
    The Chairman. Yes. I thought you just had one question.
    Senator Brown. It is one for all of them.
    The Chairman. Everybody answer his question, and then we go 
to Senator Hassan.
    Dr. Fleming. Yes, Senator. We need more competition. We 
love biosimilars. When they do come out, we try to put them in 
parity position with the originator drug to allow the 
biosimilar to compete, but the big problem we have today is, we 
need more. More competition allows prices to come down for the 
same therapeutic area.
    Senator Brown. In a shorter window, as Dr. Miller suggested 
would work. Okay.
    Mr. Prince?
    Mr. Prince. Senator, there is a lot that needs to be done 
to increase competition in the biosimilars market. We are very 
strong supporters of it.
    There are over 50 biosimilars that are actually used in 
Europe. Less than six--around six or seven are in the market in 
the United States.
    So the main reform areas could be in the FDA. So there is a 
series of things. If you follow up, we would love to provide 
solutions that you can work on.
    Thank you.
    Senator Brown. Mr. Kolar?
    Mr. Kolar. So, Senator, we are very supportive of 
biosimilars. We generally treat them on parity or preferred 
over brand. We assess them on a lowest net cost basis.
    We do not engage--you asked about bundling. Bundling is not 
a practice for us that creates a meaningful barrier to 
biosimilar uptake.
    We think one of the biggest barriers to uptake of 
biosimilars is lack of final FDA guidance on 
interchangeability.
    The Chairman. Senator Hassan?
    Senator Brown. Mr. Chairman, one more thing. I am sorry. I 
apologize.
    I think their answers really do show the importance of a 
shorter window on biosimilars, on exclusivity.
    So thank you, Mr. Chairman.
    The Chairman. Senator Hassan?
    Senator Hassan. Well, thank you, Mr. Chairman. And I thank 
you and Ranking Member Wyden for having this hearing. Thank you 
to our witnesses for being here today.
    Mr. Prince, as you mentioned in your testimony, we cannot 
lose sight of some of the truly obscene price increases from 
drug manufacturers that we have seen in recent years. And I 
agree that we cannot solve the problem of skyrocketing 
prescription drug costs without addressing that.
    But we do have a responsibility to look at all points in 
the supply chain. We spend a lot of time attempting to educate 
patients, for instance, about the value of choosing lower-cost 
generic alternatives. And many formularies penalize consumers 
financially when they do not.
    You point out in your testimony that there are times when--
because of rebates and discounts that you negotiate--the brand 
name drug may be the better value to the plan than the 
authorized generic. I certainly understand that and recognize 
that you have to balance the needs of a variety of payers in 
developing your plan.
    But just this week, my office heard from a constituent, not 
for the first time, who was baffled about why he is being told 
to pay more for the brand name drug instead of using the 
generic. In the cases where the brand-name drug is the better 
financial option for your company and for the plan purchaser, 
why are you not charging the end-use consumer the lower copay?
    Mr. Prince. So, Senator, just to frame the overall 
discussion around how things go on a formulary, then I will 
talk about how we then----
    Senator Hassan. Yes.
    Mr. Prince. So our formulary process starts with an 
independent pharmaceutical and therapeutics committee that is 
independent from our company.
    Senator Hassan. I do want to hear about that. I would ask 
you to keep it short, because I have another question. And I am 
really trying to get at why doesn't the consumer get the 
benefit that you also say in your testimony here your company 
does?
    Mr. Prince. We absolutely agree with you that the consumer 
should get all the value that we are negotiating. And that is 
why last year and this year, we have made such a huge effort 
around making sure that every discount we get is passed on to 
the consumer point-of-sale.
    Senator Hassan. So----
    Mr. Prince. We now have 9 million people as a part of that 
program. We are not going to take any additional customers in 
2020 without that, but not all of our customers have that yet.
    But we are sharing the evidence with them around the value 
for that program.
    Senator Hassan. Okay.
    So, in the case of a consumer being told they have to buy a 
brand-name drug and pay more for it because, ultimately, you 
are directing them that way because it increases the profits 
for your company, you are saying here that you want to get to a 
place where the consumer recognizes the savings and could be 
charged the lower copay.
    The PBM is choosing the brand name, in some cases, and the 
consumer should not be stuck with that decision by your 
company, is my point.
    Mr. Prince. So, Senator, it is a rare circumstance where a 
brand would be less expensive. But in rare circumstances--
because we negotiate on behalf of our customers--the price of 
the generic would actually be higher than the brand after you 
look at all the discounts.
    So the actual price--not for us, but for our client, is 
less expensive, and we want to make sure that that value is 
then passed on to the consumer, which is why we are advocating 
for point-of-sale discounts in the commercial market.
    Senator Hassan. All right.
    I am going to follow up with you a little bit after this 
hearing about that, because I just think what my constituents 
are seeing is, they are being told they have to purchase a 
brand name, and they are being charged the higher copay for it.
    Mr. Prince. Okay.
    Senator Hassan. Okay.
    To all of the witnesses, I know there has been a discussion 
here about Chairman Grassley's inquiry to the FTC. In theory, 
we know that PBMs help patients by helping negotiate lower 
prices. But I am concerned that the lack of competition in this 
area may mean that the industry is falling short of that goal 
today. And I know there has been discussion already about what 
level of competition you all think there is.
    The Federal Trade Commission oversees PBMs and has already 
begun looking into concentration and competition in this 
market. And Chairman Grassley mentioned this in his opening 
statement and sent a letter to the FTC about the issue this 
fall.
    The FTC has the authority to do more, to request rebate and 
fee information and analyze the impact of your companies' drug 
prices. I think that is a good idea, and I plan to join 
Chairman Grassley in talking with the FTC and ultimately 
encouraging them to look into it further.
    So I would just like your commitment today that if the FTC 
requests information from you, your companies will cooperate 
fully and provide the information that the agency needs to 
conduct a rigorous analysis.
    And we will just start at the end of the table, and I just 
would--Dr. Miller?
    Dr. Miller. Yes. We look forward to participating.
    Senator Hassan. Thank you.
    Mr. Rice. Absolutely, Senator.
    Senator Hassan. Thank you.
    Dr. Fleming. Yes, Senator.
    Senator Hassan. Thank you.
    Mr. Prince. Yes, Senator. We will cooperate.
    Senator Hassan. Thank you.
    Mr. Kolar. Yes, Senator, absolutely.
    Senator Hassan. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Senator Daines?
    Senator Daines. Thank you, Mr. Chairman.
    I am hearing from folks all over Montana--in fact in every 
corner of our State--on the need to lower prescription drug 
costs, particularly out-of-pocket costs. I believe one way to 
help lower costs of prescription drugs is to shine light on the 
role of the middlemen, which is why you are here today. That is 
what you are. You are between the pharmaceutical company and 
the consumer.
    It is your role, as I understand, to negotiate better drug 
prices for patients. But what we are seeing today is that there 
are higher profits on your end and we are not seeing lower 
costs ultimately for the end-user, for Montanans. In fact in 
Montana, there is a bill before legislature as we speak that 
aims to hold you all accountable, and then pass along the 
savings to consumers, versus profits back to the PBMs.
    We need more transparency on drug pricing to lower costs 
for patients. And I am exploring legislative options to do just 
that.
    My question to the panel is--we are getting a lot of 
resistance back in Montana. And why are you all fighting so 
hard against that legislation in Montana and efforts here to 
increase transparency and to pass on that savings that you 
negotiate to patients?
    Whoever wants to take the question first.
    Mr. Rice. Senator, I am not familiar with that specific 
piece of legislation, but as it pertains to transparency 
overall, we at CVS Caremark are very supportive. We provide 
full visibility to our clients of all our contracts and the 
discounts that we negotiate on their behalf.
    As I stated earlier, we pass through in the Medicaid/
Medicare book of business 100 percent of all rebates and 
discounts. We pass through overall more than 98 percent.
    In the spirit of transparency, we have been supportive of 
policies like legislation being proposed by MedPAC. What we 
have done to try to further enhance transparency is, we provide 
a real-time benefit such that the members themselves, the 
patients actually, have that same visibility. And we too are 
concerned about the out-of-pocket burden on patients.
    And so, therefore, we brought forward tools that can 
specifically help them, like point-of-sale rebates, like 
preventative drug lists for maintenance drugs that would have a 
zero-dollar copay, so then they would not have to worry about 
the deductible phase with high-deductible plans.
    These are things that can impact the patient immediately.
    Senator Daines. I want to shift gears.
    Mr. Prince, we saw the report that Optum sent a letter to 
drug makers in December asking for 7 quarters' advance notice--
that is nearly 2 years--if a manufacturer is going to lower 
their price for patients. When Montana patients are choosing 
not to fill their prescriptions, and we get these stories, 
because of high out-of-pocket costs, requesting a nearly 2-year 
advanced notice frankly shocked me.
    In fact, this type of demand would have prevented Montanans 
from getting about a 60-percent price reduction in their 
cholesterol-lowering medications after a drug maker announced 
they were dropping their list price just last year. Working 
that out, that is nearly $8,000 per year, per patient for those 
Montanans who take that drug.
    Montanans cannot afford to pay higher prices for 2 years 
for the sake of keeping industry happy, and perhaps Wall 
Street.
    My question is, why does the company need to take more 
money out of the pockets of Montanans for nearly 2 years, 
versus you doing your job and negotiating lower costs for 
patients?
    Mr. Prince. Well, Senator, specifically on rebates and 
discounts in the Medicare market, we pass 100 percent on to the 
plan, and it is just fully disclosed to CMS. So the discounts 
are fully passed on.
    And then in terms of the commercial market for employers, 
we are an advocate for point-of-sale discounts. We rolled that 
out dramatically. So the discounts that we are delivering 
actually get passed on. So we actually are not going to be 
taking additional customers in 2020 unless we pass on the 
discounts.
    So overall, the people from Montana are getting the value 
from what we deliver.
    Senator Daines. Why the 7 quarters?
    Mr. Prince. Senator, that was a technical, legal contract 
that was making sure that we could get information so that our 
clients, when they submitted their bids, the preview in June, 
would have all the information they needed to actually submit 
their bids correctly.
    And as you know, in the Medicare Part D program, you submit 
a bid in June for the following year, so that covers the 7 
quarters.
    Senator Daines. On another note, I think we can all agree 
on the importance of cracking down on drug companies 
discouraging low-cost generic drugs from coming to market. 
Since last Congress, I have worked with Chairman Grassley on 
the CREATES Act to combat anti-competitive practices and 
improve Montana's access to lower-cost generic drugs.
    I am going to continue to push for this common-sense 
legislation to be signed into law and pursuing other 
legislative priorities that will lower drug costs for folks in 
every corner of Montana and across this Nation.
    Thank you.
    The Chairman. The Senator from Nevada.
    Senator Cortez Masto. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being here. I appreciate the 
opportunity. I have met with some of you as well and had the 
opportunity to talk to you.
    And one of the things we talked about was rebates. Many of 
you discussed products that you offer clients that allow for 
point-of-sale rebates. And I am curious, in those contracts, do 
you keep any portion of the rebate for yourself?
    And if we would just kind of go down the table----
    Mr. Kolar. No, we do not.
    Mr. Prince. No, we do not.
    Dr. Fleming. Senator, no.
    Mr. Rice. No, we do not.
    Dr. Miller. No.
    Senator Cortez Masto. Thank you. I appreciate that.
    Let me ask you, Dr. Fleming: in your testimony you say 
Humana's analysis of the rebate rule--and we are talking about 
the administration's rebate rule now. But you say that Humana's 
analysis of the rule found that approximately 17 percent of 
beneficiaries will see savings at the pharmacy counter as a 
result of this rule.
    Can you tell me a little bit more about who these people 
are, and what kind of conditions they have?
    Dr. Fleming. Senator, that would be a number of members who 
are taking brand drugs for which we get rebates. And so it 
could vary all the way from the common chronic conditions, 
things like diabetes or hypertension or high cholesterol, all 
the way over to occasionally, not usually, but occasionally on 
the specialty drug side, when you think of some medications 
like treatments for rheumatoid arthritis, multiple sclerosis, 
places where there is competition.
    Senator Cortez Masto. Okay.
    So let me ask you this, and then I will open it up to 
everyone.
    There is a lot of hesitancy from all sides of the industry 
to talk about models that would enable HHS to negotiate 
directly with manufacturers. But there are a handful of 
therapies--those are the sole source drugs for which there is 
no therapeutic alternative--where you have no leverage to 
negotiate better prices.
    One of my concerns with the rebate rule is that it would 
not address this issue. Is there any situation where you would 
support or perhaps remain neutral on giving the Secretary the 
ability to negotiate prices for that subsection of drugs? And I 
am curious to hear from the witnesses, and we will open it up.
    Mr. Kolar. So, Senator, we would have to study the issue 
more closely. But from our perspective, while the Secretary 
would certainly be able to aggregate volume, what we bring is 
clinical expertise and the pharmacy expertise to better 
negotiate with manufacturers. That would have to be replicated 
within the Department or an agency in order to do that 
effectively.
    Senator Cortez Masto. Okay.
    So you would want to study it before you signed off on, or 
supported, or remained neutral whether or not the Secretary 
could negotiate for those drugs?
    Mr. Kolar. With respect to the question of government 
negotiation overall, our perspective is that it would require a 
significant development of formulary expertise within the 
government to replicate the work that we do with respect to the 
narrow drugs that you mentioned. We would want to study the 
issue. Our inclination is that that would not be as effective 
as what we do as PBMs.
    Senator Cortez Masto. For sole source drugs?
    Mr. Kolar. Correct.
    Senator Cortez Masto. Correct.
    Do you feel the same way?
    Mr. Prince. Senator, we think the solution is around 
creating more competition, addressing patent issues, addressing 
biosimilars in the market. And that would be the solution that 
we think would solve it.
    Senator Cortez Masto. Okay.
    Dr. Fleming. Senator, similarly, we need more competition. 
We need more biosimilars. My concern with government 
negotiation for those sole-source drugs would be higher list 
prices, initially, when those drugs come out to offset what the 
manufacturer may have to give up.
    And I invite a conversation at the right time around other 
tools we can employ around value-based contracts. We are asking 
physicians to engage in value-based contracts. We are asking 
hospitals to engage in them. We have programs with pharmacies.
    But we need more tools. We need the flexibility to bring 
more tools to market so that when these sole-source drugs are 
out, we have the ability to hold them accountable for the 
clinical outcomes that they are intended for.
    Senator Cortez Masto. Okay.
    Mr. Rice. We too, Senator, believe that, before we move 
down that path, we should look to exhaust all the other options 
that are available to us today, such as bringing more 
competition into this space.
    We know--via the hep C example that was cited earlier this 
morning--that when we have competition, we can bring down drug 
prices, and we do have leverage in that equation.
    Senator Cortez Masto. Thank you.
    Dr. Miller. Like my colleagues, we believe that competition 
is the key to bringing down the drug prices. And using the 
tools that we have in value-based contracting, which is not 
allowed in Part D, would be crucial to help--it would be one 
more of those tools that would help.
    Senator Cortez Masto. Okay.
    And the final question I have--and let me direct it to Mr. 
Prince. When I was in Las Vegas recently, I spoke with a 
constituent who was prescribed Xolair, a specialty medication 
for uncontrolled moderate to severe asthma. His copay for that 
medication is $489 per month.
    In September of 2018, the Institute for Clinical and 
Economic Review found that all five of the major biological 
asthma treatments that are on the market, including Xolair, 
were overpriced. The Institute also said that the cost of 
Xolair, specifically, should be cut in half if the price of the 
drug were to properly reflect its efficacy.
    Do you use evidence like this in negotiations with drug 
companies, and if so, how effective is it?
    Mr. Prince. So, Senator, we use evidence-based clinical 
information initially to see if it goes on the formulary. So 
our process actually starts with independent pharmacists and 
physicians to evaluate the clinical effectiveness of a drug, 
the comparative effectiveness, to determine whether it goes on 
the formulary or not.
    Then we go use that same data as part of the cost 
negotiations. So it is part of the process.
    Senator Cortez Masto. Okay.
    Thank you. Thank you, Mr. Chairman.
    The Chairman. Yes. Senator Young?
    Senator Young. Thank you, Mr. Chairman.
    Various stakeholders have called for more transparency in 
your transactions, specifically into the rebates and 
administrative fees paid by manufacturers. If Congress did what 
these stakeholders are calling for and made all PBM 
negotiations with the manufacturer, insurer, wholesaler, and 
pharmacy transparent and publicly available, how would that 
affect your drug pricing? Would there be a race to the top, or 
perhaps a race to the bottom?
    We will start with Dr. Miller and down the line, please.
    Dr. Miller. Yes, so we are really a strong proponent for 
transparency for those who pay for health care. So the patient 
should know exactly what they are going to pay. Our plan 
sponsors need to know exactly what is in their contract.
    The FTC and the SEC have both demonstrated that if you 
provide transparency for competitors, what that does is, it 
puts a floor on negotiations. It does not put a ceiling.
    And so what happens is, you would have shallower rebates. 
So the ability to negotiate is enhanced by the competitors not 
knowing each other's data.
    Senator Young. Mr. Rice?
    Mr. Rice. Yes, Senator. We are very supportive of 
transparency. And transparency--today we report and fully 
disclose not only to our clients, but to CMS. And we have been 
very supportive of legislative proposals like MedPAC's. And 
many of you heard me comment earlier today about even bringing 
transparency to the patient through our real-time benefits.
    What we are not supportive of is public transparency that 
would inhibit our ability to effectively negotiate with drug 
manufacturers to get to the lowest possible cost for patients 
and to lower their out-of-pocket premiums and the cost to 
plans.
    Senator Young. Right down the line.
    Yes, sir.
    Dr. Fleming. Senator, we are an integrated health plan. So 
we spend a lot of time with transparency, both at the patient 
level and at the physician level. I mentioned our Intelligent 
Rx tool. I submitted in our testimony about how we give 
physicians information right on the glass in the exam room so 
that they can have really important conversations with the 
patient.
    In this example that you are talking about, the thing I 
worry about is behaviors--in this case, the manufacturer 
behavior of wanting to negotiate to the lowest possible price 
if everything is fully transparent.
    Will they regress to the mean? Will they want to 
demonstrate that one company has gotten a better deal than 
another company because it is fully transparent?
    I do not know what that looks like. I do not know how that 
will show up. But I am not convinced that full transparency 
will allow the manufacturers to negotiate as feverishly as they 
could otherwise.
    Mr. Prince. Senator, if our discounts were publicly 
available, it would hurt our ability to negotiate effectively. 
Our discounts are transparent to our clients. Our clients have 
audit rights to actually look at our rebate contracts, look at 
the----
    Senator Young. They have what rights? I am sorry, sir.
    Mr. Prince. Audit rights.
    So actually, our clients have audit rights to look at our 
rebate contracts, to look at line-item detail on how much we 
get and tie it back to their contract. So we have transparency 
to who hires us. We also are transparent to the government in 
terms of disclosing it to CMS in terms of our rebates.
    But if you disclose that to the external market, it would 
hurt our ability to a get a good value for the people we 
negotiate for.
    Mr. Kolar. So, Senator, our business model is founded on 
the basis of transparency. And we are strong believers in 
transparency where it is meaningful and actionable in ways that 
can help improve the system and lower costs.
    So we believe in client transparency. We believe in 
actionable provider and patient transparency. We do share the 
concern around the transparency of our negotiations with 
pharmacies, with pharma, and the impact that that would have on 
our ability to drive savings for our plans and ultimately to 
their members.
    Senator Young. Is there an issue that any of you could 
speak to, perhaps a challenge where, if we require transparency 
in a more robust way, there will be adverse selection, 
especially in the Medicare Part D program, which is a voluntary 
program?
    [No response.]
    Senator Young. Does that resonate with anyone?
    [No response.]
    Senator Young. No? Okay.
    Is there a way to inject transparency into the entire 
pricing system without giving proprietary information away?
    Dr. Miller. I will tell you that transparency tools are 
crucial in giving doctors transparency at the time of 
prescribing. It is crucial to the patient and the doctor, 
choosing the right drug.
    We have actually run an analysis where we have a real-time 
benefit check in the hands of about 120,000 doctors already. 
And we can see that when they have that information, the 
patient and the physician can choose the lower-cost drug, and 
even the lower-cost channels to get the drug, either the right 
pharmacy or a mail order pharmacy.
    So you are correct that transparency tools done well will 
make a huge difference in the market.
    Senator Lankford [presiding]. Senator Thune?
    Senator Thune. Thank you, Mr. Chairman. Thanks for holding 
this hearing. And thanks to our witnesses for being here today.
    I hear often from South Dakotans frustration--from health-
care providers--regarding transparency and the power that a few 
PBMs in the market wield, particularly when it comes to the 
retroactive application of DIR fees for pharmacies, from any of 
these pharmacies, especially those serving rural areas. It is 
difficult for them to run their businesses not knowing how much 
PBMs will pull back later.
    We have heard support from the panel for a few of the bills 
that Chairman Grassley and others have introduced. I think many 
of us would like to see some ideas on the table for what role 
that your industry can play in advancing transparency in the 
drug supply chain.
    I think the thing that most people find frustrating is just 
how opaque the health care pricing system is generally, whether 
it is hospitals or pharmaceuticals, all these things, they 
are--in most free market economies, you know, competition helps 
drive prices down. But people know what prices are. If you go 
into a store, there is usually a list price and the discount 
might be on there: ``we are marking it down 40 percent.''
    People understand that. And in a free market, they can make 
very informed decisions because they have an opportunity to 
comparison-shop. And it just seems to me that in this area of 
health care, like in other areas of health care, there is not 
that transparency.
    I understand what you are saying about the ability to 
negotiate contracts and propriety and not being able to give 
away trade secrets and that sort of thing, but it does really 
detract, you have to understand, from people's understanding of 
this market.
    And there is a list price. And there is a rebate. And there 
are discounts. And there is a net price, ultimately, that is 
offered out there. But it all happens in this kind of opaque 
world that I think people just find really, really 
uncomfortable and question. It raises a lot of doubts.
    For the panel: in testimony from Mr. Kolar and Mr. Prince, 
there was some discussion about the decisions for PBMs to 
consider clinical value and efficacy first when setting 
formularies, as opposed to price and rebates, the importance 
of, obviously, premiums in negotiations.
    We have heard a lot about that today between manufacturers 
and PBMs, where rebates are used to incentivize placement of a 
more costly brand-name drug over a generic, or where rebates 
are conditioned based on the exclusion of another cheaper, 
clinically effective drug from the formulary.
    Do all of the panelists take the same approach to 
negotiation? And how do you assess and determine clinical value 
in making the decisions? And how do you respond if price and 
rebates become the driving factor in the negotiation instead?
    This question has been kind of asked in different ways 
today, but somebody take a shot at that. Anybody?
    Mr. Kolar. Senator, if I understand the question, our 
approach--again as a transparent client-owned PBM--our approach 
in setting formularies and making formulary recommendations, as 
you said--you referenced the testimony--starts first with an 
assessment of clinical safety and efficacy.
    Then we assess if there are competing drugs available. And 
we have talked much today about the need for competition.
    We do assess on a lowest net cost basis--so what is going 
to be the lowest net cost alternative for our plans to adopt 
for the benefit of their members. We do also consider the 
impact of patient transition in making formulary 
recommendations to our plans.
    Senator Thune. Does everybody follow that same negotiating 
tactic? Do you take into consideration efficacy?
    Mr. Rice. Absolutely, Senator. We start with first making 
sure that we provide the highest level of quality of clinical 
care. And then, only when we have met that threshold do we 
begin to bring into consideration costs and providing the 
lowest-cost alternative to the members, because we have seen 
that when the drugs are more affordable for those members, they 
tend to have better adherence and then downstream have better 
medical outcomes.
    And that, in essence, brings down total health-care costs.
    Dr. Fleming. Senator, the thing I might add is, we think 
about safety, efficacy, outcomes, and unit cost in that order.
    If I had a dream, I would have more outcomes for when these 
medications come to market. Typically, all we know is that they 
are safe and effective. It is over time that we build a body of 
evidence to understand does this drug really avoid a 
hospitalization? Does it avoid an ER visit? Does it help with 
some sort of activity of daily living that has nothing to do 
with other health-care costs?
    But those conversations are really important as we think 
about coverage and providing the best health outcomes for our 
patients.
    Senator Thune. Mr. Rice and Dr. Miller, you both reference 
legislation that I have worked on with Senator Carper to apply 
value-based insurance design to high-deductible health plans 
for chronic disease management. And I will have you--and maybe 
submit this for the record--but I would like to know if 
enacted, how you expect plans to utilize this tool, and what 
will be the impact on drug prices and health-care spending more 
broadly.
    And like I said, my time has expired, Mr. Chairman. But if 
you would take that one for the record, I would like to get 
your reaction.
    Thank you.
    Senator Lankford. Thank you.
    Senator Portman?
    Senator Portman. Thank you, Mr. Chairman.
    And thank you all for being here today to shed light on a 
complicated area. I hear a lot of frustration back home over 
the cost of prescription drugs, and for some people, they 
actually are not taking the prescription drugs they should be 
taking because of those high costs. So it is affecting their 
health care.
    And everybody has a role to play in this along the chain, 
going from the manufacturer to the pharmacy and to the 
consumer. And one is the PBMs. You have a role to play in 
trying to lower costs and bring more transparency--the word has 
been used a lot here today--to the system. People have a right 
to know.
    And in Ohio, as Mr. Rice and Mr. Prince probably know, 
there is currently a lot of discussion about that. I am sure 
you have seen the investigative reports from The Columbus 
Dispatch and other stories regarding disputes between the State 
and your respective companies.
    With regard to CVS, there have been concerns that you are 
withholding savings from the State Medicaid program and not 
providing equitable reimbursement to pharmacies. In regards to 
OptumRx, the State has raised concerns, again, regarding the 
company withholding savings from Medicaid, and the Attorney 
General has also accused your company of failing to disclose 
certain rebates to the Ohio Bureau of Workers Comp that are 
contractually supposed to be passed along to the State and to 
beneficiaries.
    I am sure you are aware of those allegations and the 
stories. First, I would like to know what your answers are as 
to why the State and other stakeholders in the system would 
accuse you of hiding this kind of information. And again, 
getting back to my comment on transparency, wouldn't 
transparency solve a lot this, particularly with regard to the 
rebates?
    Mr. Rice. Senator, I will go first. Let me start by first 
saying that I absolutely share your interests in making sure 
that we bring the utmost level of transparency to not only the 
plans, but also the members and the constituencies and 
consumers in your State as well as other States.
    The things that we have done--and I think it has been 
validated through the independent audit report that was 
conducted as well--I think we saved the State about $145 
million. In the course of that, we have now made a decision as 
of January 1st of this year, that we no longer have spread 
pricing.
    And as it relates to your commentary around pharmacy 
reimbursement, we reimburse the independent pharmacies far 
higher than the other major chains, including CVS pharmacy 
retailers as well.
    So we try to bring a level of transparency such that people 
can make the right decisions, and even to Senator Thune's 
earlier comments about health-care consumers needing to be able 
to act like consumers, we have also tried to be transparent at 
the patient level. And the way we have tried to do that is 
equipping them with the data and the visibility to it such that 
they can comparison-shop.
    So today we have real-time benefits which enable a 
physician to--in their office through electronic health 
records--share with that patient----
    Senator Portman. I totally support that. I think that is 
critical to getting costs down, ultimately.
    Mr. Rice. Yes.
    Senator Portman. Consumers are pretty smart.
    But I want to give Mr. Prince a chance to respond on the 
rebates.
    And let me just say this. If the Ohio government, which can 
bring the full weight of the government down on this issue to 
find out what the rebates ought to be, is having trouble 
getting information, how about the small business out there? I 
mean, why shouldn't these rebates be more transparent to the 
beneficiary, which ultimately is the people I represent in 
terms of the Medicaid system and its workers' comp system?
    Mr. Rice. The fact that we share, Senator--we pass through 
100 percent of the rebates and discounts.
    Senator Portman. But----
    Mr. Rice. One hundred percent.
    Senator Portman. Transparency has been the issue that we 
have not been able to resolve even in this case with the State 
of Ohio bringing pressure on the PBM system.
    Mr. Prince?
    Mr. Prince. Senator, we believe we have delivered against 
our contract for the State and also for the Bureau. We are not 
going to go into--I am not going to go into the details in the 
litigation here. But I guess I would say overall we are working 
closely with them to resolve the matter and make sure we 
address the concerns for them.
    But overall our organization, we are very focused on--from 
a rebate standpoint--point-of-sale discounts. We actually 
made--as an organization we pass on 100 percent in the Medicare 
market, 100 percent in the Medicaid market, and we are 
committed in the commercial market to moving to everybody 
having point-of-sale discounts.
    We are not taking on any additional customers in 2020 and 
beyond unless they do point-of-sale discounts.
    Senator Portman. Again, that is a matter of transparency 
also, so people can see what it is and understand what they are 
getting.
    Let me give you one quick story here where PBMs, I think, 
play a constructive role. And this is with regard to 
investigations we did in the permanent subcommittee, 
investigations on the Evzio product, which is a naloxone 
product. It is a life-saving thing in the opioid epidemic. This 
is a miracle drug that reverses the effects of an overdose.
    Kaleo, a company which provides this Evzio product, had 
dramatically increased their price, and they did it through 
kind of a loophole under the Part D Medicare program, saying 
that doctors should say it is medically necessary. And in that 
case, the PBM actually was encouraging the lower-priced 
alternative.
    And I think that is what your role ought to be. In other 
words, you all stepped in as a PBM and said this life-saving 
care can be provided at a lower cost.
    Now when they found the loophole, frankly, the PBMs did not 
have any additional role to play, and because the loophole is 
in our law, we are trying to fix that. And ultimately, I will 
tell you that the cost went down dramatically once we shone 
some light on this.
    But I give that as an example where I think PBMs can play a 
positive role in the case of trying to keep drug costs down for 
beneficiaries.
    Thank you, Mr. Chairman.
    The Chairman. Senator Cardin?
    Senator Cardin. Thank you, Mr. Chairman. And I thank all of 
our witnesses for being here.
    I want to drill down a little bit on your responsibility in 
regards to the public itself. You are the benefit managers. You 
are at the best interest of the people who need your services.
    Today there are--according to the FDA, 270 drugs currently 
are in shortage. I know of specific drugs that are absolutely 
essential for infants' health, including eye drops, that are 
not readily available, for cancer treatment that are not 
readily available.
    These are inexpensive drugs that are not difficult to 
produce, that are not being produced because the pharmaceutical 
manufacturer--usually one source--does not think it is 
worthwhile from a profit point of view.
    Now, you have contracts with pharmaceutical manufacturers. 
Why have you not done something to act on making sure that in 
this country we do not have shortages of drugs that are 
essential for the health of the people in our community? You 
enter into contracts every day with pharmaceutical companies. 
Why is this not one of your goals, to make sure that in the 
wealthiest nation in the world, common drugs that are 
absolutely essential for serious health-care needs are not in 
shortage?
    Who can answer that for me?
    [No response.]
    Senator Cardin. Mr. Chairman, the silence is deafening.
    Dr. Miller. I will help you, mostly from a physician 
standpoint, and not as a PBM.
    Senator Cardin. Please.
    Dr. Miller. Let me help you out here.
    Having drugs in supply is crucial. And so we do everything 
we can to make sure our patients have the drugs they need.
    There are drugs that are used in-hospital which are 
different than the ones that we administer as outpatient, as a 
pharmacy benefit manager. The vast majority of the shortages in 
the last several years have been in-hospital drugs----
    Senator Cardin. So do any of your people who are in your 
plans ever use hospitals?
    Dr. Miller. Most definitely, they use hospitals.
    Senator Cardin. Do you care about their health?
    Dr. Miller. And so we care passionately about their health, 
and I as a physician care tremendously.
    Senator Cardin. So why have you not taken up this issue 
with the pharmaceutical manufacturers?
    Dr. Miller. We do. So we actually have predictive models 
where we can try to see which drugs are in short supply.
    The biggest problem that we have had in the United States 
is when there is a single-source manufacturer.
    Senator Cardin. Yes.
    Dr. Miller. And usually the problem is specific to that 
product. So it is either----
    Senator Cardin. And do you not have contracts with that 
single-source manufacturer on other drugs?
    Dr. Miller. So they either flunk--sometimes, sometimes not. 
But when they flunk an FDA evaluation at their factory, they 
are forced to shut down. So we have worked with--and I think 
Dr. Gottlieb has done a great job at the FDA.
    If you look at the number of shortages, they have actually 
dropped dramatically over the last several years because he is 
actually prioritizing review of those products to make sure 
that other companies can either compete or that product can get 
back into the marketplace.
    Senator Cardin. You know, we all hear about using market 
forces. I was very impressed with our conversations of how 
market forces bring down the cost, and how you use that in your 
bargaining power with pharmaceutical companies to get the very 
best possible price for your customers, for your consumers.
    Why do you not use that market force to make sure we do not 
have drug shortages? That is my point.
    You can make a difference today on this issue. You can use 
market forces to say, ``Look, we will not tolerate our 
subscribers not having access to absolutely essential medicines 
because there is a single-source manufacturer who has made an 
economic decision that it is not worth it to manufacturer that 
drug.''
    Do any of you have an explanation why we are not doing 
something? You do not want government to set price, but you 
want government to deal with shortages when you could deal with 
shortages.
    Any ideas here?
    Mr. Rice. The best idea, Senator--and we talked about this 
a bit--is competition, is working with the FDA to make more 
generics. And quite frankly, the shortages that we are talking 
about are usually for those single-source or generics, and 
making more generics available to the marketplace would help.
    And we talked about ways that we can try to incentivize 
manufacturers to pursue and to manufacture more generics than 
we do today.
    Senator Cardin. I cannot accept that. I will tell you why.
    You are a major factor in the pharmaceutical delivery 
system. Market forces are allowing you to make profits, which 
is fine.
    You have leverage over pharmaceutical manufacturers. You 
can affect whether they will be on a formulary or not. You 
really determine their financial success, and that is why you 
negotiate your price.
    But it is more than the unit price of a particular drug 
that my constituents and your subscribers are interested in. 
They are interested in their general health.
    And if they cannot get a medicine today to deal with their 
cancer, and that is a real example, why are you not taking the 
initiative to change that?
    I really do not understand that. If you have a useful role 
in this process, then deal with this issue.
    Senator Lankford [presiding]. Senator Menendez?
    Senator Menendez. Thank you, Mr. Chairman. Thank you all 
for being here.
    I would like to start off with the same free advice I gave 
the pharma CEOs who appeared before the committee in February, 
which is--and as someone who appreciates the industry as a 
whole from the State of New Jersey, either you come to the 
table with real solutions to help patients in terms of the 
costs, or you will find a legislative response that you will 
not care for.
    So I really urge you to be part of the solution at the end 
of the day, or you will find a legislative response you do not 
care for.
    Having said that, there are widespread reports that PBMs 
engage in spread pricing, especially for generic drugs, where 
they pay the pharmacy one price but turn around and charge 
their clients several times the price the pharmacy received.
    So let me tell you how this little game seems to me. It is 
like asking your mom for $10 to buy a T-shirt that costs $8, 
and giving the seller only $7 and keeping the rest for 
yourself.
    So have any of you here today ever engaged in that 
practice? Just go down the line and give me an answer, ``yes'' 
or ``no.''
    Dr. Miller. We provide our clients with a lot of options on 
how to pay for their pharmacy benefit, and spread pricing is 
one of those options.
    Senator Menendez. So the answer to that is ``yes.''
    Next, Mr. Rice?
    Mr. Rice. Yes, we too provide our clients with options 
which include spread pricing.
    Senator Menendez. Dr. Fleming?
    Dr. Fleming. Senator, thank you. For 8.4 million Part D 
members, absolutely no, never. For our commercial, fully 
insured members, no. And for our limited self-funded block of 
business, we do offer that option. That is about 200,000 
members.
    Senator Menendez. Mr. Prince?
    Mr. Prince. Senator, we do not do it in the Medicare 
program. In the commercial and Medicaid market, it is a client 
choice about how they want to pay for our services. Ninety-
eight percent of the time, we actually offer the solution 
either way. And the client chooses how they want to pay for our 
services.
    Mr. Kolar. So, Senator, in our model we are focused on 
creating savings for our plans and not margins. We do not 
engage in spread pricing as a part of our business model.
    Senator Menendez. So what is the difference between the 
rebates you negotiate--let me ask this of Mr. Prince and Dr. 
Miller. Are the rebates you negotiate from pharmaceutical 
companies in the separate administrative fees that you charge 
the same companies?
    Mr. Prince?
    Mr. Prince. So in the Medicare program, we only collect a 
fixed rebate from pharmaceutical manufacturers and pass 100 
percent of that on. We do not have an administrative fee in the 
Medicare market or the Medicaid market.
    Those markets are--we have just fixed discounts that we 
pass on. In the commercial market, we do have an administrative 
fee that is disclosed to our client. And that is for clinical 
services.
    Senator Menendez. Dr. Miller?
    Dr. Miller. So in Medicare, as you know, all the fees pass 
back to the government. In the commercial marketplace, we give 
our plans options as to how they want to pay us.
    Many of them take all the rebates and the administrative 
fees. Some choose to let us keep a portion.
    Senator Menendez. Are these administrative fees based on 
list price like the rebates? Just give me a simple ``yes'' or 
``no.''
    Dr. Miller. The administrative fee is usually a fixed fee, 
not based on the rebate. And it is for services----
    Senator Menendez. Are they based on the list price?
    Dr. Miller. Are they based on the list price? I would have 
to--I believe that there are options to base it on the list 
price or to have a flat fee.
    Senator Menendez. Mr. Prince?
    Mr. Prince. Senator, as I said before, the administrative 
fees are only in the commercial market. They are linked to the 
services that we offer. Today they are linked to a percent, but 
we are open to changing that to a fair market value that is 
fixed.
    Senator Menendez. Because as the list prices increase, the 
administrative fees you collect, as well, increase. Is that not 
true?
    Dr. Miller. That is why we give our plans the option.
    Mr. Prince. That is why I also give our plans the options 
of how to pay for our services.
    Senator Menendez. Finally, when a drug company does lower 
their list price, how long does it take for the patient at the 
pharmacy counter to see that savings, if ever? Let me give you 
an example. Last fall, you may have read in the news that the 
list price for one PCSK9 inhibitor, a cholesterol-lowering 
drug, went down by 60 percent.
    Despite the price decrease, putting the drug's price below 
the threshold for specialty tier status, I recently read that 
PBMs have kept the drug on a specialty tier, which means it is 
more expensive for Medicare beneficiaries.
    Going down the line, can you tell me in one or two 
sentences why a list price cut would not lead to lower prices 
for consumers? And if you are going to tell me it is the 
different national codes, then if you get guidance on how to 
handle this NDC issue, can we expect lower list prices leading 
to immediate tier changes?
    Dr. Miller. Thanks for the question, Senator. As you know, 
we were the ones that actually negotiated with that PCSK9 
inhibitor company to bring that lower price to the marketplace. 
And so we definitely believe those prices should be reflected 
in what the patients pay.
    Mr. Rice. Senator, when those lower list prices result in 
the lowest net cost for the patient as well as for the plan, 
then absolutely, that is the preferred drug on formulary.
    Dr. Fleming. Senator, we like lower list prices. And 
candidly, had we known that the manufacturer was going to lower 
its list price, or bring an authorized generic to market, or 
bring one of these other things that allow their prices to come 
down during the formulary-setting time for Medicare, which is 
around this time of the year, in 2018 for this 2019 period, we 
absolutely would have had that drug on formulary.
    We absolutely anticipate including those drugs on formulary 
for the 2020 benefit year.
    Mr. Prince. Senator, we strongly encourage pharmaceutical 
companies to lower the list price and do that in our 
discussions with them. We are a strong advocate for making sure 
we pass on the value of all the discounts we negotiate to that 
consumer.
    That is why last year we expanded that program 
dramatically. It will serve 9 million people in 2019. We can 
only have new customers--in 2020--that pass on the consumer 
discount, all that value to the consumer at the point of sale.
    Mr. Kolar. So, Senator, as a PBM focused on driving savings 
for our plans, we welcome lower list prices as well. When a 
lower list price drug becomes available, we will assess the net 
cost effect to our plan as well as the impact of transition 
across members.
    And if the drug is the lower net cost, we will prefer that 
drug, and those savings will pass through to the members.
    Senator Menendez. Thank you.
    Senator Lankford. Senator Carper?
    Senator Carper. Thanks; our thanks to each of you. I think 
my staff and I have had the privilege to meet with most of you 
in the run-up to today's hearing. We appreciate your time.
    As I mentioned to those with whom I have met, when we took 
up the Affordable Care Act, in this room, there were witnesses 
saying that folks in Japan were spending 8 percent of GDP for 
health-care costs--8 percent. We are spending 18 percent.
    They got better results and covered everybody. And we did 
not get better results. You had about 40 million people at the 
time going to bed at night without health-care coverage, and we 
said, ``We can do better than that.'' And in some respects, we 
have done better than that.
    I think if we had more cooperation from some of our friends 
on the other side of the aisle and the current President, we 
could do even better in terms of getting better results for 
less money, providing care the people need.
    We have a strong interest in pharmaceuticals in my State. 
It is consumers, patients, people who pay for health care, and 
also employment. We have some very fine companies that are 
involved in pharmaceuticals, as you may know.
    One of the things I would like to try to do is develop 
consensus, and to find consensus on a panel like this is what I 
would like to do in the next couple of minutes.
    But in the last Finance hearing on drug prices, we heard 
from drug manufacturers that passing rebates directly to 
consumers, improving transparency, and adopting value-based 
arrangements would help reduce prescription costs.
    I am not going to ask you to comment on those points, but 
there is a fourth one that came up, and that was putting a cap 
on patients' out-of-pocket drug cost. And they suggested that 
putting a cap on patients' out-of-pocket drug cost may well 
help reduce prescription drug prices. And I would just like to 
hear from each of you.
    We will start with you, Mr. Kolar. I do not think I had a 
chance to meet with you before the hearing. So let us start off 
with you.
    Do you agree with that? Why or why not?
    Mr. Kolar. So, Senator, capping patient cost--I assume you 
are speaking about Part D and a proposal to cap costs there. We 
believe that that is an issue worth studying.
    When the Part D benefit design was rolled out, it was not 
the drug pricing environment that we have today. Patients are 
exposed to very high drug costs at the pharmacy counter, a 
percentage of them.
    We do believe, however, that that is going to require all 
stakeholders to be a part of the conversation. We cannot 
squeeze the balloon and then have increased costs in the form 
of higher premiums for beneficiaries, or higher cost to 
taxpayers. It is going to have to require manufacturer 
participation and list price relief.
    Senator Carper. Thank you.
    Mr. Prince?
    Mr. Prince. Senator, we would support a capping of the Part 
D out-of-pocket costs if it is part of a broader reform of the 
part D program. The program has been around and delivered a lot 
of value for seniors over the last decade-plus, for almost 50 
million seniors.
    And so, as part of a broader reform that looks at all the 
implications for other changes too----
    Senator Carper. All right. Thank you.
    Dr. Fleming?
    Dr. Fleming. Senator, thank you. We absolutely support 
modernizing Part D. I think the notion of putting caps on out-
of-pocket costs is one of the tools that could be used, and 
dealing with the specialty drug issue where nearly half the 
drug spend in the next couple of years will be consumed by 
specialty drugs--consumed by 2 percent--is another example.
    I am not convinced that just putting caps on member out-of-
pocket costs will cause the manufacturers to lower the list 
price. I think you are going to need to think through what are 
the tools and levers to maybe have the manufacturers 
participate in those out-of-pocket limits, or other levers to 
pull there.
    But I do think out-of-pocket cost is something that is 
important for consumers.
    Senator Carper. Thank you.
    Mr. Rice?
    Mr. Rice. Senator, we absolutely share the concern in terms 
of the burden of out-of-pocket costs on today's patients and 
American citizens. We absolutely would support putting a 
spending limit or cap for seniors in terms of their out-of-
pocket exposure.
    At the same time, we also support tools such as 
preventative drug lists with zero copays as another means of 
also trying to deal with the out-of-pocket burdens of Americans 
in this country.
    Senator Carper. All right. Thanks.
    Dr. Miller?
    Dr. Miller. Yes. Thanks for the question.
    I think targeted copay caps are really crucial. As you 
know, just a couple weeks ago we rolled out the Patient 
Assurance Program where we capped insulin at $25 a month. We 
believe that it is really important for our diabetic patients 
to be able to take their medications. That is the best way to 
lower costs for the country and improve health outcomes. But it 
should be in a very targeted manner.
    Senator Carper. Mr. Chairman, my time has expired. I want 
to just mention a question for the record, but I just want to 
get it out here, and it relates to the first question.
    For the 40 percent of drugs in Medicare Part D that do not 
offer rebates, what are your recommendations for lowering their 
prices? And I will give you that question to respond to for the 
record.
    All right. Thank you very much.
    Senator Lankford. Thank you.
    Senator Casey?
    Senator Casey. Thanks, Mr. Chairman. I want to thank the 
witnesses for being here.
    I think I may have said this to each of you at various 
times when we have discussed these issues, that when it comes 
to this issue, the cost of prescription drugs, if this issue 
were playing out in isolation, that would be one thing. 
Unfortunately, the folks who are bearing the burden of this, 
bearing the cost, are the same folks who have lived in a 
country where wages went up by 12 percent over 40 years by one 
estimate. So, in 4 decades, wages went up only 12 percent.
    And the costs of everything you can imagine for the middle 
class and folks trying to get into the middle class are 
skyrocketing. If you are younger and you have a family, it is 
the cost of child care and maybe saving for college.
    It seems like everyone is impacted by the cost of 
prescription drugs going through the roof. I just had a witness 
from Pennsylvania at our Aging Committee hearing, Barbara 
Cisek, who is from southwestern Pennsylvania and is 63 years 
old. She has multiple chronic conditions, including ulcers, 
COPD, severe migraines, and the list gets longer and longer. 
Five hundred bucks a month she is paying just on prescription 
drugs. That does not include premiums, and it does not include 
doctor visits.
    So Barbara is emblematic of that senior citizen carrying 
yet another cost. It is like American families have bags of 
rocks put on their back. And prescription drugs are just 
another bag of rocks that gets thrown on them.
    A lot of people are just face-down on the pavement from 
these costs. And I heard your testimony, and I read through 
some of the ideas you have. And we appreciate those ideas.
    But I think there has to be, from you and from 
manufacturers, a sense of urgency about this. Not just ideas 
thrown around, but a sense of urgency and what more you can do.
    And that leads me to Medicaid, which is--you all are 
familiar with the program, but maybe not until 2017 were enough 
Americans familiar with the program, and certainly politicians 
were not. But politicians found out in 2017 that Medicaid is an 
``us'' program, not a ``them'' program.
    They found out that in a State like mine, Pennsylvania, 40 
percent of the kids benefit from Medicaid, roughly. 
Approximately half the people with disabilities benefit, and 
more than 60 percent of the people in my State who are over the 
age of 65 benefit from Medicaid--seniors, kids, and people with 
disabilities.
    And that program is being decimated before our eyes. Or at 
least attempts were made to do it.
    And another thing we need your help on is to speak up when 
proposals are made here. There is a House Republican budget 
proposal, voted on by the House Budget Committee, that would 
cut Medicaid by more than a trillion and a half dollars.
    The administration, just days ago, proposed another 
trillion and a half cut to Medicaid over 10 years. The silence 
on that side is deafening. I hope the silence in your board 
rooms, from your companies, is not deafening.
    We need your help on this. We need your help to fight 
against these kinds of cuts. It will hurt Americans who are 
very vulnerable. It will also hurt each of you in your own way.
    This question we will do very quickly, because you have 
already answered it, but I want to hear it again. One of the 
things that Senator Menendez raised was so-called ``spread 
pricing contract behavior'' in which pharmacy benefit managers 
mark up the difference between how much they reimburse 
pharmacies and the amount they charge the plan sponsor.
    I want to ask each of you, have you engaged in that 
practice, number one? And number two, if you have not, does 
your company plan to do anything to make sure that you never 
engage in that process?
    I will start with Dr. Miller and go down. And you can 
amplify it in written form, because we are running out of time.
    Dr. Miller. Yes. So in limited cases, we do engage in 
spread pricing. We give our clients the options of how they 
want to reimburse us. And that is one of the options available 
to them.
    Senator Casey. Mr. Rice?
    Mr. Rice. Senator, it is an option that we do provide to 
our clients in terms of how they want to engage in 
remuneration.
    Dr. Fleming. Senator, we are an integrated health plan--for 
Medicare members, no. For Medicaid, no. For our fully insured 
commercial, no. It is available on a limited basis for our 
self-funded population, which is about 200,000 members. And it 
is client choice.
    Mr. Prince. Senator, we do not engage in that in the 
Medicare program. In the Medicaid program, it is client choice 
about how they want to contract and pay for our services. In 
the commercial market, it is also client choice on how they 
want to pay.
    Usually, each client in the commercial market asks for a 
bid with it and without it. And it is a client choice about how 
they want to pay for our services.
    Mr. Kolar. So, Senator, our business model is transparent 
and passed through. With our clients, our model is not to 
engage in spread pricing.
    Senator Casey. Thank you, Mr. Chairman.
    Senator Lankford. Senator Whitehouse?
    Senator Whitehouse. Thank you, Mr. Chairman.
    Are the pharmacy benefit managers the most formidable force 
that the pharmaceutical industry faces in terms of bringing its 
pricing down?
    [No response.]
    Senator Whitehouse. Somebody is going to answer that, 
right?
    Mr. Kolar. Senator, I would say competition would be the 
other force that heavily influences.
    Senator Whitehouse. But, as an institution, you guys are 
organized. You have a lot of expertise on your side. And you 
tangle with the pharmaceutical industry to bring rebates that 
then go through to your clients, who are mostly insurers, and 
that ends up supporting clients.
    That is kind of the theory of the case, is not it? Yes?
    Mr. Rice. Yes, Senator.
    Senator Whitehouse. Yes. So let me--two quick numbers here. 
The pharmaceutical industry, last year, declared $27.5 million 
in lobbying. And the individual drug companies add another $194 
million, for a total of $221.5 million in lobbying by the 
pharmaceutical industry, which as a general proposition, if you 
want to understand what is wrong with Congress, just ask about 
one industry that does $220 million in lobbying in 1 year. So 
that is one figure--that $220-plus-million on lobbying.
    The other is that, out of $480 billion that the U.S. spends 
on drugs, my figures are that $323 billion of that goes to the 
pharmaceutical industry, and $23 billion of it goes to you.
    So that makes you 7 percent of what the pharmaceutical 
industry gets, and 5 percent of the total spending. So if we 
whacked you in half, that would affect prices by 3\1/2\ 
percent.
    Fair math?
    [No response.]
    Senator Whitehouse. So it has to be interesting to you all 
to witness how the pharmaceutical industry has been able to 
take pressure on their pricing and turn it into, with political 
Jiu-Jitsu of an almost magical variety, pressure on their 
greatest adversary, the most powerful force for pushing prices 
down.
    So I hope that you at least respect what they have been 
able to pull off here. That is quite a trick on their part.
    You do not decide where the rebate goes when you send it 
through your client, do you?
    Mr. Rice. No.
    Senator Whitehouse. No.
    Do some of you have State Medicaid programs as your 
clients?
    Mr. Rice. Yes.
    Senator Whitehouse. Yes.
    Dr. Fleming. Yes.
    Senator Whitehouse. Yes.
    Mr. Prince. Yes.
    Senator Whitehouse. Yes.
    Mr. Kolar. Yes.
    Senator Whitehouse. Yes.
    Dr. Miller. Through some of our health plans; correct?
    Senator Whitehouse. Okay, indirectly, then. Four ``yeses'' 
and one ``indirectly.''
    And presumably those State Medicaid plans have the same 
rights as your other clients to audit and look into your 
methodology and your cost in your rebate structure?
    Mr. Kolar. So, Senator, just to clarify, my answer was also 
an indirect ``yes.''
    Senator Whitehouse. Got it.
    Mr. Kolar. Yes, our direct----
    Senator Whitehouse. With respect to my question, can any 
State Medicaid program look at your books as a client?
    Mr. Kolar. Our clients have extensive audit rights in our 
business, and their clients have audit rights into our 
business. Correct.
    Senator Whitehouse. Great.
    So the State Medicaid programs do have audit rights in your 
business?
    Mr. Kolar. Correct.
    Senator Whitehouse. True for all five of you?
    Mr. Rice. Indirectly, yes.
    Senator Whitehouse. Directly or indirectly.
    Dr. Fleming. Senator, I might add that in the primary State 
where we have Medicaid business, the State does its own rebates 
and formulary.
    Senator Whitehouse. Yes.
    And there is legislation pending to provide transparency 
into your business model, both to MedPAC and to MACPAC who 
would then be in a position to provide expert advice to 
Congress on whether there were problems with the industry and 
things that we should address without having to divulge every 
part of your business. By the way, I would support full 
transparency, but this is not my hearing. This is your hearing.
    So one-by-one, do each of you support or oppose the 
legislation that would give MedPAC and MACPAC the ability to 
examine your business model and report to Congress?
    Dr. Miller. Support.
    Senator Whitehouse. Support.
    Mr. Rice. Support.
    Senator Whitehouse. Support.
    Dr. Fleming. Senator, we are neutral on that.
    Senator Whitehouse. Okay. No opposition.
    Dr. Fleming. No opposition.
    Senator Whitehouse. Even through your lobby groups?
    Dr. Fleming. Right.
    Senator Whitehouse. Because sometimes people say they have 
no opposition, and then they send their lobbyists out the 
opposite.
    Mr. Prince. We support if kept confidential--if the data is 
kept confidential.
    Senator Whitehouse. Yes, but the advice to us can be, you 
need to look at this, this, and this. And you understand that? 
There is an advice to Congress function in that.
    Mr. Prince. Right, as long as the data is kept 
confidential.
    Senator Whitehouse. Got it.
    Mr. Kolar. We support.
    Senator Whitehouse. Support. Okay.
    Well, let us hope we can at least get that piece of 
legislation moving, which I think would be very helpful, and I 
think a considerable number of members of this committee 
support it. And then we will keep looking, but I guess my point 
is, I appreciate the scrutiny of the PBMs, but let us not go 
away without remembering that they are $23 billion out of a 
$480-billion problem.
    And just as somebody who sees a lot of this around here, I 
stand in awe of the pharmaceutical industry's Jiu-Jitsu magic 
to have gotten their prime antagonists to become the focus of 
the problem with, by my count, $457 billion remaining to be 
looked at.
    Thank you, Mr. Chairman.
    Senator Lankford. Thank you.
    The chair recognizes himself for some time for questions.
    Gentlemen, thank you for being here. Thanks for a very long 
morning to be able to go through this kind of dialogue. There 
are a lot of questions that you have been peppered with during 
the course of the day.
    Let me bring up some specifics that maybe we have not dealt 
with already. The administration has put out a point-of-sale 
effort for DIR fees. Does anyone here have a problem with what 
the administration has put out so far as a recommendation for 
how to do a point-of-sale effort for DIRs?
    Dr. Miller. Are you talking about the point-of-sale rebate?
    Senator Lankford. Yes.
    Dr. Miller. So we really support the sentiment. We believe 
that lowering cost at the counter is really crucial to 
patients.
    However, I am not convinced that this mechanism is going to 
be very successful. A couple of things: one is, it shifts cost 
to the taxpayer. CMS auditors have estimated that to be about 
$196 billion over the next 10 years.
    Second is, many patients will pay down their copay so they 
will get stuck on a branded product instead of switching to a 
generic that is equally effective and, therefore, continue to 
cause high cost.
    Third is that, when you make the rebates publicly known, it 
will make our ability to negotiate deeper discounts that much 
less effective. And so you will not get as effective discounts, 
and you will decrease our negotiations. You will take the 
pressure off of pharmaceutical companies; you will raise the 
premium for 100 percent of the beneficiaries while only helping 
a minority of the beneficiaries.
    And so we believe, while the intent is really good, there 
are targeted ways to achieve the same thing without these 
problems.
    Senator Lankford. What would those be?
    Dr. Miller. So one of the things we did is, if you look at 
the categories of drugs that are creating the pain for the 
patients at the pharmacy counter, they fall into several 
buckets. It is diabetic agents. It is hepatitis C. It is 
asthma. Those are the ones that actually--if you had a targeted 
solution for those, you would actually relieve most of the 
patients who have the problem.
    If you think about patients with cancer who have an 
enormous burden at the counter--because there are no rebates in 
those products--they do not benefit at all from moving the 
rebate to the point of sale.
    Senator Lankford. Right.
    Does anyone have any other feedback on that, on both the 
administration's recommendation or responses to it?
    Mr. Rice. Yes, Senator. We are absolutely supportive of the 
administration's goal of reducing out-of-pocket costs for 
seniors and lowering overall health-care costs. We too--when we 
look at the proposed rule--have a few concerns where there may 
be elements of it that would drive costs higher actually, not 
lower. The types of solutions that we would put forward are, 
again, point-of-sale rebates as an option. And we were the 
first Med D plan to provide that option in 2019 for seniors who 
want to sign up.
    In addition to that, we would also be very supportive of 
preventive drug lists with $0 copays, again, as another means 
of reducing the out-of-pocket burden for seniors that we are 
all worried about.
    Senator Lankford. So, let me switch subjects on this a 
little bit.
    When I talk to independent pharmacies, they will talk about 
the DIR fees 100 percent of the time, and clawbacks. They are a 
standalone rural pharmacy, and there are two issues that come 
up. Let me deal with them in order.
    One of them is, obviously, they get a bill at some point 
for $50,000 that they are clawing back from something 6 or 7 
months before, and they did not know that was coming back. 
Obviously, cash flow becomes exceptionally difficult on that.
    They will reference that there are performance metrics put 
on them, but I can never hear what those performance metrics 
are. Can anyone give me an example of what performance metrics 
might be for an independent pharmacy to avoid the clawbacks?
    Dr. Fleming. Senator, I am a pharmacist. Forever, 
pharmacists have wanted to be paid for cognitive services, to 
be at the top of the list.
    Senator Lankford. I am limited on time. I understand for 
the cognitive part of it.
    Dr. Fleming. Yes, sir. So the example of performance fees 
that we put in place to get the pharmacists engaged are things 
that will help the patient with drug adherence, identify those 
patients who are not as adherent, engage with them.
    And through these programs, we have seen a 2 percentage-
point increase in drug adherence in several disease states year 
over year over year because of getting the pharmacist engaged 
in a value-based conversation just like we asked doctors and 
hospitals----
    Senator Lankford. All right.
    Any other examples of metrics? Are those proprietary, the 
metrics that go out to independent pharmacies?
    Dr. Fleming. Senator, no.
    Senator Lankford. Okay.
    We will kind of walk through that somewhat. I have had 
several independent pharmacists who have said to me, they will 
have a particularly large requirement for a DIR fee, a 
clawback. And within 2 weeks after that big check comes in, 
they will get a phone call from a PBM that also owns pharmacies 
that will say, ``How are things going? Would you consider 
selling to us?''
    They find those things strangely coincidental, that they 
have a big check for a clawback and then a phone call to say, 
``Are you interested in being able to sell back to us?''
    Now, I would certainly hope those two are not aligned. But 
that is a concern that they have, that is expressed. I cannot 
be the first person who has expressed that to anyone here.
    Let me express one thing, because I do not expect us to be 
able to answer that without knowing the specifics on the 
location. Do you ever negotiate a higher list price for a drug 
to give you more flexibility on the rebate side? Is there a 
time when you work with a manufacturer to negotiate a higher 
list price to give you more flexibility? And let's have each of 
you answer that.
    Dr. Miller. No.
    Mr. Rice. No.
    Dr. Fleming. No.
    Mr. Prince. No.
    Mr. Kolar. No.
    Senator Lankford. Do any of you ever, when a generic 
becomes available--do you put the generic on a formulary with 
the branded group? So there are branded tiers, generic tiers, 
and such where the generic would enter the formulary in a 
branded tier. Does that happen with you at all on the pricing?
    Dr. Miller. I would have to--on the basis of the large 
number of drugs, I would have to get back to you if there is 
any specific example. But that would not be our practice.
    Senator Lankford. Okay.
    Mr. Rice?
    Mr. Rice. Senator, our focus is providing the lowest cost 
option.
    Senator Lankford. So that generics would not be on a 
branded tier?
    Mr. Rice. If it is the lowest cost option.
    Dr. Fleming. Senator, I can think of limited circumstances, 
very rare, where that is the case, usually because of the 6-
month exclusivity rule when a generic hits the market.
    Mr. Prince. Senator, our objective is around lowest net 
cost for drugs in what tier it goes on. But in terms of what 
might be--I am not sure if there would be examples where that 
might occur. But it would be rare.
    Senator Lankford. Okay.
    Mr. Kolar. Senator, I cannot think of a specific example, 
but our model would be to prefer the lowest net cost drug.
    Senator Lankford. To the consumer?
    Mr. Kolar. To the plan.
    Senator Lankford. Okay.
    Mr. Kolar. For the benefit of the member.
    Senator Lankford. Okay.
    Senator Wyden?
    Senator Wyden. Thank you, Senator Lankford.
    And I also note that the chairman of the committee, Senator 
Grassley, is here, and he was kind enough----
    The Chairman. Let me thank Senator Lankford for taking over 
for me while I met with the Iowa hospital people.
    Senator Wyden. And I want to thank Chairman Grassley as 
well for being able to ask this extra question.
    So, gentlemen, a couple of hours ago I said the whole 
system--drug companies, middlemen, insurance companies--the 
citizens think this is all one big scam. It is a ripoff. They 
are all scratching each other's back and trying to keep the 
prices up, and everybody is blaming each other.
    My own view is--and I have talked to the chairman about 
this--every sector of American health care has got to bring 
more value and lower prices. In other words, you have to get 
beyond the blame game.
    Now, for 2 hours you heard from both sides of the dais, the 
Democratic side and the Republican side, that there are not a 
lot of people up here on this side of the dais holding rallies 
for spread pricing.
    Okay. And the reason why you heard this from Democrats and 
Republicans is that spread pricing is a ripoff, plain and 
simple. When a PBM pays a set price to a pharmacy and then the 
PBM turns around and charges Medicare and Medicaid many times 
more for that prescription, that is plain old price-gouging.
    So I just want to ask a question and want to hear you 
answer it in a ``yes'' or ``no'' fashion. If the Congress 
proposes to ban spread pricing in Medicare and Medicaid, will 
you oppose it?
    Let us go right down the row. This is just a ``yes'' or 
``no.''
    Dr. Miller. We look forward to working with you on it.
    Senator Wyden. ``Yes'' or ``no''? Are you going to support 
it if Congress proposes a ban on spread pricing in Medicare and 
Medicaid; ``yes'' or ``no''? Will you oppose it?
    Dr. Miller. If it becomes market standard, we are 
supportive.
    Mr. Rice. Yes.
    Dr. Fleming. One hundred percent support. We always have, 
always will.
    Senator Wyden. Good. We're making some headway. We are 
going to save taxpayers some money.
    Sir?
    Mr. Prince. We do not do spread pricing in Medicare, and it 
is the choice of the client on the----
    Senator Wyden. Will you oppose it if we propose, in 
Medicare and Medicaid, outlawing it? That is a ``yes'' or 
``no''?
    Mr. Prince. Probably neutral.
    Senator Wyden. Okay.
    Mr. Kolar. We would not oppose.
    Senator Wyden. Great. So, out of the five of you, we got 
three who will be with us if we propose getting rid of spread 
pricing in Medicare and Medicaid. And we got one ``neutral,'' 
and one I am just going to scratch my head about a little bit 
and try to figure out.
    Gentlemen, you heard from Democrats and Republicans----
    Mr. Rice. Senator, I want to make sure we are clear. I was 
saying ``yes,'' we would support----
    Senator Wyden. The ban.
    Mr. Rice. Yes.
    Senator Wyden. Yes. There are five of you. We got three of 
you to be with us, one of you to be neutral, and one to take a 
position that I am going to have to decipher.
    But the point really is, gentlemen, this is a gut question. 
I do not think it is really complicated.
    As Chairman Grassley and I have talked about, this taxpayer 
money, Medicare and Medicaid--some of the States have already 
been blowing the whistle. We have not even talked about 
Kentucky yet.
    So I am leaving here saying I got 60 percent of you to say 
we are going to protect taxpayers, but we have a lot more to 
do. And I want you to know that everybody in this--the drug 
companies, the middlemen, yourselves, the other players--has 
got to be part of it, the insurers. So I hope that we will keep 
the record open. I hope all of you are going to join me in 
saying we ought to ban spread pricing in Medicare and Medicaid.
    Mr. Chairman, thank you for the chance to get into an 
additional area.
    The Chairman. Thank you very much.
    First of all, I thank you for your attendance. Thank you 
for the preparation. I assume you had to put a lot of 
preparation into it, even though you know your business well.
    We thank you for that. And you know the inside, and you 
know that I have said it is kind of an opaque business, and we 
need more transparency, and all that. So you have helped us 
considerably on that. And I assume that we will be back to you, 
or we will be hearing from you as we progress. I hope you will 
cooperate with us. I know you will, so I do not have any 
questions about that.
    I am going to ask all the members, if you have questions in 
writing for these five witnesses, Tuesday, April the 23rd, is 
the deadline for that. And then, in turn, the extent to which 
you have to respond to those, I hope you can do it as soon as 
possible.
    With that, this hearing is adjourned. And thanks, 
everybody, for attending.
    [Whereupon, at 12:47 p.m., the hearing was concluded.]

                            A P P E N D I X

              Additional Material Submitted for the Record

                              ----------                              


          Prepared Statement of William K. Fleming, Pharm.D., 
          Segment President, Healthcare Services, Humana, Inc.
    Chairman Grassley, Ranking Member Wyden, and the members of the 
committee, thank you for the opportunity to be here today. My name is 
Dr. William Fleming, and I am a pharmacist. I have spent nearly 30 
years working in a variety of pharmacist roles, including 25 years with 
Humana. I currently serve as Segment President of Humana's clinical 
organization, which includes pharmacy, home health, and behavioral 
health.

    I am honored to join you today, and I look forward to working with 
the committee to achieve our shared goals of reducing prescription drug 
prices for Americans and improving the Medicare Part D prescription 
drug program for current and future beneficiaries.

    Humana is an integrated health and wellness company focused on 
providing value to seniors by operating a holistic, health outcomes-
driven model that is beneficiary-centric, and which focuses on chronic 
care and contains locally integrated health capabilities. Humana 
currently provides Medicare prescription drug coverage for more than 
8.4 million seniors across all 50 States, with approximately 4 million 
Medicare Advantage (MA) members and 4.4 million Medicare Prescription 
Drug Plan (PDP) members. We also provide medical coverage for 
approximately 1.5 million commercial customers, more than 340,000 
Medicaid beneficiaries, and 5.9 million TRICARE enrollees in the 
eastern United States. Humana is unique in that our pharmacy and 
medical teams are tightly integrated and focused solely on serving our 
own members--not those of other payers. As a result, the savings we 
achieve through our pharmacy programs, such as manufacturer rebates and 
discounts, accrue directly to our members through lower premiums and 
improved benefits.

    Humana's integrated approach to serving seniors delivers a 
personalized and simplified experience through a value-based health 
ecosystem that improves clinical outcomes. This ecosystem includes 233 
owned, jointly-owned, or allied primary care facilities; an ownership 
interest in the Nation's largest home health and hospice providers;\1\ 
as well as initiatives to address social determinants of health.
---------------------------------------------------------------------------
    \1\ Forty percent stake in Kindred At Home and CURO Health 
Services.

          humana's transparency and clinical innovation tools
    Humana is focused on providing seniors with the best care possible. 
As part of that goal, Humana has developed innovative solutions for 
ensuring that our members are informed when making decisions about 
their prescription drugs to reduce costs and improve health outcomes 
including:

          IntelligentRx: Humana was the first Part D plan to provide 
        real-time access to drug cost and formulary information to 
        physicians and their patients through our IntelligentRx tool. 
        IntelligentRx enables physicians and their patients to make 
        joint treatment decisions based upon efficacy and cost for 3.1 
        million prescriptions annually. The tool is currently available 
        to all 10 million Humana members, including individuals with 
        Medicare, Medicaid, and employer coverage.

          Maximize Your Benefits (MYB) Program: Humana continuously 
        analyzes our members' prescription drug claims to identify 
        opportunities for them to save money by switching to a lower-
        cost drug or by pointing them to other savings programs such as 
        foundation-based cost-sharing assistance. Based upon that 
        analysis, we proactively reach out to our members and provide 
        instructions on how to maximize their savings opportunities. We 
        estimate that the program saved our members almost $200 million 
        in 2018.

          Clinical Pharmacy Programs: Humana also ensures that seniors 
        are taking the right combination of drugs necessary to improve 
        their health through our clinical programs--medication therapy 
        management (MTM) and medication reconciliation during 
        transitions of care from facility to home. Through these 
        programs, we help seniors by eliminating duplicative drugs, 
        identifying lower-cost options, supporting medication 
        adherence, and identifying possible adverse drug interactions. 
        As a result of these initiatives, beneficiaries have increased 
        medication adherence by as much as 13 percent and have 
        experienced reduced emergency room visits, urgent care visits, 
        and hospital admissions.

I appreciate the committee's keen interest in working to understand 
better the root causes of high drug costs and advancing policy 
solutions.
                evolution of the medicare part d program
    Less than 15 years ago, Americans did not have access to an 
outpatient prescription drug benefit under Medicare. Today, more than 
43 million seniors have access to life-improving medicines through Part 
D.\2\
---------------------------------------------------------------------------
    \2\ ``March 2019 Report to the Congress: Medicare Payment Policy:'' 
http://medpac.gov/docs/default-source/reports/
mar19_medpac_ch14_sec.pdf?sfvrsn=0.

    At the inception of the Medicare Part D program, Congress designed 
a competitive marketplace where prescription drug plan sponsors 
competed based upon premium. As a result, seniors enrolled in 
prescription drug coverage have gained significant value from the 
---------------------------------------------------------------------------
program's focus on market competition including:

          Stable premiums through the 13 years of the program 
        averaging approximately $30 per month by negotiating rebates to 
        lower costs for all seniors;\3\
---------------------------------------------------------------------------
    \3\ Ibid.

          Generic dispensing rates near 90 percent;\4\
---------------------------------------------------------------------------
    \4\ Ibid.

          Medicare beneficiaries average more than 26 Part D plan 
        sponsor options;\5\
---------------------------------------------------------------------------
    \5\ Ibid.

          A 50 percent reduction in medication non-adherence due to 
        affordability;\6\ and
---------------------------------------------------------------------------
    \6\ Diebold, Jeffrey. ``The Effects of Medicare Part D on Health 
Outcomes of Newly Covered Medicare Beneficiaries.'' The Journals of 
Gerontology: Series B, Volume 73, Issue 5, July 2018, pages 890-900: 
https://academic.oup.com/psychsocgerontology/article/73/5/890/2631953.

          Beneficiary satisfaction rates near 90 percent.\7\
---------------------------------------------------------------------------
    \7\ 2018 Medicare Today Senior Satisfaction Survey: http://
medicaretoday.org/resources/senior-satisfaction-survey/.

    Despite the benefits realized by Part D beneficiaries, there are 
still seniors who struggle with the increasing cost of prescription 
drugs. This is especially true for the 1 million beneficiaries who are 
not eligible for the low-income subsidy who reach the catastrophic 
phase of the benefit each year and generally spend more than $3,041 in 
out-of-pocket costs for their prescription drug needs.\8\
---------------------------------------------------------------------------
    \8\ See Announcement of Calendar Year (CY) 2019 Medicare Advantage 
Capitation Rates and Medicare Advantage and Part D Payment Policies and 
Final Call Letter, available here: https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf.

[GRAPHIC] [TIFF OMITTED] T0919.001


    The most recent Medicare Payment Advisory Commission (MedPAC) 
Report to the Congress from March 2019 echoed the challenges for the 
populations of seniors with high drug costs:\10\
---------------------------------------------------------------------------
    \9\ Kaiser Family Foundation. ``No Limit Medicare Part D Enrollees 
Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on 
Spending:'' https://www.kff.org/report-section/no-limit-medicare-part-
d-enrollees-exposed-to-high-out-of-pocket-drug-costs-without-a-hard-
cap-on-spending-issue-brief/; Kaiser Family Foundation. ``10 Essential 
Facts About Medicare and Prescription Drug Spending.'' January 29, 
2019: https://www.kff.org/infographic/10-essential-facts-about-
medicare-and-prescription-drug-spending/; Kaiser Family Foundation. 
``Medicare Part D in 2016 and Trends Over Time.'' September 16, 2016: 
https://www.kff.org/report-section/medicare-part-d-in-2016-and-trends-
over-time-section-4-the-low-income-subsidy-program/. Part D enrollment 
figures reflect 2016 enrollment.
    \10\ ``March 2019 Report to the Congress: Medicare Payment 
Policy:'' http://medpac.gov/docs/default-source/reports/
mar19_medpac_ch14_sec.pdf?sfvrsn=0.

          Beneficiaries in the catastrophic phase continue to see 
        increasing costs: Spending for high-cost beneficiaries (those 
        who reached the catastrophic phase) increased from 40 percent 
---------------------------------------------------------------------------
        of Part D spending in 2011 to 58 percent in 2016.

          The average list price increased 10 percent annually: MedPAC 
        cites the growth in the average price of drugs filled by high-
        cost beneficiaries as the most significant factor for spending 
        growth among high-cost beneficiaries. The price per 
        standardized, 30-day prescription for high-cost beneficiaries 
        grew annually at 10 percent from 2010-2016.

          Ten times the number of seniors reached the catastrophic 
        phase on first fill in 2016: The number of seniors who reached 
        the catastrophic phase through a single claim increased from 
        33,000 in 2010 to 360,000 in 2016. Non-LIS beneficiaries were 
        more likely to have this claim than LIS beneficiaries.

          Spending on specialty drugs accounted for four times the 
        share since 2007: Specialty-tier drugs accounted for 25 percent 
        of Part D overall gross spending in 2017, an increase from 6 
        percent in 2007.

    Humana's experience reflects the challenges faced throughout the 
Part D program. In 2018, two percent of our beneficiaries who utilized 
specialty drugs comprised 36 percent of total Part D spending. In 2 
years, Humana projects that seniors utilizing specialty drugs could 
account for as much as 50 percent of total Part D spending.

    Ultimately, policymakers are faced with the challenge of preserving 
the benefits of the Part D program--which has been successful for 
many--while modernizing the program to address the new challenges in 
the prescription drug market since the program's inception in 2003.
            anti-competitive behavior by drug manufacturers
    As members of the committee have highlighted in previous drug 
pricing hearings, a major factor contributing to the increase in drug 
spending is the list price of prescription drugs. Drug manufacturers 
alone set the list price of prescription drugs. Drug manufacturers have 
also historically engaged in a host of tactics meant to delay generic 
competition, including preventing generic manufacturers from obtaining 
drug samples, utilizing the Risk Evaluation and Mitigation Strategy 
(REMS) process to block timely entry of generics, utilizing loopholes 
in the patent system to delay and thwart the market entry of lower cost 
competitors, and paying generic manufacturers to delay market entry. 
According to the Federal Trade Commission (FTC), these anti-competitive 
``pay-for-delay'' actions alone increase costs for seniors and American 
taxpayers by $3.5 billion annually.\11\
---------------------------------------------------------------------------
    \11\ See https://www.ftc.gov/sites/default/files/documents/reports/
pay-delay-how-drug-company-pay-offs-cost-consumers-billions-federal-
trade-commission-staff-study/100112payfordelayrpt
.pdf.

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. 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. For example, Forest Laboratories' Namenda (memantine HCl) is 
indicated for the treatment of moderate to severe Alzheimer's disease. 
When the 5/10 mg tablets were scheduled to go off patent in April 2015, 
Forest responded by creating a ``new'' version marketed as Namenda XR 
(an extended release version of the drug) and obtained a new patent, 
providing the manufacturer with an additional 14 years without generic 
competition.\12\ In 2015, the first year with generic memantine HCl 
tablets, the annual per-user cost decreased 23.8 percent in Part D, 
consistent with Calendar Year (CY) 2011 levels. In contrast, the per-
user cost of patent-protected Namenda XR increased 52.2 percent from CY 
2014 to CY 2015.
---------------------------------------------------------------------------
    \12\ Michael Carrier and Steve Shadowen, ``Pharmaceutical Product 
Hopping: A Proposed Framework for Antitrust Analysis,'' Health Affairs 
Blog (June 1, 2017); letter from Patrick G. Boen, Senior Director, 
Clinical Development at Forest Research Institute, to providers (Feb. 
2014) (announcing plans ``to discontinue the sale of NAMENDA'' 
(memantine HCl) tablets on August 15, 2014).

    There are numerous additional examples where a brand drug 
manufacturer has delayed competition to preserve its monopoly, 
---------------------------------------------------------------------------
resulting in astronomically high drug prices:

          Humira, the highest-selling drug in the world, has received 
        six different orphan drug designations since 2005. Its drug 
        price increased by 200 percent from 2012-2018 to $38,000 per 
        patient.\13\
---------------------------------------------------------------------------
    \13\ FDA, https://www.accessdata.fda.gov/scripts/opdlisting/oopd/
listResult.cfm.

          The REMS for Thalomid, an earlier iteration of Celgene's 
        top-selling cancer drug Revlimid, has been patented over 14 
        times in order to delay the development of generics. The price 
        for Revlimid rose from $6,195 in 2006 to $16,691 in 2017.\14\ 
        The Medicare program spent an average of $88,437 per 
        beneficiary for a year of Revlimid treatment in 2017.\15\
---------------------------------------------------------------------------
    \14\ Alison Kodjak, ``How a Drugmaker Gamed the System to Keep 
Generic Competition Away,'' NPR, May 17, 2018.
    \15\ CMS 2017 Part D Drug Spending Dashboard, available here: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/Information-on-Prescription-Drugs/
MedicarePartD.html.

          The price of Evzio, a drug manufactured by Kaleo and 
        utilized for emergency treatment of known or suspected opioid 
        overdoses with a novel delivery mechanism, has risen by 
        approximately 600 percent since 2014.\16\
---------------------------------------------------------------------------
    \16\ Ken Alltucker, ``Drug Company Raised Price of Lifesaving 
Opioid Overdose Antidote More Than 600 Percent,'' USA Today, November 
19, 2018.

    These actions from brand drug manufacturers weaken the ability of 
plan sponsors to negotiate lower costs for prescription drugs. Plan 
sponsors have been most successful negotiating lower drug costs on 
behalf of beneficiaries when there is sufficient competition in the 
market. According to the Centers for Medicare and Medicaid Services 
---------------------------------------------------------------------------
(CMS) Office of the Actuary (OACT), the:

          Federal spending on retail prescription drugs is flat: For 
        the second consecutive year, retail prescription drug growth 
        has decreased; the 0.4 percent growth has been driven by a 
        continued shift to lower-cost generic drugs and declines in 
        generic drug prices.\17\
---------------------------------------------------------------------------
    \17\ ``CMS Office of the Actuary Releases 2017 National Health 
Expenditures,'' available online at https://www.cms.gov/newsroom/press-
releases/cms-office-actuary-releases-2017-national-health-expenditures.

          Cost of drugs with limited competition has increased at 
        double the rate: Conversely, there have been significant price 
        increases for drugs subject to limited or no competition. In 
        2016, the cost of single-source drugs with no generic 
        alternatives increased at more than double the rate of average 
        annual drug spending.\18\
---------------------------------------------------------------------------
    \18\ Ibid.

    The trend of increasing list prices for prescription drugs with 
limited competition is seen for prescription drugs administered in both 
clinical settings, which are typically covered by Medicare Part B and 
are generally considered specialty drugs, and dispensed at the pharmacy 
---------------------------------------------------------------------------
counter, which are typically covered by Medicare Part D.

          90 percent of the Medicare B drugs with the highest 
        expenditure have no generic: A 2017 study performed by the 
        Government Accountability Office (GAO) found that Medicare Part 
        B drugs with the highest expenditures are predominantly single-
        sourced (84 percent) without a generic option (90 percent).\19\ 
        This has resulted in a market where eight of the top ten Part B 
        top-expenditure drugs have an annual cost of $10,000 to 
        $30,000.\20\
---------------------------------------------------------------------------
    \19\ GAO, ``Medicare Represented at Least Half of the Market for 22 
of the 84 Most Expensive Drugs in 2015,'' GAO-18-83, published December 
18, 2017, available online at https://www.gao.gov/assets/690/
689082.pdf.
    \20\ MedPAC, ``Medicare and the Healthcare Delivery System,'' 
available online at http://www.medpac.gov/docs/default-source/reports/
jun17_reporttocongress_sec.pdf?sfvrsn=0.

          List prices increase beyond inflation for Part D drugs with 
        fewer than five manufacturers: An analysis of 2017 Part D 
        prescription drug spending found that prescription drugs with 
        less competition were more likely to have list price increases 
        than drugs with five or more manufacturers.\21\
---------------------------------------------------------------------------
    \21\ Based on Humana analysis of the CMS 2017 Part D Drug Spending 
Dashboard and Data, available online at https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD.html. The CMS dashboard includes 
all Part D organizations and plan types. Part D PDE records were 
summarized by drug by linking National Drug Codes (NDCs) available in 
the PDE data to a commercially available database and aggregated across 
all strengths, dosage forms, and routes of administration to the drug 
brand name and generic name. CMS did not provide NDCs in the public use 
file. Over-the-counter drugs in the PDE data are excluded as well as 
NDCs with fewer than 50 claims in the current (2017) or previous year 
(2016). In addition, NDCs with large variations in reported units from 
year to year were reviewed by CMS on a case-by-case basis and data 
anomalies were excluded. Drug spending metrics for Part D drugs are 
based on the gross drug cost, which includes ingredient cost, 
dispensing fees, sales tax, and applicable vaccine administration fees. 
Part D drug spending represents total spending for the prescription 
claim, including amounts paid by the Medicare Part D plan and 
beneficiary payments. The Part D spending metrics do not reflect any 
manufacturers' rebates. For purposes of this analysis, we removed Part 
D covered supplies, such as syringes and alcohol swipes for diabetics, 
and weighted average change in spending per dosage unit by 2017 claim 
volume. Average 2017 inflation rate is sourced from the Bureau of Labor 
Statistics website.

[GRAPHIC] [TIFF OMITTED] T0919.002

HHS OIG Proposed Rule Does Not Address Anti-Competitive Behavior
---------------------------------------------------------------------------
    \22\ Ibid.
---------------------------------------------------------------------------
    The recently proposed regulatory changes to the Anti-Kickback 
Statute's Safe Harbors from the Office of the Inspector General (OIG) 
at the Department of Health and Human Services (HHS) will not address 
any of the anti-competitive actions from drug manufacturers detailed 
above and, in some cases, will only increase the bargaining power of 
manufacturers. Drug manufacturers alone set the list price of 
prescription drugs; nothing in the proposed rule compels drug 
manufacturers to lower the list price of drugs.
Recommended Legislative Actions
    The examples of anti-competitive pricing detailed above and the 
importance of competition require innovative policy approaches to 
enhance competition in the market, especially for specialty drugs. 
Humana strongly supports the introduction of S. 340, the Creating and 
Restoring Equal Access to Equivalent Samples (CREATES) Act, as well as 
S. 64, the Preserve Access to Affordable Generics and Biosimilars Act, 
developed under Chairman Grassley's leadership. We believe the 
enactment of these bills will encourage the development of generic and 
biosimilar drugs that will infuse additional competition into the 
market, prevent brand drug manufacturer REMS abuses that block generic 
competition, and penalize brand drug manufacturers for engaging in pay-
for-delay agreements.
The Food and Drug Administration (FDA) Is Taking Proactive Steps Within 
        Its Regulatory Authority
    Humana applauds the FDA's efforts to bring additional competition 
and transparency to the prescription drug market. In particular, Humana 
supports the FDA's Drug Competition Action Plan and the goal of 
removing barriers to generic development and market entry to increase 
competition, improve access, and lower costs.

    Policymakers within Congress and the administration have been 
focused on addressing the rising prices of prescription drugs. In 
January, the HHS OIG proposed a rule that modifies the current Discount 
Safe Harbor under the Anti-Kickback Statute to exclude from discounts 
protected by the Safe Harbor rebates negotiated by PBMs, Part D plan 
sponsors, and Medicaid managed care plan sponsors.\23\ The OIG's 
proposed rule also establishes a new Safe Harbor allowing those rebates 
to be applied to reduce the price at the pharmacy counter.
---------------------------------------------------------------------------
    \23\ Available here: https://www.regulations.gov/document?D=HHSIG-
2019-0001-0001.

    Through the proposed rule, HHS ultimately seeks to reduce out-of-
pocket cost of prescription drugs for those currently covered by 
Medicare and Medicaid and ultimately to reduce the list price of 
prescription drugs. However, the rule fails to take into account the 
role of rebates in reducing the price of premiums for all beneficiaries 
and in reducing costs to the Federal Government. The proposed rule also 
fails to consider the complexity of operationalizing the new 
requirements by the proposed January 1, 2020, implementation date and 
the downstream behavioral impacts of beneficiaries, drug manufacturers, 
and plan sponsors.
Rebates Are Currently Used to Lower Premiums
    Currently, plan sponsors utilize rebates as a tool to ensure that 
beneficiaries are obtaining the greatest possible value from their 
Medicare coverage. Savings that are obtained by Humana through rebate 
negotiations with drug manufacturers are distributed to our entire 
beneficiary population through reduced premiums for Part D coverage, 
resulting in lower costs for seniors in PDP and MA plans.

    Additionally, rebates have resulted in significant savings to the 
government. As cited in the Medicare Trustees Report, rebates have 
played a critical role in keeping the overall cost of Part D lower than 
projected when the program was first launched in 2006.\24\
---------------------------------------------------------------------------
    \24\ 2018 Medicare Trustees Report: https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
ReportsTrustFunds/Downloads/TR2018.pdf.
---------------------------------------------------------------------------
The Proposed Rule Will Lead to Higher Premiums and Increase Costs to 
        the Government While Creating a Windfall for Drug Manufacturers
    If the proposed rule is finalized as written, all Part D 
beneficiaries will pay higher premiums. Rebates that have historically 
been utilized to lower premiums across the program will no longer be 
applied to the entire population and will instead be utilized to reduce 
out-of-pocket costs for a small number of seniors. The analysis 
performed by the CMS OACT indicates that shifting cost savings from 
rebates to a beneficiary's copay will increase the overall cost of the 
Part D program for the majority of beneficiaries, the government, and 
Part D plan sponsors.

    Humana's analysis found that approximately 17 percent of 
beneficiaries would see savings at the pharmacy counter, with only 12 
percent saving more than $70 annually.\25\ The remaining 83 percent of 
beneficiaries will see an increase in costs for prescription drug 
coverage due to premium increases that will exceed any potential 
savings the beneficiary may have experienced at the pharmacy.\26\
---------------------------------------------------------------------------
    \25\ Based upon internal analysis of estimated premium impacts for 
CY 2020 resulting from the proposed rule.
    \26\ Ibid.

    [GRAPHIC] [TIFF OMITTED] T0919.003
    

    The small number of beneficiaries who will benefit from the rule 
will do so at a significant cost to the government. The projections 
developed by the OACT estimate that government outlays for the Part D 
program would increase by approximately $200 billion while 
beneficiaries would save approximately $25 billion; this means that 
government spending will increase approximately $7 for every $1 of 
savings realized by beneficiaries.\28\
---------------------------------------------------------------------------
    \27\ Based on internal analysis of estimated premium impacts 
resulting from the proposed rule.
    \28\ Removal of Safe Harbor Protection for Rebates Involving 
Prescription Pharmaceuticals and Creation of New Safe Harbor Protection 
for Certain Point-of-Sale Reductions in Price on Prescription 
Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees (RIN 
0936-AA08)

    The rule also creates a significant windfall for drug manufacturers 
through reduced liability in the Coverage Gap Discount Program (CGDP). 
According to the analysis performed by OACT, drug manufacturers will 
realize savings of $44 billion over a 10-year period.\29\
---------------------------------------------------------------------------
    \29\ Ibid.
---------------------------------------------------------------------------
The Proposed Rule Will Lower Out-of-Pocket Costs for a Limited Number 
        of Seniors
    The proposed rule will have a limited impact on seniors at the 
pharmacy counter. An analysis based upon 2017 claims data for 
prescription drugs from CMS found that only 7.8 percent of total 
prescriptions filled were for drugs for which Humana has a rebate 
agreement in 2019.\30\ This is due to the high utilization of generic 
drugs, which are not eligible for rebates, and a large number of brand 
drugs where the manufacturer does not offer rebates.
---------------------------------------------------------------------------
    \30\ Based on Humana's analysis of CMS Part D Drug Spending 
Dashboard and Data, available online at https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD.html. Products in the dashboard 
were categorized as generic if the generic name listed matched the 
brand name. The remaining products were categorized as brand and then 
segmented based on whether Humana has a rebate contract for that 
product in 2019. Finally, ``Total Claims'' was summed across all 
products in each category.

    Put another way, fewer than one in ten prescriptions will have a 
lower out-of-
pocket cost as a result of the proposed rule while premiums for all 
beneficiaries will increase and costs to the government will rise 
significantly. Humana believes that there are alternative policy 
options that could modernize the Part D program and also reduce out-of-
pocket spending on prescription drugs. These options are discussed in 
detail at the end of this testimony.
List Prices for All Brand Drugs Will Need to Decrease by 28 Percent to 
        Keep Beneficiaries Whole
    One of the underlying assumptions in the proposed rule is that the 
changes will result in drug manufacturers lowering their lists prices. 
However, when asked by Chairman Grassley, ``Should the administration 
finalize this [OIG] rule, would you commit to lowering your drug 
prices?'', the CEOs of AstraZeneca, AbbVie, Bristol-Myers Squibb, 
Johnson & Johnson, Pfizer, Merck, and Sanofi all testified that they 
would only lower list prices if the same rules were applied in the 
commercial sector or they failed to answer the question. The proposed 
rule only applies to Federal health-care programs and does not extend 
to ERISA or the Public Health Service Act which governs much of the 
commercial market.

    This will result in increased drug prices that will cause some 
beneficiaries to pay more out of pocket. Based upon Humana's actuarial 
analysis, the only way to achieve the same costs for the Part D program 
and maintain beneficiary premiums comparable to the current system is 
if all brand drug manufacturers--including those who do not currently 
offer rebates--elect to decrease their list prices by at least 28 
percent. Alternatively, if brand drug manufacturers refuse to reduce 
their list prices for products not currently rebated, manufacturers of 
the remaining branded products would need to drop their list prices by 
at least 45 percent in order to avoid higher costs for CMS, taxpayers, 
and beneficiaries.
Drug Manufacturers Raise List Prices to Boost Their Revenue
    Drug manufacturers alone set the list price of prescription drugs. 
However, some in the pharmaceutical industry cite rebates and other 
price concessions as the driver of increasing list prices for all brand 
drugs. Currently, there are few brand drugs with a rebate agreement in 
comparison to the total number of drugs in the market. For the 2019 
benefit year, Humana will only receive rebates on 255 brand drugs, or 
seven percent of the potential drugs on its Medicare formulary.

[GRAPHIC] [TIFF OMITTED] T0919.004


    Additionally, there are many examples of increasing list prices for 
brand drugs where the manufacturer does not offer rebates. To highlight 
this, Humana analyzed the historical list prices of three brand drugs--
Revlimid, Imbruvica, and Isentress--which accounted for over $4 billion 
in taxpayer spending in Part D for 2017.\32\
---------------------------------------------------------------------------
    \31\ Based on Humana's rebate experience applied to an analysis of 
the ``total claims'' in the CMS 2017 Part D Drug Spending Dashboard and 
Data public use file, available online at https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD.html. Note, CMS excludes over-the-
counter drugs and National Drug Codes (NDCs) with fewer than 50 claims 
per year from the public file. Drug spending metrics for Part D drugs 
are based on the gross drug cost, which includes ingredient cost, 
dispensing fees, sales tax, and applicable vaccine administration fees, 
but does not reflect any manufacturers' rebates. For purposes of this 
analysis, we removed Part D covered supplies, such as syringes and 
alcohol swipes for diabetics.
    \32\ CMS 2017 Part D Drug Spending Dashboard and Data, available 
online at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/
MedicarePartD.html.

               Examples of Brand-Name Drugs With No Rebate
 
                                                        Overall Part D
    Product        Condition        Manufacturer       Spending in 2017
 
Revlimid        Cancer           Celgene                   $2.3 billion
Imbruvica       Cancer           AbbVie                    $1.4 billion
Isentress       HIV              Merck                   $320.9 million
 


    None of these drugs were subject to rebate agreements during the 
2013-2017 time period examined. However, each drug's list price 
increased annually by as much as 64 percent. This analysis, utilizing 
publicly available CMS data, directly refutes the suggestion that 
rebates are the driver of increasing drug list prices. Ultimately, this 
is further evidence that the proposed changes to the Anti-Kickback 
regulations will not result in HHS's desired outcome of lower list 
prices for prescription drugs and lower out-of-pocket costs for 
beneficiaries.

[GRAPHIC] [TIFF OMITTED] T0919.005


the hhs's oig proposed rule will inject new uncertainties into the part 
       d market that will put upward pressure on part d premiums
---------------------------------------------------------------------------
    \33\ Based on Humana's analysis of the CMS Part D Drug Spending 
Dashboard and Data, available online at https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD.html. Chart reflects the percent 
change in the unit price of each product in 2013-2017 compared to a 
base year. Base year is 2012 for Revlimid and Isentress. Base year is 
2013 for Imbruvica, which was launched in November 2013.
---------------------------------------------------------------------------
    Consistent with the administration's own analysis, Humana's 
actuaries project that Part D premiums will increase for all 
beneficiaries as a result of the HHS's OIG proposed rule, with out-of-
pocket costs reduced for a subset of beneficiaries that utilize rebated 
brand drugs. We project that those premium increases will lead to 
changes in beneficiary behavior that will have premium and beneficiary 
impacts not contemplated in the proposed rule. We have outlined several 
potential consequences of the OIG HHS proposed rule--none of which are 
contemplated in the regulation.

          POS rebates will lead to changes in prescription drug 
        manufacturer pricing and market access behaviors that will be 
        difficult for plan sponsors to project--POS transparency also 
        impacts prescription drug manufacturer pricing and market 
        access behaviors. Each brand drug manufacturer will naturally 
        seek to develop pricing strategies that maximize market share 
        without deflating their profit margins. Some manufacturers are 
        considering authorized generic drug pricing strategies, while 
        others are examining an average net of rebate pricing strategy 
        with minimal or no price segmentation between Part D plan 
        sponsors. We expect many other variations on these pricing 
        strategies moving forward. The challenge plan sponsors face 
        when preparing 2020 Part D bids is that these constantly 
        evolving market/pricing dynamics further increase the 
        difficulty of projecting Part D plan costs if POS rebates are 
        implemented in 2020. This enhanced unpredictability will either 
        lead to greater pricing misestimates in Part D bids or 
        conservatism in pricing (and thus higher premiums).

          Some beneficiaries with high drug costs will likely make 
        plan choices based primarily on POS drug costs, which may 
        result in migration to those specific plans, thus increasing 
        the likelihood of adverse risk selection--We anticipate that 
        beneficiaries shopping for Part D coverage in 2020 and beyond 
        will be choosing a plan based on different criteria than in 
        previous years. With greater transparency of drug prices 
        inclusive of manufacturer rebates, we anticipate that more 
        consumers will be selecting plans based on POS costs versus the 
        traditional focus on premiums, formulary, and pharmacy network. 
        While there are numerous long-term advantages to this change in 
        beneficiary shopping behavior, in the near term, this shift 
        will lead to increased membership movement between plans. 
        Increased beneficiary movement will place further upward 
        pressure on premiums because, historically, newly enrolled 
        beneficiaries are less likely to enroll and engage in clinical 
        programs. In addition, as beneficiaries increasingly select 
        plans based on POS costs, it will place plan sponsors at an 
        increased risk of adverse selection. The current Part D risk 
        adjustment model is not built to sufficiently mitigate this 
        risk, because it assumes that high cost beneficiaries will be 
        evenly spread across all Part D plan sponsors.
          proposals to mitigate beneficiary disruption in 2020
    Plan sponsors are in the process of preparing Part D bids to CMS 
for the 2020 benefit year and will be submitted to CMS by June 3rd. If 
the administration elects to move forward with the proposed changes to 
the Anti-Kickback Safe Harbor regulations, it is absolutely critical 
that CMS take immediate steps to mitigate inevitable premium increases 
and beneficiary disruption. The proposed rule will make it exceedingly 
difficult for plan sponsors offering Part D coverage to project costs 
and set accurate beneficiary premiums.\34\
---------------------------------------------------------------------------
    \34\ For a more detailed discussion of the actuarial challenges 
posed by the HHS OIG proposed rule, please consult public comments 
submitted by the American Academy of Actuaries, available online at 
https://www.actuary.org/sites/default/files/2019-04/
Rx_Rebate_Timeline_0403
2019.pdf.

    Mandatory point-of-sale rebates would be the most significant 
regulatory change to the Part D program since its inception. This 
actuarial uncertainty, coupled with the lack of guidance to date from 
the CMS OACT, will lead to more conservative (i.e., higher) rate 
---------------------------------------------------------------------------
setting, potentially resulting in significant beneficiary disruption.

    The following steps would be necessary to help preserve stability 
and predictability in the Part D market in 2020. We would respectfully 
suggest members of the committee and other members of Congress to 
encourage CMS to take the following actions:

          Implement interim adjustments to the Part D risk adjustment 
        model immediately--The current Part D risk adjustment model 
        cannot sufficiently mitigate the actuarial uncertainties posed 
        by the Anti-Kickback Safe Harbor proposed regulation. 
        Historically, it has taken CMS multiple years to recalibrate 
        the Part D risk adjustment model to reflect changes in Part D 
        utilization and spending. We strongly urge CMS to work with 
        plan sponsor actuaries immediately on methods for potentially 
        making interim adjustments and to implement a model 
        recalibration as soon as possible to reflect a mandatory point-
        of-sale rebate market.

          Require all Part D plan sponsors to offer a plan designed 
        specifically for LIS auto-enrollees as part of a new, fourth 
        plan option--Part D LIS-eligible beneficiaries will prove to be 
        the most challenging population for plan sponsors to predict 
        pricing and drug utilization for 2020, primarily because LIS 
        beneficiaries are more likely than the general Part D 
        population to utilize rebated brand-name drugs.\35\ Our 
        recommendation would encourage population-based formulary 
        design; enhance the value of manufacturer price concessions for 
        CMS; establish parity across the market; and preserve 
        competition and beneficiary choice. We note that there is 
        precedent for this approach; MA dual-eligible special needs 
        plans (D-SNP) are specifically structured for the dual-eligible 
        population both in cost-sharing and formulary design. In order 
        to accommodate the new LIS-only plan, CMS would need to allow 
        plan sponsors to offer a fourth plan, because they are 
        currently limited by CMS sub-
        regulatory guidance to no more than three plans in any market.
---------------------------------------------------------------------------
    \35\ ``MedPAC Report to Congress: Medicare Payment Policy, March 
2017,'' available at http://www.medpac.gov/docs/default-source/reports/
mar17_medpac_ch14.pdf.

          Narrow Part D risk corridors for 2020--In order to manage 
        the transition to the new Part D rebate model contemplated by 
        the HHS OIG proposed rule and mitigate premium increases, we 
        recommend that CMS narrow the Part D risk sharing corridors for 
        2020 consistent with risk corridors applicable during the first 
        2 years of the Part D program (2006-2007).\36\
---------------------------------------------------------------------------
    \36\ CMS used its demonstration authority to smooth the premium 
impacts to protect beneficiaries from negative aspects at the start of 
the Part D benefit. It announced the Medicare Demonstration to 
Transition Enrollment of Low Income Subsidy Beneficiaries on June 8, 
2006 as well as implementing a 1-year payment demonstration, the 
``Medicare Demonstration to Limit Annual Changes in Part D Premiums Due 
to Beneficiary Choice of Low-Cost Plans.'' Those are potential examples 
of the agency's ability to minimize disruption.

          Increase the 2020 de minimis premium policy for LIS-eligible 
        beneficiaries--In order to avoid disruption, movement between 
        plans, and confusion for LIS beneficiaries, we recommend that 
        CMS permit plan sponsors to voluntarily waive the portion of 
        the monthly adjusted basic beneficiary premium that is up to a 
        de minimis amount of $10 during the 2020 transition to the new 
        Part D rebate model.\37\
---------------------------------------------------------------------------
    \37\ Ibid.

          Allow plan sponsors to facilitate chargebacks and pharmacy 
        reimbursement--A 2020 implementation date does not provide 
        sufficient time for stakeholders to develop, test, and deploy 
        the new system for processing chargebacks and pharmacy 
        reimbursement contemplated in the HHS OIG proposed rule. Rather 
        than trying to reinvent the wheel in a matter of months, CMS 
        should continue allowing plan sponsors to process and 
        facilitate chargebacks in order to ensure that pharmacies 
---------------------------------------------------------------------------
        receive timely and accurate payment for their services.

          Temporarily exclude Part D from the Total Beneficiary Cost 
        (TBC) calculation for MA-PD plans beginning in 2020--Because 
        drug formularies may change significantly as a result of the 
        proposed rule, there may be large changes in the Part D 
        component of the TBC calculation. We request that Part D be 
        excluded from the TBC calculation until the impact of formulary 
        changes can be adequately evaluated and quantified.

          Issue guidance on 2020 bid assumptions as soon as possible--
        We strongly encourage CMS to provide guidance on 2020 bid 
        assumptions to ensure consistency in approach among plan 
        sponsors. In particular, because direct subsidy and low-income 
        premium subsidy amounts are a function of plan sponsor bids, 
        there needs to be consistency in bidding approaches to avoid 
        wide swings in plan bids and beneficiary premiums.

          Preserve the ability for plan sponsors to implement value-
        based purchasing programs for pharmacies--Given the 
        extraordinary disruption that could occur in the Part D market 
        in 2020, we recommend that CMS not finalize its proposal. It 
        would add yet another layer of complexity by eliminating 
        pharmacy direct and indirect remuneration (DIR), such as value-
        based purchasing programs. As CMS's own analysis indicates, 
        prohibiting pharmacy DIR will further increase Part D 
        premiums--amplifying the upward premium trend attributable to 
        POS rebates. In addition, CMS has failed to consider several 
        key unintended consequences of eliminating pharmacy DIR. For 
        example, we anticipate that plan sponsors would respond by 
        lowering pharmacy reimbursement rates and reducing the size of 
        their existing pharmacy networks. All of which would likely 
        result in significant changes in Plan Sponsors' pharmacy 
        networks occurring at the same time as widespread premium 
        increases and formulary changes.

          Delay the Health Insurance Tax--In addition to the projected 
        impact of the rebate rule and value-based pharmacy networks 
        rule (DIR), we are also preparing for the potential return of 
        the Health Insurance Tax in 2020. Under both President Obama 
        and President Trump, bipartisan legislation passed delaying the 
        tax, including in the current calendar year (2019). Without 
        congressional action, the tax is scheduled to return in 2020, 
        resulting in tens of millions of seniors with Part D coverage 
        paying higher premiums. We strongly urge congressional action 
        in support of S. 172, the Health Insurance Tax Relief Act of 
        2019.

 modernizing the part d program to better serve medicare beneficiaries
    Given the profound changes that have occurred in the pharmaceutical 
marketplace since the implementation of Part D, we encourage the 
committee to examine potential reforms to the Part D program that would 
both alleviate the burdens seniors face when paying for high cost drugs 
and leverage market-based reforms to drive down prescription drug 
prices.

          Maximum Out-of-Pocket (MOOP) Cost Protection--In order to 
        better protect non-LIS beneficiaries from high prescription 
        drug costs, we recommend that the committee consider 
        establishing an annual maximum out-of-pocket cap for Part D 
        drugs. It is critical that any proposal to cap out-of-pocket 
        costs in Part D be paired with prescription drug pricing 
        reforms that meaningfully reduce prescription drug costs by 
        improving competition in the pharmaceutical market. Stated 
        another way, the costs of implementing a Part D MOOP should be 
        borne by the pharmaceutical industry.

          High Cost Specialty Drugs--As discussed previously, 2 
        percent of our beneficiaries who utilized specialty drugs 
        comprised 36 percent of total Part D spending in 2018. In 2 
        years, Humana projects that seniors utilizing specialty drugs 
        could account for as much as 50 percent of total Part D 
        spending. We welcome the opportunity to explore potential 
        solutions for alternative pooling or funding mechanisms for 
        this growing category of products.
             proposals to increase drug market competition
    Humana strongly urges the committee to encourage CMS and other 
Federal agencies to remove barriers to prescription drug competition 
and regulations that are abused in anticompetitive ways and are harmful 
to affordable drug access for beneficiaries. We specifically have 
recommended to the administration to take the following actions that 
would address abuses of regulations and anticompetitive behaviors:

          Finalize CMS's proposed drug pricing rules aimed at 
        increasing competition--Humana urges CMS to finalize the 
        proposed rules on plan sponsor flexibility for protected 
        classes and the Part B step therapy program in ``Modernizing 
        Part D and Medicare Advantage to Lower Drug Prices and Reduce 
        Out-of-Pocket Expenses Proposed Rule'' [CMS-4180-P]. Humana has 
        long supported these policy changes and has identified 
        opportunities to create competition in the market and lower 
        drug costs for beneficiaries. Internal analysis estimates that 
        the lack of competition due to the protected class policy 
        collectively increased beneficiary premiums by an estimated 
        $2.79 per-beneficiary per-month (PBPM, $34 per-beneficiary-per-
        year) in 2018. Additionally, 50 percent of Humana's Part B drug 
        spending is attributable to drug classes with multiple 
        clinically equivalent substances where additional competition 
        can be stimulated through utilization management. Additional 
        flexibility with respect to formulary development will enable 
        sponsors to effectively drive competition in the market and 
        lower drug costs for their beneficiaries.

          Eliminate the requirement that Part D plan sponsors cover at 
        least two drugs in each therapeutic category or class--CMS 
        currently requires Part D plan sponsor formularies to cover at 
        least two drugs in every Part D covered therapeutic category 
        and class as long as there are at least two drugs available. 
        When two drugs are mandated to be covered in a class, 
        manufacturers of a drug with only one other competitor 
        typically refuse to negotiate rebates or discounts in Medicare 
        Part D because they know their products must be covered. The 
        existing policy increases costs to the plan sponsor, which are 
        passed through not only to individuals in the form of higher 
        premiums, but also to the Federal Government in terms of 
        increased direct subsidy payments.

          Leverage CMS data to illustrate the cost impacts of 
        anticompetitive behaviors such as patent ``evergreening''--CMS 
        is best-positioned to leverage its claims from Parts A, B, and 
        D to empirically illustrate the Medicare Trust Fund and 
        beneficiary impacts associated with these and other 
        anticompetitive behaviors.

          Issue information regarding manufacturers' drug pipelines 
        and anticipated drug prices prior to market launch--It is 
        critical for Part D and Medicare Advantage (MA) plan sponsors 
        and the CMS OACT to be aware of anticipated new drugs, new drug 
        indications, and their potential launch prices. These data are 
        necessary to make critical decisions about MA and Part D 
        bidding parameters, making special updates to the MA and Part D 
        risk adjustments models, and for OACT to perform its long-term 
        program cost estimation duties for the Medicare Trustees. With 
        the right information, this decision-
        making will have a significant impact on our ability to provide 
        lower drug costs and premiums for beneficiaries. While we 
        understand there are proprietary data provisions and there is 
        general uncertainty about approvals of new therapies, we 
        believe that, between clinicaltrials.gov and PubMed, there is a 
        notable opportunity to produce a transparent summary dashboard 
        of the drug pipeline in one place. We ask that HHS ensure that 
        the FDA works toward this goal and provide CMS and plan 
        sponsors with this necessary information.

          Address anticompetitive actions by drug manufacturers--
        Humana strongly supports the administration's continued work to 
        address and prevent anticompetitive actions by drug 
        manufacturers. Again, congressional action through passage of 
        the CREATES Act and S. 64 will limit these actions, bringing 
        more competition to the market and placing downward pressure on 
        beneficiary drug costs.
                               conclusion
    We appreciate the committee's keen interest in working to better 
understand the root causes of high drug costs. We look forward to 
working with you on policy solutions to ensure access to affordable 
prescription drugs and to foster stability in the 2020 benefit year.

                                 ______
                                 
   Questions Submitted for the Record to William K. Fleming, Pharm.D.
               Questions Submitted by Hon. Chuck Grassley
      collection, use, and sharing of personal health information
    Question. Consumers are becoming more and more concerned about the 
data collection and sharing practices of companies. While these issues 
have been most prevalent in the social media and tech industry, 
companies in the pharmaceutical supply chain also have access to 
tremendous amounts of sensitive, personal health information of the 
individuals they serve. For example, the company Livongo partners with 
CVS Caremark to provide low-cost or no-cost blood sugar meters to 
diabetic patients. The meters are always ``connected'' to Livongo's 
``Diabetes Response Specialists.'' As the company's website states, 
``When readings are out of range, our Diabetes Response Specialists 
call or text [the individual] within minutes.'' While these innovations 
may be highly beneficial for individuals in managing their health, it's 
also important for this committee to fully understand what types of 
information is collected, how or why it's stored or shared, and for 
what purposes PBMs themselves and other affiliated drug supply chain 
participants (such as insurers) use the information.

    Health information is extremely sensitive. It's the most personal 
of all the information we share. So I want to know more about each of 
your companies' data collection, sharing, and protection practices.

    Does your company collect and store health information from the 
end-users of the prescriptions you provide? For example, information or 
records of a diabetic individual's blood sugar levels.

    Answer. Yes. Humana's wholly owned pharmacy benefit manager 
collects protected health information (PHI), as defined in 45 CFR 
Sec. 160.103, as necessary to determine if a submitted claim meets the 
applicable coverage criteria established by CMS and/or Humana's 
Pharmacy and Therapeutics Committee.

    Question. Does your company make any treatment, cost, or coverage 
decisions based on the health information you collect from an 
individual?

    Answer. In order to ensure compliance with Medicare coverage 
requirements for certain items and procedures, MAPD and Part D plans 
must collect health information from the patient and his or her doctor 
to confirm that the patient meets the applicable coverage criteria 
established by CMS and Medicare Administrative Contractors (MACs).

    Question. Does your company share health information with third 
parties? And, if so, does your company profit from that sharing?

    Answer. Humana shares data with third parties for health care 
operations, treatment, payment, and other activities as permitted under 
HIPAA.

    Question. Do you believe customers are fully aware of your 
information collection and sharing practices?

    Answer. Yes.
  impact of vertical integration between pbms and insurance companies
    Question. To highlight whether/how vertical integration of PBMs and 
insurance companies benefits the consumer and taxpayer.

    The PBM industry has experienced significant consolidation within 
the past 10 years, which has contributed to concerns about the 
potential abuse of market power, barriers to market entry, and 
exclusionary practices. In 2012, for example, Express Scripts acquired 
Medco Health Solutions--a nearly $30-billion transaction that merged 
two of the country's three largest PBMs.\1\ More recently, PBMs are 
also vertically integrating with insurers/payers, reflected by the 2018 
acquisitions of Express Scripts Holding Co. (a PBM) by Cigna Corp. (a 
payer) and of Aetna Inc. (a payer) by CVS Health Corp. As a result, the 
three largest PBMs are all vertically integrated with insurance 
companies. According to a report from the Kaiser Family Foundation, the 
two combined entities, along with UnitedHealth and Humana, will cover 
71 percent of all Medicare Part D enrollees and 86 percent of stand-
alone drug plan enrollees.\2\ Vertical integration can result in 
increased efficiencies and consumer benefits. I can also, however, lead 
to higher barriers to entry for competition, leading to further 
consolidation. FDA Commissioner Scott Gottlieb recently warned that 
``consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious. And the very 
complexity and opacity of these schemes help to conceal their corrosion 
on our system--and their impact on patients.''\3\
---------------------------------------------------------------------------
    \1\ See ``FTC Closes Eight-Month Investigation of Express Scripts, 
Inc.'s Proposed Acquisition of Pharmacy Benefits Manager Medco Health 
Solutions, Inc.,'' Federal Trade Commission (April 2, 2012), available 
at https://www.ftc.gov/news-events/press-releases/2012/04/ftc-closes-
eight-month-investigation-express-scripts-incs.
    \2\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.
    \3\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients,'' (March 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.htm.

    I'd like to talk about consolidation, including the recent 
integration of PBMs with insurance companies. Last year, I wrote to the 
Justice Department on this issue. It's reported that the three largest 
PBMs--who are before us today--now cover 71 percent of Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees.\4\ Such 
market power has raised concerns. FDA Commissioner Scott Gottlieb said, 
``the consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious.''\5\
---------------------------------------------------------------------------
    \4\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.
    \5\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients'' (March 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.
htm.

    I want to hear briefly from each of you on whether the PBM industry 
is competitive. For example, are there high barriers to entry for new 
---------------------------------------------------------------------------
competitors?

    Answer. Competition between firms offering pharmacy care services 
is intense and robust. Such competition helps to spur innovation of new 
products and technology offerings to preserve the value proposition of 
Humana's integrated pharmacy care services model. Humana's approach to 
integrated pharmacy and medical care services allows Humana to deliver 
a personalized and simplified experience for seniors through a value-
based health ecosystem that improves clinical outcomes.

    Question. I'm also interested in what effect the most recent 
consolidations of PBMs and insurers has had on the bottom line for the 
government and consumer.

    Do these arrangements result in a lower cost to the government--as 
a payer--and the consumer? Please explain.

    Answer. Humana's pharmacy care services are fully integrated with 
our medical service offerings and focused on serving Humana members. 
This integrated approach to serving seniors delivers a personalized and 
simplified experience through a value-based health ecosystem that 
improves clinical outcomes. This ecosystem includes 233 owned, jointly 
owned, or allied primary care facilities; an ownership interest in the 
Nation's largest home health and hospice providers; as well as 
initiatives to address social determinants of health. As a result, the 
savings to the government and consumers achieved through our pharmacy 
programs accrue directly to our members through lower premiums and 
improved benefits.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
                           manufacturer money
    Question. What is the total dollar amount that you obtain from 
pharmaceutical manufacturers in any form such as rebates, fees, etc.?

    Answer. Rebates received by Humana for Part D drugs are reported to 
CMS annually through Direct and Indirect Remuneration (DIR) and 
reflected in Part D bid submissions. Humana Part D plans reinvest the 
savings accrued from these rebates in benefit offerings. Humana's 
wholly owned pharmacy benefit manager does not receive fees from 
pharmaceutical manufacturers.

    Question. What is the total dollar amount that you remit to health 
plans?

    Answer. Rebates received by Humana for Part D drugs are passed 
through to the Part D plans. Humana's wholly owned pharmacy benefit 
manager does not receive fees from pharmaceutical manufacturers.
                              biosimilars
    Question. Managed Care Organizations are on record as widely 
supportive of the potential of biosimilars. However, most MCOs have 
continued to support originator brand products and have not preferred 
and often excluded less expensive biosimilars. For example, most MCOs 
have kept Remicade (a treatment for rheumatoid arthritis and other 
diseases) as the preferred agent on their formularies, and in most 
cases to the exclusion of its biosimilar, Infliximab.

    Why do you tout support for biosimilars while, at the same time, 
inhibiting adoption of these less expensive products?

    Answer. We recognize the importance of biosimilars as low-cost 
alternatives to originator brand products. We have elected to place 
biosimilars at parity status compared to the originator brand products. 
Unfortunately, today there are few biosimilar products on the market 
and the prices of those products are similar to the originator brand 
products. Our hope is that the market will continue to grow, resulting 
in lower prices through increased competition. As the market matures 
and prices begin to drop it is our intent to begin moving biosimilars 
to lower formulary tiers and to prefer those agents over the originator 
brand products.

    Question. HHS may broaden the scope of its proposed rule and 
eliminate rebates between Medicare Advantage plans and manufacturers 
for Part B drugs.

    Would this realign incentives to encourage preferred access for 
lower-cost drugs, such as biosimilars?

    Answer. As mentioned previously, Humana recognizes the importance 
of biosimilars as low-cost alternatives to originator brand products 
and currently places these products at parity with originator brand 
products on the formulary. As with generic products, biosimilars 
frequently launch at prices similar to the originator brand products 
until there is competition in the market. We support biosimilars that 
launch at a substantial discount to the originator brand product and 
specifically prefer the biosimilar Retacrit over the originator brand 
product Procrit. As such, we encourage the FDA to continue to provide 
clear guidance, such as the recently released Interchangeability 
guidelines, that will spur additional biosmiliars to market and 
increase competition.

    Question. What changes can we recommend/make to help you prefer 
lower-cost drugs, such as biosimilars, without rebates?

    Answer. Humana strongly supports the introduction of S. 340, the 
Creating and Restoring Equal Access to Equivalent Samples (CREATES) 
Act. We believe the enactment of this bill will encourage the 
development of generic and biosimilar drugs that will infuse additional 
competition into the market, prevent brand drug manufacturer REMS 
abuses that block generic competition, and penalize brand drug 
manufacturers for engaging in pay-for-delay agreements.

    Question. Why is there such a disparity in reimbursed pharmacy 
prices for specialty generic drugs in Part D? (e.g., Imatinib) Does 
ownership of specialty pharmacy influence your reimbursement decision?

    Answer. Network contracted pharmacies, including Humana owned 
pharmacies, are predominantly reimbursed based off the same specialty 
generic drug fee schedule as other pharmacies.

    Question. I'm concerned with the recent trend of PBMs allowing 
brand companies to ``pay for position'' on insurance formularies, which 
results in seniors losing access to lower-cost generics and 
biosimilars.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs?

    Answer. We support continued flexibility to determine the cost-
sharing structure that is most appropriate for our benefit design, 
including the ability to mix brand and generic drugs within the non-
preferred drug tier (second highest tier on the Humana Part D 
formulary) or exclude drugs from the formulary. The cost of a brand-
name drug is not guaranteed to be lower than a generic. For example, 
the oral bisphosphonate class of drugs utilized in the treatment of 
osteoporosis in post-menopausal women illustrates this phenomenon. 
Alendronate (the generic version of Fosamax) is placed on the lowest 
tiers (tier 1 or 2), ibandronate (the generic version of Boniva) 
tablets are placed on tier 2, and risedronate (the generic version of 
Actonel) is placed on the non-preferred drug tier. This formulary 
placement allows plans to create behavioral changes that drive members 
to the more cost-
effective medication choice. Generally, an increased number of generic 
competitors correlates strongly with lower formulary tier placement of 
a generic and the Food and Drug Administration (FDA) has proven that 
generic drug prices are reduced with each additional market entry of a 
generic competitor.
                 delays and denials in cancer treatment
    Question. I have received stories of cancer patients facing delays 
or denials for their treatment due to PBM actions. Data shows that 
breast cancer patients who experienced a 3-month or more delay in 
treatment had a 12 percent lower 5-year survival rate compared with 
breast cancer patients with only a 0- to 3-month delay.

    What percent of patients experience a 14-day or longer delay in 
receiving an oral oncolytic prescribed by their oncologist?

    Answer. Once approved, 84 percent of patients receive their oral 
oncolytic within 14 days of the initial authorization request submitted 
by their prescriber. Sixteen percent of patients fill their oral 
oncolytic more than 14 days after the initial authorization request is 
submitted and approved. Authorization requests for oral oncolytics are 
reviewed within 72 hours upon receipt for non-expedited requests and 
within 24 hours for expedited requests or as quickly as the 
beneficiary's condition requires in accordance with CMS requirements. 
Most prescribers will submit the request for approval prior to sending 
the prescription to the pharmacy for filling.

    Question. What are the primary reasons patients experience delays 
or denials for their treatments?

    Answer. Delays for approval are primarily driven by incomplete 
information provided by the prescriber or his or her office staff. 
Approximately 30 percent of total requests received are incomplete and 
require Humana to reach back out to the prescriber for this additional 
information in order to adequately review the request. Humana provides 
the specific information needed during the outreach in order to help 
provide transparency to the prescribers and facilitate receipt of the 
information needed to complete the review.

    Denials for authorization are due primarily to the request not 
meeting the clinical criteria outlined in the coverage policy for that 
oral oncolytic or to the requested use not being supported by one of 
the following: the FDA-approved labeling, the current treatment 
guidelines or compendia (e.g., NCCN), or there is not adequate 
available data in the current literature or peer reviewed medical 
journals.

    Question. What percent of determinations to delay or deny treatment 
for cancer patients are made by an oncologist or healthcare 
professional with oncology training?

    Answer. The clinical criteria for approval that is outlined in the 
coverage policies which governs authorization requests for oncology 
therapies are developed by health-care professionals (both pharmacists 
and physicians) with oncology training and are then reviewed and 
approved by Humana's Pharmacy and Therapeutics (P&T) Committee which 
also includes healthcare professionals (both pharmacists and 
physicians) with oncology training. In addition to P&T Committee 
approved coverage policies, requests for authorization are reviewed 
based on the national treatment guidelines and compendia (e.g., NCCN) 
to see if the use is supported by the recommendations and these 
guidelines are developed and reviewed by health-care professionals with 
oncology training.

    Question. Why is a PBM-owned specialty pharmacy better qualified to 
manage a cancer patient's adherence and side effects than a community 
cancer clinic with a medically integrated pharmacy?

    Answer. A plan-owned specialty pharmacy has access to a patient's 
entire medication profile and can more completely check for drug 
interactions and risk for adverse drug events, as well as assess 
historical adherence in order to identify opportunities to optimize a 
patient's treatment. In addition, these pharmacies tend to have access 
to other relevant and rich data elements, such as medical history, and 
to a vast set of care team resources such as behavioral health 
clinicians and experts in social determinants of health. These 
capabilities allow the patient to be treated holistically, with the 
intent being to reduce costs and improve clinical outcomes while 
delivering a more integrated experience for the patient.
              direct and indirect remuneration (dir fees)
    Question. Many community-based cancer clinics have established 
medically integrated pharmacies so patients can access their oral 
chemotherapy prescriptions or other medications at the point-of- care. 
These practices are often assessed large DIR which are based on certain 
quality measures targeted toward primary care.

    Shouldn't pharmacies be evaluated on the type of drug dispensed and 
disease managed rather than a one-size fits all approach?

    Answer. Humana's approach to performance-based contracting with 
network pharmacies closely aligns with our value-based payment 
initiatives for providers, hospitals, and other healthcare providers 
and aims to improve defined quality metrics such as medication 
adherence in targeted disease states. In all of our performance-based 
reimbursement programs, we seek to incent our partners to improve the 
quality of care delivered to our members by more closely aligning 
reimbursement with beneficiary outcomes and moving away from the 
traditional FFS reimbursement model. Humana's performance-based 
pharmacy network is also modeled, in part, on CMS's Star Ratings 
program. Humana received recommendations regarding the design of the 
performance-based network from standard-setting organizations that 
developed metrics for the Star Ratings program to ensure that high-
performing pharmacies were rewarded similarly to those plan sponsors in 
the Star Ratings program.

    Question. Does assessing large DIR fees on medically integrated 
pharmacies drive patients to PBM-owned specialty pharmacies?

    Answer. Humana's approach to performance-based contracting with 
network pharmacies, including our own specialty network pharmacy, 
closely aligns with our value-based payment initiatives for providers, 
hospitals, and other healthcare providers and aims to improve defined 
quality metrics, such as medication adherence in targeted disease 
states.

    Question. Why are pharmacies forced to pay DIR and other fees to 
PBMs?

    Answer. As stated previously, the concept of paying for value and 
quality, which is at the core of the performance-based pharmacy 
network, can be seen in numerous value-based payment models including 
those implemented or proposed by CMS in which the financial incentives 
are paid after the performance is observed.

    Question. According to CMS, PBMs justify DIR fees as adjustments to 
improve quality. CMS also found that PBMs and PDPs withhold 
substantially more in reductions in payments than as rewards paid to 
pharmacies. Aren't so-called ``quality adjustments'' that collect more 
for ``poor performance'' than they pay out for ``high performance'' 
just another way for PBMs to collect even more money from pharmacies?

    Why do PBMs collect more in quality payment adjustment than they 
pay pharmacies under Part D?

    Answer. Humana's approach to performance-based contracting with 
network pharmacies closely aligns with our value-based payment 
initiatives for providers, hospitals, and other healthcare providers. 
In all of our value-based reimbursement programs, we seek to incent our 
partners to improve the quality of care delivered to our members by 
more closely aligning reimbursement with clinical interventions that 
improve outcomes and moving away from the traditional FFS reimbursement 
model. The concept of paying for value and quality, which is at the 
core of the performance-based pharmacy network, can be seen in numerous 
value-based payment models including those implemented or proposed by 
CMS in which the financial incentives are paid after the performance is 
observed.
                  formulary placement/generic tiering
    Question. In 2011, 71 percent of generic drugs in Part D were on 
the lowest tier designed for generics; by 2019, that number decreased 
to only 14 percent of generics. According to an Avalere study, this 
practice cost seniors $22 billion in higher out-of-pocket costs since 
2015, costs that could have been avoided through the proper formulary 
placement of lower-cost generics. This practice, known as ``paying for 
position,'' allows brands to block uptake of lower-cost generics and 
biosimilars, thereby unnecessarily increasing out-of-pocket costs for 
seniors.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs? Do you ever consider portfolio or bundled rebates with brand 
manufacturers?

    Answer. The use of portfolio or bundled negotiations with drug 
manufacturers does not align with Humana's Pharmacy and Therapeutics 
Committee's policy and procedures or the formulary development process. 
Our coverage decisions are based on treatment guidelines and the 
evidence base. We prioritize low-cost generic drugs, and if multiple 
brand name drugs are available to treat the same clinical condition, we 
negotiate with competing manufacturers to provide access to drug 
coverage that produces the most value to the member, which includes the 
lowest out-of-pocket cost over the course of the year and the health 
outcomes produced.

    Question. When you place generics on your formularies, do you place 
that generic favorably to brand products--in other words, on generic-
only tiers?

    Answer. The primary drivers of formulary placement are the evidence 
base, clinical efficacy, and status as a biosimilar. After these 
factors are considered, the P&T Committee considers the affordability 
of the drug. A drug's status as a generic or a brand does not always 
correlate with the affordability of the drug.

    Question. When a generic becomes available, do you place it on your 
formularies immediately?

    Answer. Each new-to-market medication, including generics, is 
reviewed based on the available clinical data for the product, which 
includes FDA labeling, compendia listing, peer-reviewed literature, 
real-world evidence, comparative effectiveness data, and nationally 
recognized treatment guidelines. Evaluation begins with safety and 
efficacy and the incremental health outcome value in the context of 
existing treatment options, including brand and generic medications. 
Generic medications are safe and efficacious, cost-effective 
alternatives, and the generic utilization rate among Humana's Medicare 
population is greater than 90 percent among products with currently 
available FDA AB-rated generic alternatives. This 90 percent generic 
dispensing rate is driven by Humana not covering higher cost brand 
medications in classes where a generic equivalent medication is on the 
market.

    It should also be noted that the presence of a single generic does 
not always result in an immediate decrease in the price of the generic 
or brand drug. Humana's analysis of 2017 Part D prescription drug 
spending found that prescription drugs with less competition were more 
likely to have list price increases than drugs with five or more 
manufacturers.

    Question. According to CMS, from 2012 to 2017 PBMs imposed a 45,000 
percent increase in the amount of DIR fees pharmacies had to pay PBMs 
and PDPs under Part D, and revenues earned from these fees increased 
225 percent per year during this period.\6\ I thought PDPs and PBMs 
were supposed to pay pharmacies for dispensing drugs to patients. Why 
do pharmacies have to pay DIR fees to PBMs at all?
---------------------------------------------------------------------------
    \6\ CMS Proposed Rule: Modernizing Part D and Medicare Advantage to 
Lower Drug Prices and Reduce Out-of- Pocket Expenses, 83 Fed. Reg. 
62152, 62174 (November 30, 2018).

    Answer. Humana's approach to performance-based contracting with 
network pharmacies closely aligns with our value-based payment 
initiatives for providers, hospitals, and other healthcare providers. 
In all of our value-based reimbursement programs, we seek to incent our 
partners to improve the quality of care delivered to our members by 
more closely aligning reimbursement with clinical interventions that 
improve outcomes and moving away from the traditional FFS reimbursement 
model. The concept of paying for value and quality, which is at the 
core of the 
performance-based pharmacy network, can be seen in numerous value-based 
payment models including those implemented or proposed by CMS in which 
---------------------------------------------------------------------------
the financial incentives are paid after the performance is observed.

                                 ______
                                 
                 Question Submitted by Hon. John Thune
    Question. You've all shared your ability to leverage technology 
such as real-time benefit tools to help patients and providers 
understand drug costs at the point of prescribing, as well as how 
technology can be used to help identify opportunities to provide 
enhanced support and medication management for enrollees. What policies 
can we consider to incentivize greater uptake of these tools?

    Answer. Humana applauds CMS's final rule published on May 23, 2019, 
which will require all Part D plan sponsors to have a real-time benefit 
tool by 2021. We believe that there are several current barriers that 
lessen the effectiveness of these tools. Most importantly, there are 
currently no regulations requiring EHR vendors to implement open APIs 
that specifically facilitate the integration of real-time benefit 
tools. As a result, some EHR vendors have implemented exorbitant 
``connection fees'' in order to enable this integration, while others 
have refused to partner with plans. On the provider side, there are 
often insufficient incentives in place to spur provider adoption. In 
launching our Real Time Benefit Tool (RTBT) IntelligentRx, we found 
that three functionalities made our tool more attractive for use by 
providers: cloud-based solution, integration with a point-of-sale 
claims engine, and electronic prior authorization functionality.

    In fact, Humana is the first national health-care insurer to 
collaborate with Epic to bring together patients, providers, and payers 
to power value-based care. Humana and Epic are advancing 
interoperability to promote open communication and information 
transparency that will give patients and their practitioners integrated 
and real-time access to the patients' medical history, health insights, 
and treatment options, which, in turn, enables cost reduction, improves 
quality, and increases patient satisfaction. To enhance the 
prescriber's experience, Humana will integrate its RTBT, IntelligentRx, 
directly into Epic's e-prescribing workflow, delivering real-time 
pharmacy data throughout its network.

                                 ______
                                 
                Questions Submitted by Hon. Richard Burr
    Question. Pharmacy Benefit Managers (PBMs) offer a variety of 
contract designs to health insurance plans, allowing the insurer or 
client to choose the best structure for their customers. During the 
Finance Committee hearing on April 9, 2019, each witness stated that, 
in the contracts structured to allow for the pass through of rebate 
dollars at the point of sale, PBMs do not keep any portion of the 
rebate. If the PBM does not keep a portion of the rebate, what type of 
revenue do PBMs receive from these contracts? What percent of your 
contracts are point of sale and what percent utilize a structure 
providing a percentage of the rebate back to the PBM?

    Answer. Currently Humana does not administer any point-of-sale 
rebate plan designs. Rebates received by Humana for Part D drugs are 
passed through to the Part D plans. Humana's wholly owned pharmacy 
benefit manager does not receive fees from pharmaceutical 
manufacturers.

    Question. It is our understanding that contracts with 
pharmaceutical manufacturers may also take a variety of forms. In 
calendar years 2016, 2017 and 2018, what was the total dollar amount 
that you obtained from pharmaceutical manufacturers in any form such as 
rebates, fees, etc.? What is the total dollar amount that was passed on 
to health insurance plans with which you have an agreement or contract?

    Answer. For all calendar years, rebates received by Humana for Part 
D drugs are reported to CMS annually through Direct and Indirect 
Remuneration (DIR) and reflected in Part D bid submissions. Rebates 
received by Humana for Part D drugs are passed through to the Part D 
plans. Part D plans reinvest the savings accrued from these rebates in 
benefit offerings. Humana's wholly owned pharmacy benefit manager does 
not receive fees from pharmaceutical manufacturers.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. One challenge that I see, when considering the medical 
treatment marketplace, is that we have a new wave of life-saving 
treatments--of incredible cures we could never have dreamed of, even 10 
or 15 years ago--for which cost, by necessity, is going to be a major 
issue. You look, for instance, at a condition like sickle cell disease. 
For the average SCD patient who reaches age 45, lifetime treatment 
costs are at roughly $1 million--and there are complications that can 
make that figure even higher. Now that we see therapies coming down the 
pipeline that could erase those long-term costs and drastically improve 
the quality of life for sickle cell patients, the question becomes how 
can our current payment systems adapt to--and absorb--the high costs 
necessary to bring treatments like these to market and to ensure that 
we continue to see innovations like these ones moving forward?

    Answer. Few interventions are available for sickle cell disease 
beyond palliative treatment but many therapies are on the horizon, and 
some are already in late-stage trials. Clinically meaningful outcomes 
that result in improved quality of life are essential for all new 
products being reviewed by the FDA. Manufacturers have historically 
focused drug development on safety and clinical efficacy compared to a 
placebo for regulatory approval. FDA accelerated approval is often 
based on surrogate markers as opposed to outcomes data which are 
directly tied to improvements in patient health. This is a very real 
issue in the treatment of oncologic diseases where products are 
approved with limited phase 2 clinical trial data which are not 
designed to assess outcomes for a broad patient population or long-
term. In a review of the 93 cancer drug indications granted accelerated 
approval since 1992, only 19 drugs (20 percent) had improvement in 
overall survival while 19 drugs (20 percent) simply met the original 
surrogate end point used in the accelerated approval. To support better 
health outcomes, the FDA approval process should be transformed from 
accelerated approval based on surrogate endpoints to a system based on 
outcomes and value that improves health. Such a shift in FDA approval 
of high cost specialty drugs would facilitate payment and reimbursement 
subject to a Coverage with Evidence Development (CED). CED would allow 
Medicare Advantage and Part D plans to provide coverage and 
reimbursement based on shared risk with drug manufacturers with the 
condition that additional data is systemically produced by 
manufacturers through prospective registries or additional controlled 
trials to assess actual health outcomes that may be produced. Once 
sufficient data is reported, permanent coverage and reimbursement based 
on longer term health outcomes would be established.

    Question. And along the same lines, beyond creating some much-
needed clarity around value-based arrangements--which I've been working 
with Senators Cassidy and Warner to accomplish legislatively--are there 
steps that Congress could take to facilitate these innovative payment 
models?

    Answer. Outcomes (or value-based) contracts: Outcomes-based 
contracting should be leveraged and reserved for disease states with 
limited or no competition and serve as a feedback loop to answer the 
uncertainties that exist around first-in-class agents, accelerated 
approval drugs, and orphan drugs approved in small populations in order 
to inform future formulary and coverage decisions. Three disease states 
account for 70 percent of the pharmaceutical industry's drug pipeline--
oncology, infectious diseases, and central nervous system (CNS) 
disorders. And the proportion of new therapies approved as orphan drugs 
has ballooned. In 2015, 21 orphan drugs were approved, accounting for 
47 percent of all new medicines, up from just 29 percent in 2010; in 
2016, nine more orphans won approval, 40 percent of the total. These 
drugs are typically fast tracked, offered breakthrough status, and 
approved on phase 2 trials without the rigorous standards other drug 
classes are held to. These are the areas of focus where outcomes-based 
contracting would be most helpful.

    Manufacturers should take on meaningful risk in outcomes-based 
contracting: Our experience is that the vast majority of manufacturers 
are only willing to enter into outcomes-based contract arrangements 
that align with a product's clinical trial data and FDA approval. As 
such, the findings from such agreements add little or nothing to the 
existing evidence base and virtually assure a positive outcome for the 
manufacturer. In most cases, manufacturers seek outcomes-based 
contracts for products in drug classes where robust competition already 
exists, indicating that the manufacturer is more interested in gaining 
a competitive advantage or preferred formulary access as opposed to 
advancing the medical evidence around the safety and efficacy of their 
product in a real-world environment. It is our view that outcomes-based 
contracting remains the exception--and not the norm--in determining the 
ultimate value of prescription drugs. They do not produce the best 
arrangement in every situation. In competitive disease areas where 
multiple drug manufacturers offer well-established treatments or where 
generics are prevalent, such as the markets for oral diabetes drugs, 
multiple sclerosis, and hepatitis C, the ordinary effects of 
traditional price concession negotiations afforded by robust 
competition produce the lowest costs.

    Medicaid best price is a barrier to outcomes-based contracting: In 
our negotiations with drug manufacturers, they often cite Medicaid Best 
Price as the primary reason for refusing to take on more significant 
downside risk in outcomes-based contracts. Although we cannot 
empirically validate that Best Price is a limiting barrier--only drug 
manufacturers can speak to that question--just over 30 percent of our 
executed outcomes-based contracts apply solely to our Medicare Part D 
plans, which are statutorily excluded from manufacturers' Best Price 
calculations. The products associated with these outcomes-based 
contracts are predominantly high-cost specialty drugs and include 
therapies for auto-immune/inflammatory conditions (rheumatoid 
arthritis, psoriasis), cardiovascular disease, diabetes, infectious 
disease, and cancer. The remaining 70 percent of our outcomes-based 
contracts apply equally to our commercial and Medicare lines of 
business. Recently published reports have found that though Medicaid 
Best Price is an understandable concern for manufacturers determining 
whether to pursue value-based contracts, particularly in the commercial 
market, its effect can be mitigated and is not the immutable obstacle 
to value-based contracting that some manufacturers' claim. We encourage 
CMS to review this research and determine if additional guidance is 
necessary to clarify the treatment of outcomes-based agreements 
relative to manufacturer calculations of Best Price. CMS may also wish 
to consider using its demonstration authority to explore opportunities 
to ameliorate manufacturers' concerns regarding the impact of outcomes-
based contracting on Medicaid Best Price calculations. For example, CMS 
could develop a limited pilot program to test whether excluding 
outcomes-based contracts from Medicaid Best Price results in 
manufacturers taking on more significant downside risk, and whether 
that in turn creates net savings for the Federal Government and 
beneficiaries.

    Question. I'm also interested in the role that technology can play 
in helping to drive down drug costs--as well as to increase medication 
adherence. Some estimates suggest that between 50 and 75 percent of 
patients don't take their medications as prescribed, and that one in 
five new prescriptions go unfilled. And study after study shows that 
cost is a key factor here. As a consequence, we see roughly 125,000 
deaths from non-adherence every year, along with more than $100 billion 
in excess costs to the health-care system. To what extent can 
technology help providers and patients to make more informed and cost-
effective choices about prescriptions--and to then adhere to these 
prescriptions?

    Answer. Humana was the first Part D plan to provide real-time 
access to drug cost and formulary information to physicians and their 
patients through our IntelligentRx tool. IntelligentRx enables 
physicians and their patients to make joint treatment decisions based 
upon efficacy and cost for 3.1 million prescriptions annually. The tool 
is currently available to all 10 million Humana members, including 
individuals with Medicare, Medicaid, and employer coverage.

    Humana applauds CMS's final rule published on May 23, 2019, which 
will require all Part D plan sponsors to have a real-time benefit tool 
by 2021. We believe that there are several current barriers that lessen 
the effectiveness of these tools including the lack of requirements on 
electronic medical records vendors and creating incentives for 
increased provider participation. In launching IntelligentRx, we found 
that three functionalities made our tool more attractive for use by 
providers: cloud-based solution, integration with a point-of-sale 
claims engine, and electronic prior authorization functionality.

    Question. And maybe more to the point, to the extent that these 
technological tools are out there, what steps are you and your clients 
taking to encourage physicians and patients to use them?

    Answer. In 2019, Humana plans to launch integrations with 
additional electronic medical record vendors, including Epic, which is 
one the largest medical record companies in the country. We believe 
this will significantly increase provider access to and utilization of 
our real-time benefit tool.

                                 ______
                                 
                Questions Submitted by Hon. Bill Cassidy
    Question. Are there ever cases where a patient in your health plan 
or one of the health plans for whom you negotiate as a PBM pays more 
for a medicine than the plan spends on a net basis, when you reimburse 
the pharmacy for that same medicine? In those cases, what entity 
receives the benefit of the difference between the amount the patient 
pays and the net amount the plan pays?

    Answer. No. Humana members always pay out-of-pocket costs that are 
the lowest amount of the benefit defined member cost share, the 
negotiated rate, and the pharmacy ``usual and customary'' (U&C) cash 
price.

    Question. In calendar years 2015, 2016, 2017--what percent of your 
revenue was from fees paid by plans, fees paid by manufacturers, other 
fees, pharmacy spread or rebates? Same question as to profits. Of all 
revenue generated from part D contracts, what percent did you retain?

    Answer. For all calendar years, rebates received by Humana for Part 
D drugs are passed through to the Part D plans. Humana's wholly owned 
pharmacy benefit manager does not receive fees from pharmaceutical 
manufacturers.

    Question. Should a patient ever pay more out of pocket for a 
medicine than what you pay the pharmacy for that medicine?

    Answer. No. Humana members always pay out-of-pocket costs that are 
the lowest amount of the benefit defined member cost share, the 
negotiated rate, and the pharmacy ``usual and customary'' (U&C) cash 
price.

    Question. PBM revenue from fees has risen, illustrated below. 
Further, PBM's retained revenue as a percent of net retail drug spend 
has consistently increased. What do you attribute this increase to?

    Answer. Humana's wholly owned pharmacy benefit manager does not 
receive fees from pharmaceutical manufacturers. Rebates received by 
Humana for Part D drugs are passed through to the Part D plans. Part D 
plans reinvest the savings accrued from these rebates in benefit 
offerings. Additionally, rebates have resulted in significant savings 
to the government. As cited in the Medicare Trustees Report, rebates 
have played a critical role in keeping the overall cost of Part D lower 
than projected when the program was first launched in 2006.

[GRAPHIC] [TIFF OMITTED] T0919.014


    Question. How are bona fide service fees established? What was your 
revenue generated in part D by bona fide fees in 2015, 2016, and 2017?

    Answer. For all calendar years, Humana's wholly owned PBM has not 
had bona fide service fee arrangements with drug manufacturers.

    Question. A Health Affairs article suggests plans may prefer paying 
PBMs using rebates instead of fees, as ``Using retained rebates to 
cover PBM costs in lieu of fees could artificially lower reported 
administrative costs and make it easier to meet government medical loss 
ratio (MLR) requirements.'' Is it true that paying the PBM a percent of 
rebates would keep that revenue from counting towards a plan's MLR?

    Answer. Humana is not familiar with this approach. Rebates received 
by Humana for Part D drugs are passed through to the Part D plans.

    Question. Would you support an industry-wide standard set of 
performance metrics by which a PBM would set its pharmacy contracts, 
which would be tailored based on regional patient populations, to give 
certainty for local pharmacies?

    Answer. While Humana appreciates the goal of standardizing 
information, we strongly oppose requiring plans and PBMs to implement a 
set of universally applicable performance metrics. Mandating a 
compulsory set of performance/contracting metrics would homogenize 
value-based payment programs for pharmacies and stifle innovation. 
Similar to the way in which CMS and other payers are experimenting with 
a variety of value-based reimbursement for physicians and hospitals, 
plans need the flexibility to test and learn. Furthermore, the 
generation of a standard data set in this fashion would be an 
infringement upon the contractual relationship between the plan 
sponsors and the pharmacies and could potentially limit future 
innovation to improve member outcomes.

                                 ______
                                 
                Questions Submitted by Hon. Steve Daines
    Question. In Medicare Part D, beneficiaries' deductible and 
coinsurance payments are calculated based on the price negotiated 
between the PBM and the pharmacy.

    Does this take into account rebates and discounts the PBM 
negotiates separately with pharmaceutical manufacturers?

    Answer. Currently Humana does not administer any point-of-sale 
rebate plan designs.

    Question. In calendar years 2016, 2017, and 2018, what share of 
brand prescriptions covered by the Part D plans you contract with were 
filled in the deductible or required beneficiaries to pay coinsurance? 
What was the total amount beneficiaries spent out-of-pocket for those 
prescriptions? What would beneficiaries' total out-of-pocket spending 
have been under the same cost sharing structure if their payments were 
based on the net price to the Part D plan, inclusive of rebates and 
other price concessions, rather than the price negotiated between your 
PBM and the pharmacy?

    Answer. It is important to note that Part D has a very high generic 
dispensing rate, and plans do not receive rebates on generics. Generic 
drugs account for the vast majority of Part D program utilization and 
now approach 90 percent in the Part D Program. In CY 2016, low cost 
generic drugs accounted for 87 percent of overall prescription drug 
utilization for Humana. Despite accounting for the vast majority of the 
utilization, these drugs only contributed to 24 percent of total drug 
costs in 2016. To illustrate, we calculated the frequency distribution 
of annual cost sharing savings of the POS rebate construct and the 
associated percentage of Humana membership that would have received the 
annual cost sharing savings if rebates at the POS were required during 
the 2016 plan year (see table below). 
Seventy-one percent of Humana's membership would receive $0 in cost 
sharing reduction, 19 percent would receive $100 or less in annual cost 
sharing reductions, and only 10 percent of membership would receive 
more than $100 in annual cost sharing savings.


Frequency Distribution of Annual Member Cost Sharing Reductions With POS
                                 Rebates
------------------------------------------------------------------------
   Annual Sum of Cost
     Sharing Savings                 Percentage of Membership
------------------------------------------------------------------------
$0                                                         71.3 percent
------------------------------------------------------------------------
<$20                                                        8.3 percent
------------------------------------------------------------------------
$21-$40                                                     4.3 percent
------------------------------------------------------------------------
$41-$60                                                     3.0 percent
------------------------------------------------------------------------
$61-$80                                                     2.0 percent
------------------------------------------------------------------------
$81-$100                                                    1.4 percent
------------------------------------------------------------------------
$101-$1,000                                                 9.4 percent
------------------------------------------------------------------------
>$1,000                                                     0.2 percent
------------------------------------------------------------------------


                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
                       spread pricing in medicaid
    Question. A PBM practice that has come up quite a bit recently is 
the practice of spread pricing. Spread pricing occurs when PBMs charge 
health plans more for prescription drugs than they actually reimburse 
pharmacies, and then pocket the different as profit.

    Do you engage in spread pricing practices?

    Answer. Humana does not use spread pricing in the Medicare 
Advantage, Part D PDP, or Managed Medicaid plans. Humana offers the 
opportunity for employers to select spread pricing. Providing employers 
a choice in financing preserves the ability for plan sponsors to 
effectively manage the performance of pharmacy benefit managers through 
performance-based contracts and creates incentives for stronger price 
negotiations.
                             rebate demands
    Question. The use of rebates as a negotiating tool has led to 
problematic incentives in the prescription drug supply chain. For 
example, drug companies have argued that they increase list prices in 
response to demands from PBMs for high or increasing rebates.

    Does your company currently have, or has your company had since 
January 2013, any agreements with drug manufacturers that require 
equivalent rebates, even in the case of a drug for which the list price 
has been lowered?

    Answer. No.

    Question. Does your company currently have, or has your company had 
since January 2013, any agreements with drug manufacturers that require 
advance notice of changes in the list price of drugs, including 
reductions or increases in list price?

    Answer. No.
                            revenue sources
    Question. Please provide an annual breakdown of the following 
components of the revenue you received from drug manufacturers from 
January 1, 2013 through December 31, 2018: dollar amount and percent of 
revenue from rebates; dollar amount and percent of revenue from 
administrative fees; dollar amount and percent of revenue from 
distribution fees; dollar amount and percent of revenue from marketing 
fees; dollar amount and percent of revenue from clinical case 
management fees; and all other sources of revenue from manufacturers 
not listed above.

    Answer. For all calendar years, rebates received by Humana for Part 
D drugs were reported to CMS annually through Direct and Indirect 
Remuneration (DIR) and reflected in Part D bid submissions. Humana Part 
D plans reinvest the savings accrued from these rebates in benefit 
offerings. Humana's wholly owned pharmacy benefit manager did not 
receive fees from pharmaceutical manufacturers.
                           part d negotiation
    Question. The PBM market has changed dramatically over the past 
several years. Many Part D health plans also operate as PBMs, including 
your companies. While Part D has done a great job offering Medicare 
beneficiaries drug coverage they did not have access to before, Part D 
has not been successful at keeping up with the growing cost of 
medicines. PBMs and Part D plans claim they bargain to get lower 
prices, but the HHS Inspector General found that almost 4 in 10 brand 
name drugs in Part D offered no rebate or discount to Part D plans.

    Why have Part D plans been ineffective at bringing down the cost of 
almost half of brand-name medicines?

    Answer. The current challenges in the Part D market are complex. 
The three major issues that are preventing Part D plans from 
effectively negotiating with manufacturers on the price of sole-source 
brand-name drugs are: the introduction of high cost specialty drugs 
which frequently do not have any competition; the anti-competitive 
actions taken by manufacturers to delay competition and further prolong 
monopolies; and the unintended consequences of well-intended drug 
policies have limited the negotiating power of Part D plan sponsors.

    We discuss these challenges and potential solutions to address them 
in our response to the recent discussion draft on Part D Improvements 
developed by the House Committees on Ways and Means and Energy and 
Commerce, which is attached. We welcome additional conversations with 
the Senate Finance Committee on these policy challenges as well.

    Question. At the hearing, witnesses spoke about the ways in which 
they seek to get the best price for patients. However, behind this is 
the reality that PBMs are driven by their bottom line. Researchers at 
Johns Hopkins University found that 72 percent of formularies in Part D 
charge lower cost-sharing for a brand name drug compared to the cheaper 
generic equivalent. This occurs because the more expensive brand name 
drugs are able to give bigger rebates, but we can never know for sure 
because rebate information is kept secret.

    How can the public have confidence that they're getting the lowest 
price and not the price that gives you the biggest rebate to your 
business?

    Answer. Humana has a history of maintaining low premiums in Part D. 
Additionally, over 80 percent of seniors have out of pocket costs of 
less than $275 annually. One of the tools used to ensure that 
beneficiaries receive the best value from their prescription drug plans 
is rebates. Savings that are obtained by Humana through rebate 
negotiations with drug manufacturers are distributed to all Part D 
beneficiaries through reduced premiums, resulting in lower costs for 
seniors in PDP and MAPD plans. Additionally, rebates have resulted in 
significant savings to the government. As cited in the Medicare 
Trustees Report, rebates have played a critical role in keeping the 
overall cost of Part D lower than projected when the program was first 
launched in 2006.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Should the CREATES Act become law, what commitment can 
your company making to covering generics as soon as they are approved 
and passing those savings on to patients?

    Answer. Humana strongly supports the introduction of S. 340, the 
Creating and Restoring Equal Access to Equivalent Samples (CREATES) 
Act. If this bill were to become law, Humana will continue to advance 
the adoption of generics through our formulary development process. We 
also believe that the CREATES Act would lead to a more robust market 
for generics that could be leveraged to increase the utilization rate 
of generic drugs in Part D (currently 85 percent of the drugs provided 
to Part D beneficiaries are generic).

    Question. What are your concerns with point-of-sale rebates and 
what alternatives do you propose to such rebates to improve consumer 
savings at the pharmacy counter?

    Answer. We anticipate the Part D rebate model will be changed to 
one where the rebates that manufacturers are willing to offer will be 
applied at point-of-sale. This regulatory action will have mixed 
results. All beneficiaries will pay higher premiums: 83 percent will 
see higher total costs given the premium increases; 5 percent will see 
savings of less than $70 per year; and only 12 percent will see savings 
of greater than $70 per year.

    The only way to achieve the same costs for the Part D program and 
maintain beneficiary premiums is if all brand drug manufacturers elect 
to decrease their prices by at least 28 percent, not just the 7 percent 
of drugs currently receiving rebates--which would require a 45-percent 
reduction.

    We have attached our recent letter to the House Energy and Commerce 
and Ways and Means Committees, which include policy recommendations for 
modernizing the Part D program.

    Question. What are the specific steps your company is taking to 
move PCSK9 inhibitors off the specialty tier in Medicare Part D and to 
fixed copay tiers given that prices went down by 60 percent and are no 
longer above the specialty tier threshold?

    Why haven't your plans moved it already, given that CMS allows 
plans to make positive mid-year formulary changes that improve patient 
access and affordability?

    Answer. At the time the formulary is developed, Humana formulary 
placement is determined based on the evidence base, clinical efficacy, 
and status as a biosimilar. After these factors are considered, the P&T 
Committee considers the affordability of the drug. In some cases, 
manufacturers do not share their intention to offer lower costs 
versions of medications when plans and formularies are being designed. 
In the case of PCSK9 inhibitors, Humana added the lower priced NDC to 
its formularies as soon as it launched in 2019 and starting in 2020 
PCSK9 inhibitors will be on a lower tier.

                                 ______
                                 
             Questions Submitted by Hon. Benjamin L. Cardin
              drug rebate rule and higher part d premiums
    Question. In January, the Department of Health and Human Services 
released a proposal to reform prescription drug rebates paid by 
pharmaceutical manufacturers to pharmacy benefit managers under 
Medicare Part D. The OIG proposal attempts to ban most rebates by 
eliminating their regulatory protections and creating two new safe 
harbor provisions: one to expressly protect discounts applied directly 
at the point of sale (POS) for consumers, and another to protect 
certain service fees that manufacturers pay to PBMs for services 
furnished to health plans. The only service fees that would be 
permissible under the proposal are those that are fixed, and not based 
on a percentage of sales and not based on volume or the value of other 
business generated between the parties. The proposed rule was designed 
to address the Department's concerns with the current rebate system, 
which HHS believes rewards high list prices, discourages the use of 
generics and biosimilars, and does not reflect patient out-of-pocket 
costs. For consumers, this proposal may result in lower costs at the 
pharmacy counter, but Part D premiums may increase as a result.

    Could you explain which Part D beneficiaries could see savings on 
their drug costs at the pharmacy counter and which Part D beneficiaries 
could not see lower drug costs?

    Answer. The implementation of the rebate rule is most likely to 
reduce POS drug costs for non-LIS seniors who take patent-protected 
drugs that treat conditions like hepatitis C, diabetes, and various 
autoimmune disorders. Humana's analysis applying the POS rebate policy 
to its 2018 benefits found that approximately 17 percent of 
beneficiaries would see savings at the pharmacy counter, with only 12 
percent saving more than $70 annually. The remaining 83 percent of 
beneficiaries will see an increase in costs for prescription drug 
coverage due to premium increases that will exceed any potential 
savings the beneficiary may have experienced at the pharmacy.
    perverse incentive to place more expensive drugs on formularies
    Question. In a Senate Finance Committee hearing had a few weeks 
ago, many pharmaceutical companies argued that the current rebate 
structure incentivizes high list prices. These companies argue that the 
higher the list price of the drug, the greater the rebates, and 
therefore, the more profit the PBM earns. While contracts between PBMs, 
Part D Plans, and pharmaceutical companies require PBMs to pass through 
100 percent of the negotiated rebate back to insurance plans, I worry 
that this structure could incentivize PBMs to favor a more expensive 
drug on the formulary because they could get a higher rebate.

    Is there an incentive for a PBM to place a higher cost drug on the 
Part D formulary because the PBM receives a larger rebate for that more 
expensive drug? Why or why not?

    Answer. Our goal is to ensure that our beneficiaries are receiving 
the lowest possible price. We prioritize low-cost generic drugs, and if 
multiple brand name drugs are available to treat the same clinical 
condition, we negotiate with competing manufacturers to provide access 
to drug coverage that produces the most value to the member, which 
includes the lowest out-of-pocket cost over the course of the year and 
the health outcomes produced. Humana's current formulary design 
includes 10 percent or less of brand medications on the preferred 
generic and generic tiers (the lowest tiers on Humana's Part D 
formulary), with the majority of those two tiers composed of generic 
medications.
               six protected classes proposal and access
    Question. This past November, the Centers for Medicare and Medicaid 
Services released a proposed rule for 2020 to help tackle drug pricing. 
Among the proposed changes is one, which would alter the current rules, 
governing the ``six protected classes.'' The concept of the ``protected 
classes'' has been around since the launch of the Medicare Part D 
Program, and it was instituted to ensure that some of our most 
vulnerable patients would have access to their needed drugs by 
requiring formularies to cover nearly all protected drugs. These 
classes are anticonvulsants, antidepressants, antipsychotics, 
immunosuppressants, antiretrovirals, and antineoplastics.

    Some people have argued that these protected classes have led to 
higher drug prices because formularies are required to include this 
prescription coverage, and there are limited tools left to help lower 
prices. In an effort to increase competition, this proposed new rule 
would do a couple of different things. The first aspect of the 
administration's proposal would allow Part D sponsors to implement 
broader use of prior authorization and step therapy for protected class 
drugs, including determining use for protected class indications. Any 
time there is a mention of plans using prior authorization or step 
therapy there is an immediate concern of restricting patient access to 
needed drugs or medical services.

    Could you explain why your company would favor such utilization 
management tools like step therapy or prior authorization?

    Answer. Humana fully supports the use of utilization management 
tools such as prior authorization and step therapy--including the 
expanded use of non-formulary drug status. Plan sponsors utilize their 
pharmacy and therapeutic (P&T) committees, which make their own 
assessments of clinical appropriateness and therapeutic alternatives 
based upon labeling from the Food and Drug Administration (FDA), 
clinical guidelines, peer-reviewed literature, and the medical 
compendia, which is a critical component of a well-managed drug plan. 
Humana's P&T committee evaluates each member case individually to 
ensure members stable on their drug therapies receive evidence-based 
quality care. Humana has long supported the use of 
evidence-based utilization management for Part B drugs to lower out-of-
pocket costs for its members and stimulate increased price competition 
in the Part B drug market. The historic barrier to more efficient 
management of Part B drug utilization is that existing Medicare 
policies made it impossible for MA plans to leverage market-based tools 
to increase competition and lower costs. Without such tools, 
pharmaceutical companies had nearly unlimited pricing power, as 
evidenced by the ever-increasing costs of Part B drugs. Since 2009, 
Medicare Part B drug spending has grown at an average rate of 9 percent 
per year. Approximately 50 percent of the growth in Part B drug 
spending from 2009 to 2013 was the result of increased prices for 
existing products and shifts in the mix of drugs, including the 
adoption of new drugs.

    Question. Do you believe there is a danger that using step therapy 
or prior authorization could possibly restrict patients from having 
access to medication that has been successful for them? Why or why not?

    Answer. We do not believe there is a danger of restricted access to 
drugs due to prior authorization or step therapy. The step therapy 
program was developed with clinical efficacy as the primary 
requirement. Step therapy policies are reviewed periodically to ensure 
that all standards are based on the most up-to-date clinical criteria. 
Furthermore, all patients and providers have the ability to request 
exceptions and appeals, which can be processed in less than 24 hours if 
needed.

    Question. If you were to use step therapy or prior authorization 
for drugs in the six protected classes, how would you ensure patients 
would continue to have access to their needed medications in one of the 
six protected classes?

    Answer. Humana is disappointed in CMS's decision not to finalize 
the protected class proposals this spring. However, if Congress were to 
revisit the proposals on protected classes, Humana would use many of 
the same measures currently in place today in the Part B Step Therapy 
to ensure that beneficiaries have access to the appropriate 
medications. This would include the development of clinical policies, 
communication efforts to beneficiaries and providers, expedited appeals 
processes as necessary, and savings in the form of reduced premiums.

    Question. The second aspect of the administration proposed change 
to the six protected classes is the proposal to allow drug coverage 
formularies to exclude a protected class drug from a Part D formulary 
if the drug represents a new formulation of a single-sourced drug, 
regardless of whether the older formulation remains on the market. My 
understanding is that this administration is trying to target 
pharmaceutical companies who participate in the anticompetitive 
practice of ``evergreening.'' This is a practice where pharmaceutical 
companies make slight alterations to a drug's packaging, color, and 
formulation without an added or new benefit. However, we also 
understand that seemingly small changes to a drug can still make a big 
difference to patient well-being. We have heard from Maryland 
physicians that the creation of combination antiretroviral pills was a 
huge step forward in the fight against HIV. Even though these 
combination pills or extended release versions didn't have a new 
chemical formula, they made a world of difference to the HIV patients 
taking over a dozen pills a day. These vulnerable patients are 
obviously very concerned that they could lose coverage for new and 
better drugs, especially when their old drugs may no longer be 
available. HIV treatments have come a long way in the last few decades, 
and proper antiretroviral treatment is vital to ensuring an end to the 
HIV epidemic.

    Do you think the proposed rule anticipates a situation where a 
pharmaceutical company stops producing an older version of a drug when 
a new formulation is available, but the newer formulation is not 
covered by a Part D plan? Why or why not?

    Answer. Humana is disappointed in CMS's decision not to finalize 
the protected class proposals this spring. If Congress were to revisit 
the proposals on protected classes, Humana does not believe there would 
be access issues for protected class drugs. However, it should be noted 
that manufacturers alone make production decisions for the medications 
that are brought to the market.

    Question. What would your company do to ensure that patients 
continue to have access to their medication in this situation?

    Answer. Humana would encourage manufacturers to continue to make 
novel medications that support beneficiaries but manufacturers alone 
make production decisions for the medications they bring to market.
                       appeals process in general
    Question. Prior authorization and step therapy are some of the most 
commonly mentioned concerns from patient groups coming to talk to my 
office, second only patients' concerns about out-of-pocket costs. What 
has become especially striking in the past few weeks is the number of 
physicians explaining how they feel stymied by prior authorization 
restrictions by insurance plans. We have heard from one surgeon who 
argued for weeks with the insure to appeal a decision that had been 
made to deny a newer type of less-invasive surgery. Someone who was not 
a surgical expert made the denial. Eventually, his patient made the 
decision to stop waiting and opted for a far more invasive and 
dangerous procedure because it was covered by insurance. Other doctors 
talk about the hours they spend on the phone waiting to appeal a 
decision, only to be told they need to write an extensive report 
justifying their medical decision. While the physicians are waiting for 
a response, quite often there are patients suffering without their 
proper medications, without certain tests, or not getting the surgery 
that the expert recommends.

    What is your organization doing to improve the appeals process for 
patients and physicians, in order to ensure timely medical care and 
access to their prescription drugs?

    Answer. Humana strives to ensure that all of our beneficiaries and 
their providers have as much information as possible when making 
decisions about their care. That is why Humana was the first Part D 
plan to provide physicians and their patients with real-time access to 
drug cost and formulary information through our IntelligentRx tool. 
IntelligentRx enables physicians and their patients to make joint 
treatment decisions based upon efficacy and cost for 3.1 million 
prescriptions annually. The tool is currently available to all 10 
million Humana members, including individuals with Medicare, Medicaid, 
and employer coverage. One of the elements of this tool is electronic 
prior authorizations or ePA which instantaneously processes prior 
authorizations and minimizes the need to file appeals.

    Question. What do you think is an appropriate wait limit for 
emergency medical appeals, and how do you make sure you meet it?

    Answer. Humana complies with current CMS requirements to process 
regular and expedited drug appeals within 72 or 24 hours respectively 
or as quickly as the beneficiary's condition requires.

    Question. Another complaint that I have heard from physician groups 
is that many formularies do not cover newer drugs that they consider to 
be necessary for hard-to-treat diseases, even if the drugs are very 
well-studied.

    With technology changing so rapidly, how do your companies ensure 
that you keep up with the medical and surgical experts and new 
research, so that your authorization decisions are in line with the 
most recent medical innovations and physician standards?

    Answer. Our coverage decisions are based on treatment guidelines 
and the clinical evidence base. Our treatment guidelines are generally 
evaluated quarterly and at least annually to ensure appropriate 
coverage based on the most recent medical innovations and evidence.
                 direct and indirect remuneration fees
    Question. I have heard from independent pharmacies in Maryland that 
have struggled with Pharmacy Benefit Managers and Direct and Indirect 
Remuneration (DIR) fees. According to independent pharmacies, there are 
times when DIR fees are based on performance, and these fees range from 
$2-$7 for certain types of maintenance prescriptions and are often 
collected retroactively--weeks or even months after a prescription was 
filled. A PBM can take money back from the pharmacy when the pharmacies 
haven not met a PBM's performance standard. In these instances, the PBM 
claws back money and creates a situation where the pharmacy does not 
receive adequate reimbursement to cover its costs. As a result, DIR 
fees can be a significant financial loss to pharmacies and an 
additional cost burden to patients.

    Could you explain what performance measures are considered when 
determining a DIR fee?

    Answer. The highest performing pharmacies in Humana's quality 
performance network, those that are above the 80th percentile of 
medication adherence measures, are rewarded at a higher level in order 
to recognize their superior performance. For example, in 2017 the 
highest performing pharmacies received up to $6 per eligible claim, 
pharmacies in the 50th to 80th percentiles received up to $2 per 
eligible claim, and those below the 50th percentile were not rewarded. 
The medication adherence measures included:

        Diabetes (non-insulin agents): biguanides, sulfonylureas, 
thiazolidinediones, DPP-IV inhibitors, incretin mimetics, meglitinides, 
sodium glucose co-transporter2 (SGLT2) inhibitors (Members filling 
insulin products are excluded).

        Hypertension/blood pressure (Renin Angiotensin System 
Antagonists): Direct Renin Inhibitor, Angiotensin Receptor Blockers 
(ARBs), Angiotensin Converting Enzyme (ACE) Inhibitors (members filling 
Entresto (sacubitril/valsartan) are excluded from the measure).

        Hyperlipidemia/high cholesterol: All statins.

    Question. How is that performance measure communicated to the 
pharmacy?

    Answer. Quality performance measures are contractually laid out, 
completely transparent and utilize a third party data service platform 
called EQuIPP (Electronic Quality Improvement Platform for Plans and 
Pharmacies). EQuIPP was created by Pharmacy Quality Solutions (PQS). 
PQS is a subsidiary of the Pharmacy Quality Alliance (PQA), which has 
developed, tested, and endorsed numerous measures of medication-use 
quality. The platform provides a weekly updated list of outlier 
patients to pharmacies and a monthly performance score. Outlier 
patients are patients who are non-adherent to their medications or have 
demonstrated historical non-adherence. Pharmacies can use this 
information to help coordinate, inform, and monitor their quality 
improvement efforts, allowing them to deliver high-quality care locally 
while understanding how their performance compares to other pharmacies 
in Humana's quality performance network. Performance results are 
updated monthly with the percentage of Humana patients that are 
adherent and pharmacy percentile rankings.

    Question. How much does your company receive in DIR fees?

    Answer. Rebates received by Humana for Part D drugs are reported to 
CMS annually through Direct and Indirect Remuneration (DIR) and 
reflected in Part D bid submissions. Humana Part D plans reinvest the 
savings accrued from these rebates in benefit offerings. Humana's 
wholly owned pharmacy benefit manager does not receive fees from 
pharmaceutical manufacturers.

    Question. How much does your company receive in performance-related 
DIR fees?

    Answer. Performance-related DIR fees received by Humana for Part D 
drugs are reported to CMS annually through Direct and Indirect 
Remuneration (DIR) and reflected in Part D bid submissions. Humana Part 
D plans reinvest the savings accrued from these fees in benefit 
offerings.

    Question. Are those fees passed on to the consumer? If so, how?

    Answer. Humana Part D plans reinvest the savings accrued from these 
fees in benefit offerings.
                             drug shortages
    Question. Currently there are over 270 drugs in shortage. Drug 
shortages happen for many reasons such as manufacturing and quality 
problems, natural disasters, and inventory practices of wholesalers and 
pharmacies. Drug shortages cause harm to providers, hospitals, and most 
importantly patients. Pharmacists and providers must spend significant 
amounts of time on researching alternative drug treatments for the 
patient, which may not always be the most optimal therapies.

    As a pharmacy benefit manager, you have contractual agreements with 
pharmaceutical companies in order to place their drugs on a plan's 
formulary. While I understand that drug shortages happening in both the 
inpatient and outpatient settings, there may be a role PBMs can play in 
protecting patients.

    For the prescription drugs you negotiate to cover on a plan 
formulary, could you use your negotiating power to ensure a drug is 
available to a patient? Why or why not?

    Answer. Humana is focused on providing seniors with access to the 
best care possible. As part of that goal, Humana has developed 
innovative solutions for ensuring that our members are informed when 
making decisions about their prescription drugs to reduce costs and 
improve health outcomes. Drug manufacturing is outside of the scope of 
the service offering of Humana's pharmacy care services.

    Question. What do you do to ensure that patients have the drugs 
they need?

    Answer. Humana is focused on providing seniors with the best care 
possible. As part of that goal, Humana has developed innovative 
solutions for ensuring that our members are informed when making 
decisions about their prescription drugs to reduce costs and improve 
health outcomes. Humana was the first Part D plan to provide real-time 
access to drug cost and formulary information to physicians and their 
patients through our IntelligentRx tool. IntelligentRx enables 
physicians and their patients to make joint treatment decisions based 
upon efficacy and cost for 3.1 million prescriptions annually. The tool 
is currently available to all 10 million Humana members, including 
individuals with Medicare, Medicaid, and employer coverage.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
                              biosimilars
    Question. During the hearing, each of you expressed support for 
biosimilars and most of you indicated you try and take advantage of 
available biosimilars to help lower costs. When I asked each of you to 
identify solutions to help ensure a robust biosimilar marketplace here 
in the U.S., most of you mentioned things Congress or the 
administration could do to help ensure uptake of biosimilars--from 
lowering the exclusivity period for biologics to finalizing guidance on 
interchangability at the FDA. However, none of you offered any 
solutions or ideas for what your company could do to help ensure timely 
uptake of biosimilars, a robust U.S. biosimilars market, and a 
resulting cost savings to patients to taxpayers.

    Most of the biosimilars currently approved and on the market in the 
U.S. are reimbursed through the medical benefit. What are the 
similarities and differences in how rebates are passed onto patients 
and providers in the medical benefit versus pharmacy benefit. In your 
answer, please describe these similarities and differences across each 
of your books of business (i.e., commercial, Medicare, Medicaid).

    Answer. Currently Humana does not administer any point-of-sale 
rebate plan designs.

    Question. Do any of your plans require the use of a higher list 
price, branded product over the use of a therapeutically equivalent 
lower list price generic or biosimilar product? Why? If a plan 
restricts the use of a biosimilar or generic product in lieu of an 
innovator or brand name product, do patients pay more out-of-pocket 
than they would if the biosimilar was preferred?

    Answer. Our position is to negotiate the lowest net cost for any 
drug, and there are instances where it is beneficial to members to 
exclude generic competitors from formulary placement. Unfortunately, 
today there are few biosimilar products on the market and the prices of 
those products are similar to the originator brand products. Humana 
places such biosmiliars at parity with the originator brand products.

    Question. Recognizing most biosimilars are paid for via medical 
benefit, please explain whether you use step-therapy to restrict access 
to biosimilars for your patients in any medical benefit you manage 
across each of your books of business (i.e., commercial, Medicare, 
Medicaid). What role do rebates playing in your consideration for 
patient access to biosimilars in each of these instances?

    Answer. As mentioned previously, our position is to negotiate the 
lowest net cost for any drug, and there are instances where it is 
beneficial to members to exclude generic competitors from formulary 
placement. Unfortunately, today there are few biosimilar products on 
the market and the prices of those products are similar to the 
originator brand products. Humana places such biosmiliars at parity 
with the originator brand products.

    Question. How can and will your company help ensure a robust 
biosimilars market here in the U.S.?

    Answer. Humana strongly supports the introduction of S. 340, the 
Creating and Restoring Equal Access to Equivalent Samples (CREATES) 
Act. We believe the enactment of this bill will encourage the 
development of generic and biosimilar drugs that will infuse additional 
competition into the market prevent brand drug manufacturer REMS abuses 
that block generic competition, and penalize brand drug manufacturers 
for engaging in pay-for-delay agreements.

    Question. I have heard concerns that ``rebate walls'' are 
responsible for keeping new biosimilars off of formularies, where a 
manufacturer offers conditional rebates on a bundle of their products 
in order to incentive PBMs to exclude a new biosimilar competitor from 
their formularies. Have you ever decided to place a drug on a preferred 
tier because of the rebates you receive for other drugs from that 
manufacturer? If you do not do this, do you support this practice being 
carried out by your competitors?

    Answer. Our coverage decisions are based on treatment guidelines 
and the evidence base. We prioritize low-cost generic drugs, and if 
multiple brand name drugs are available to treat the same clinical 
condition, we negotiate with competing manufacturers to provide access 
to drug coverage that produces the most value to the member, which 
includes the lowest out-of-pocket cost over the course of the year and 
the health outcomes produced.

    Question. What more can and will you do to counteract efforts to 
rebate-block or bundle rebates to block biosimilar formulary placement? 
Will you commit to taking these actions as more biosimilars become 
available in Part D?

    Answer. While an increased number of generic competitors generally 
correlates strongly with lower formulary tier placement of a generic or 
biosimilar and the Food and Drug Administration (FDA) has proven that 
generic drug prices are reduced with each additional market entry of a 
generic competitor, there are numerous examples of generic medications 
and biosimilars that do not provide cost savings or equivalent 
therapeutic benefits that would warrant placement on a lower tier. As 
generic class sizes grow and competition increases, we encourage the 
continued flexibility to evaluate the cost-effectiveness of each 
medication in the class in order to determine tier placement. This 
includes the flexibility to mix brand and generic drugs within the non-
preferred drug tier (the second highest tier). Since the cost of a 
brand name drug is not guaranteed to be lower than the generic 
alternative, any requirement to name tiers ``brand'' or ``generic'' 
would not help the member understand which tier has a more affordable 
drug. While moving certain high-cost generic and biosimilar drugs to 
lower tiers may produce savings for some members through reduced out-
of-pocket cost-sharing, it would result in all members experiencing 
higher monthly premiums.
                            rebates vs. fees
    Question. During the hearing, Senator Cassidy asked each of you 
about the trend in PBM contracting where a larger share of your 
reimbursement and payment is a result of ``fees'' which you are able to 
pocket, as opposed to ``rebates'' which must be passed back to the 
plan/consumer.

    Please define the word ``rebate.'' As part of your definition, 
please clarify whether or not you consider administrative fees, 
inflation payments, product discounts, prospective rebates, care 
management fees, procurement fees or any other type of fee or payment 
that isn't a retrospective rebate to be a rebate.

    Answer. Payments made from a drug manufacturer to a plan or PBM 
after the point of sale that change the cost of covered drugs for plan 
sponsors.

    Question. Please provide, across your books of business (i.e., 
commercial, Medicare, Medicaid), a list of each of the different types 
of rebates, charges, and/or fees that you incorporate into your 
contracts.

    Answer. Rebates received by Humana for Part D drugs are reported to 
CMS annually through Direct and Indirect Remuneration (DIR) and 
reflected in Part D bid submissions. Humana's wholly owned pharmacy 
benefit manager does not receive fees from pharmaceutical 
manufacturers.

    Question. Rebates, by definition, must be passed along to the 
employer, health plan, or consumer. Please provide, across your books 
of business (i.e., commercial, Medicare, Medicaid), details on which of 
the rebates/fees detailed in my prior question are passed along to the 
consumer and/or plan and which are kept by the PBM.

    Answer. Rebates received by Humana for Part D drugs are passed 
through to the Part D plans.
                             fiduciary duty
    Question. Each of you have argued that you are the one entity in 
the drug supply chain that exists to help lower the cost of 
prescription drugs. You claim that your value comes in saving 
taxpayers, plans, and consumers money.

    Would you be willing to accept a fiduciary standard in your 
contracts? In other words, do you believe you have a fiduciary duty to 
the plan or employer you contract with--to act in their best interest 
and not your own? If not, why not?

    Answer. In today's highly competitive market for PBM services, 
these types of requirements are unnecessary. Many PBM customers, 
including Part D plan sponsors, receive 100 percent of rebates 
collected by the PBM under pass-through pricing models. In these cases, 
the interests of the PBM and its customer are already aligned. Other 
customers, such as commercial insurers and large employer groups, may 
receive services under spread pricing models, but they are 
sophisticated purchasers operating in a highly competitive PBM market. 
These customers often solicit competitive bids from PBMs before 
selecting a contracting partner and negotiate ``market check'' 
provisions into their contracts, allowing the customer to periodically 
renegotiate the contract if an independent third party determines that 
more favorable aggregate pricing terms are available elsewhere in the 
market. The entities that purchase PBM services have considerable 
leverage to obtain competitive pricing from PBMs and pass savings 
through to consumers. Government regulation in this area is not needed 
and would interfere with an already highly competitive market.
                           paying pharmacists
    Question. Following a series of reports in The Columbus Dispatch, 
Ohio has taken a number of actions over the past year to crack down on 
several PBM practices. Efforts to date have included investigations, 
lawsuits, and policy changes to address the egregious use of spread-
pricing, alleged breaches of contract, accusations of anti-competitive 
behavior, a misuse of taxpayer dollars, and a general lack of 
transparency.

    PBMs are responsible for creating pharmacy networks, setting the 
price patients and health plans pay for prescription drugs, 
adjudicating claims, and reimbursing pharmacies for dispensed drugs. In 
addition, nearly all PBMs own proprietary pharmacies that directly 
compete with the PBM-created retail network. Do you design plans that 
incentivize or require patients to use a pharmacy owned by your 
affiliate over a competing retail pharmacy. If yes, do you believe this 
represents a conflict of interest? If yes, how do you ensure there is 
no resulting anticompetitive misuse of pharmacy and patient data?

    Answer. Under CMS's current requirements for Part D, the 
beneficiary incentives for use of mail service are limited, which has 
resulted in relatively low utilization of mail service as compared to 
other programs. If more flexibility on mail service benefit design were 
permitted, Medicare beneficiaries would be able to choose a plan that 
incentivizes use of mail service pharmacy. Savings from increased 
flexibility in plan design and the increased use of mail service 
pharmacies in plan networks could significantly reduce Part D costs to 
both the Medicare program and beneficiaries while simultaneously 
improving clinical quality through improved medication adherence.

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. Can you answer the following questions to help us 
understand the pharmacy benefit manager business model and how you make 
formulary decisions?

    What percent of rebates are passed to the consumer under Medicare 
Part D?

    Answer. Currently, plan sponsors utilize rebates as a tool to 
ensure that beneficiaries are obtaining the greatest possible value 
from their Medicare coverage. Rebates received by Humana for Part D 
drugs are passed through to the Part D plans. Part D plans reinvest the 
savings accrued from these rebates in benefit offerings and reduced 
premiums for Part D coverage, resulting in lower costs for seniors in 
PDP and MAPD plans. Additionally, rebates have resulted in significant 
savings to the government. As cited in the Medicare Trustees Report, 
rebates have played a critical role in keeping the overall cost of Part 
D lower than projected when the program was first launched in 2006.

    Question. What percent of rebates are passed to the consumer in the 
private insurance market?

    Answer. Humana does not administer any point-of-sale rebate plan 
designs.

    Question. Do you have any comments on how health plans should use 
their share of the rebates to lower drug prices for patients with high 
deductibles?

    Answer. Humana utilizes rebates as a tool to ensure that 
beneficiaries are obtaining the greatest possible value from their 
Medicare coverage. Rebates that are invoiced and collected from 
manufacturers are returned to beneficiaries in the form of reduced 
premiums for Part D coverage, resulting in lower costs for seniors in 
PDP and MAPD plans.

    Question. What is the process of deciding on which tier a generic 
will be placed in your formularies?

    Answer. Each new-to-market brand and generic medication is reviewed 
based on the available clinical data for the product which includes FDA 
labeling, compendia listing, peer-reviewed literature, real-world 
evidence, comparative effectiveness data, and nationally recognized 
treatment guidelines. Evaluation begins with safety, efficacy, and the 
incremental health outcome value in the context of existing treatment 
options.

    Question. Are generics always tiered as preferred (versus branded 
drugs)?

    Answer. No. Our mission is to negotiate the lowest net cost for any 
drug, and there are instances where it is beneficial to members to 
exclude generic competitors from formulary placement. As generic class 
sizes grow and competition increases, we encourage the continued 
flexibility to evaluate the cost-effectiveness of each medication in 
the class in order to determine tier placement. This includes the 
flexibility to mix brand and generic drugs within the non-preferred 
drug tier (second highest tier on the Humana Part D formulary). Since 
the cost of a brand name drug is not guaranteed to be lower than the 
generic alternative, any requirement to name tiers ``brand'' or 
``generic'' would not help the member understand which tier has a more 
affordable drug. While moving certain high-cost generic drugs to lower 
tiers may produce savings for some members through reduced out-of-
pocket cost-sharing, it would result in all members experiencing higher 
monthly premiums.

    Question. How quickly are generics placed on formularies once FDA 
clears them?

    Answer. Each new-to-market brand and generic medication is reviewed 
based on the available clinical data for the product which includes FDA 
labeling, compendia listing, peer-reviewed literature, real-world 
evidence, comparative effectiveness data, and nationally recognized 
treatment guidelines. Evaluation begins with safety, efficacy, and the 
incremental health outcome value in the context of existing treatment 
options.

    Question. Given the struggles we hear about patients accessing 
insulin, what measures are you taking to ensure that diabetes products 
and different types of insulin are placed on a preferred tier when 
establishing a formulary?

    Answer. Approximately 26 million Americans living with diabetes are 
subject to the pharmaceutical industry's price increases, with 
significant hikes in the cost of the life-saving drug, insulin. More 
specifically:

        The price of insulin has tripled in the last decade.
        From 2013 to 2016, the average price increase for all insulin 
products was 28 percent compared to 12 percent for all brand name drugs 
over the same period.

    Answer. Humana covers both a short- and long-acting insulin on its 
preferred brand drug tier (tier 3 of 5 on the Humana Part D formulary). 
This provides a significant contribution to stabilizing premiums and 
reducing financial burden to members.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
               transparency, rebates, and spread pricing
    Question. During the hearing, I asked an initial question on spread 
pricing and wanted to follow up here. According to the Centers for 
Medicare and Medicaid Services (CMS), total gross spending in 2017 on 
prescription drugs was $154.9 billion in Medicare Part D, $30.4 billion 
in Part B, and $67.6 billion in Medicaid.

    One of the main challenges in lowering the price of prescription 
drugs is that there is a disturbing lack of transparency all along the 
supply chain, from research and development to what the patient is 
expected to pay at the counter. Further, the out-of- pocket costs for 
drugs varies greatly and unpredictably from patient to patient. That is 
why Senate Special Committee on Aging Chairwoman Collins and I 
introduced legislation that would codify the Drug Spending Dashboards 
at the CMS. The dashboards provide cost and spending information for 
drugs in the Medicaid, Medicare Part B, and Medicare Part D 
programs.\7\ With regards to transparency in the prescription drug 
supply chain, please provide answers to the following questions:
---------------------------------------------------------------------------
    \7\ S. 709, 116th Congress, Prescription Drug Pricing Dashboard 
Act. Online at: https://www.congress.gov/bill/116th-congress/senate-
bill/709?q=%7B%22search%22%3A%22drug+dash
board%22%7D&s=1&r=1. Accessed April 23, 2019.

    Is it the policy and practice of your company to negotiate with 
drug manufacturers in good faith and obtain the best and lowest prices 
---------------------------------------------------------------------------
possible for patients and American taxpayers?

    Answer. Yes. As mentioned previously, our mission is to negotiate 
the lowest net cost for any drug.

    Question. Is it the policy and practice of your company that 
patients, providers, researchers, policymakers, and the American people 
in general, know how taxpayer dollars are being spent in the Medicare 
and Medicaid programs?

    Answer. Humana supports transparency in the spending of taxpayer 
dollars and supports legislation providing the Medicare Payment 
Advisory Commission (Med-PAC) with the authority to collect information 
about rebate agreements as long as the disclosure of the information is 
protected.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs?

    Answer. As stated previously, Humana supports legislation that 
would require plan sponsors to provide MedPAC with the authority to 
collect information about rebate agreements similar to the data 
elements below as long as the disclosure of the information is 
protected.

    Question. Please provide a list of actions your company has taken 
to ensure that pharmacists are enabled and allowed to communicate to 
patients how they can pay the lowest out-of- pocket cost possible for 
their prescription drugs.

    Answer. Humana encourages pharmacies to provide our members with 
information on the lowest possible price at which they can obtain their 
prescription drugs. Humana does not currently, and has not in the past, 
employed gag clauses or any other such limitations. Consistent with 
Part D regulatory requirements, Humana members pay the lowest amount of 
applicable member cost sharing, the negotiated price, or the pharmacy 
``usual and customary'' (U&C) cash price. Humana has developed several 
innovative solutions for ensuring that our members are informed when 
making decisions about their prescription drugs.

        IntelligentRx: Humana was the first Part D plan to provide 
physicians and their patients real-time access to drug cost and 
formulary information through our IntelligentRx tool. IntelligentRx 
enables physicians and their patients to make joint treatment decisions 
based upon efficacy and cost for 3.1 million prescriptions annually. 
The tool is currently available to all 10 million Humana members, 
including individuals with Medicare, Medicaid, and employer coverage.

        Maximize Your Benefits (MYB) Program: Humana continuously 
analyzes our members' prescription drug claims to identify 
opportunities for them to save money by switching to a lower-cost drug 
or by utilizing other savings programs, such as foundation-based cost-
sharing assistance. Based upon that analysis, we proactively reach out 
to our members and provide instructions on how to maximize their 
savings opportunities. We estimate that the program saved our members 
almost $200 million in 2018.

        Clinical Pharmacy Programs: Humana ensures that seniors are 
taking the right combination of drugs necessary to improve their health 
through our clinical programs--medication therapy management (MTM) and 
medication reconciliation during transitions of care from facility to 
home. Through these programs, we help seniors by eliminating 
duplicative drugs, identifying lower-cost options, supporting 
medication adherence, and identifying possible adverse drug 
interactions. As a result of these initiatives, beneficiaries have 
increased medication adherence by as much as 13 percent and have 
experienced reduced emergency room visits, urgent care visits, and 
hospital admissions.

  Attachment: Humana Comments to House Ways and Means and Energy and 
            Commerce Bipartisan Draft on Part D Improvements

June 6, 2019

The Honorable Richard Neal          The Honorable Frank Pallone, Jr.
U.S. House of Representatives       U.S. House of Representatives
2309 Rayburn House Office Building  2107 Rayburn House Office Building
Washington, DC 20515                Washington, DC 20515
The Honorable Kevin Brady           The Honorable Greg Walden
U.S. House of Representatives       U.S. House of Representatives
1011 Longworth House Office 
Building                            2185 Rayburn House Office Building
Washington, DC 20515                Washington, DC 20515

Dear Chairman Neal, Chairman Pallone, Ranking Member Brady, and Ranking 
Member Walden:

We are pleased to respond to your discussion draft of legislation to 
reform and improve the Medicare Part D program. We look forward to 
continuing to work with you on public policy solutions to lower drug 
costs for Medicare Part D beneficiaries.

Humana is an integrated health and wellness company focused on 
providing value to seniors by operating a holistic, health outcomes-
driven model that is beneficiary-centric, focuses on chronic care and 
includes locally-integrated health capabilities. Humana currently 
provides Medicare prescription drug coverage to more than 8.4 million 
seniors across all 50 States, with approximately 4 million Medicare 
Advantage (MA) members and 4.4 million Medicare Prescription Drug Plan 
(PDP) members. We also provide medical coverage for approximately 1.5 
million commercial customers, more than 340,000 Medicaid beneficiaries, 
and 5.9 million TRICARE enrollees in the eastern United States. Humana 
is unique in that our pharmacy and medical teams are tightly integrated 
and focused solely on serving our own members--not those of other 
payers. As a result, the savings achieved by our pharmacy programs, 
such as through manufacturer rebates and discounts, accrue directly to 
our members in the form of lower premiums and improved benefits.

Humana's integrated approach to serving seniors delivers a personalized 
and simplified experience through a value-based health ecosystem that 
improves clinical outcomes. This ecosystem includes 233 owned, jointly-
owned, or allied primary care facilities; an ownership interest in the 
Nation's largest home health and hospice providers;\8\ as well as 
initiatives to address social determinants of health.
---------------------------------------------------------------------------
    \8\ Forty percent stake in Kindred at Home and CURO Health 
Services.

We value this opportunity to provide our views on the Part D Program 
and the high cost of prescription drugs for a subset of the Medicare 
population. Your leadership in this area is appreciated, and we stand 
ready to work with you as a partner on our shared goal of using smart, 
---------------------------------------------------------------------------
effective policy changes to lower prescription drug costs.

Our comments on the discussion draft center around three themes:

      Part D is highly successful and complex: Since its inception, 
the prescription drug program has played a pivotal role in supporting 
America's seniors. Currently over 80 percent of seniors have out-of-
pocket costs of less than $275 annually, and 85 percent of seniors 
state that they are satisfied with their prescription drug plan.\9\, 
\10\ However, the program and its funding structures are extremely 
complex. As changes are made, there is risk for unintended consequences 
that could undermine the success of the benefit, especially when it 
comes to the potential for increased premiums. As such, it is important 
to consider the complexities of the Part D program and the unique 
funding mechanisms that have been established for different populations 
in each phase of the benefit.
---------------------------------------------------------------------------
    \9\ ``10 Essential Facts About Medicare Prescription Drug 
Spending:'' https://www.kff.org/infographic/10-essential-facts-about-
medicare-and-prescription-drug-spending/.
    \10\ 2017 CMS Stars Report Card Master Table. Notes: ``Rating of 
Drug Plan.''

      Manufacturers should have accountability for beneficiary costs 
and government reinsurance: At a high level, it is imperative to 
recognize that drug manufacturers alone set list prices for 
prescription drugs. Any policies that are implemented to address 
beneficiary and government costs should address the actions of and 
incentives for drug manufacturers. This proposal does not attempt to 
moderate the price setting practices of manufacturers nor does it 
address the current policies that have created these challenges in the 
market. The committees should modify manufacturers' pricing incentives 
by increasing their liability in the catastrophic phase of the benefit 
---------------------------------------------------------------------------
and by establishing a maximum-out-of-pocket (MOOP) cap.

      Discussion draft will have a minimal impact on committee goals: 
The committees state that the draft legislation will ``improve the 
Medicare Part D prescription drug program for beneficiaries and 
taxpayers alike.''\11\ An analysis of the proposed policy indicates 
that it will result in $84 billion in additional government spending 
while only generating savings for 2.2 percent of Part D beneficiaries 
through the drug spending cap.\12\, \13\ Furthermore, 
beneficiaries will essentially be paying for government reinsurance 
savings in the catastrophic phase of the benefit through a premium 
increase of $5.9 billion.\14\ While the proposal shifts incentives and 
protects some seniors, we believe that there are alternative policies 
that should be explored that will allow for greater savings to the Part 
D program.
---------------------------------------------------------------------------
    \11\ Committee Leaders Announce Call for Comments on Bipartisan 
Medicare Part D Pricing Legislation. House Committee on Energy and 
Commerce. May 23, 2019. Available here: https://
energycommerce.house.gov/newsroom/press-releases/committee-leaders-
announce-call-for-comments-on-bipartisan-medicare-part-d.
    \12\ Oliver Wyman. ``Part D Catastrophic Coverage--Financial 
Implications of Restructuring Liability.'' May 2019. Available here: 
https://www.ahip.org/wp-content/uploads/Restructuring-the-CMS-Federal-
Reinsurance-Program.pdf.
    \13\ MedPAC. ``March 2019 Report to the Congress: The Medicare 
Prescription Drug Program Status Report.'' March 2019. Available here: 
http://medpac.gov/docs/default-source/reports/
mar19_medpac_ch14_sec.pdf?sfvrsn=0.
    \14\ Oliver Wyman. ``Part D Catastrophic Coverage--Financial 
Implications of Restructuring Liability.'' May 2019. Available here: 
https://www.ahip.org/wp-content/uploads/Restructuring-the-CMS-Federal-
Reinsurance-Program.pdf.

Less than 15 years ago, Americans did not have access to an outpatient 
prescription drug benefit under Medicare. As the committees have noted, 
today more than 46 million seniors have access to life-improving 
medicines through Part D. At the inception of the Medicare Part D 
program, Congress designed a competitive marketplace where PDP sponsors 
competed with one another, primarily based on premiums. Seniors 
enrolled in prescription drug coverage have gained significant value 
---------------------------------------------------------------------------
from the program's focus on market competition including:

      Stable premiums through the 13 years of the program, averaging 
approximately $30 per month negotiating rebates to lower costs for all 
seniors;\15\
---------------------------------------------------------------------------
    \15\ ``10 Essential Facts About Medicare Prescription Drug 
Spending:'' https://www.kff.org/infographic/10-essential-facts-about-
medicare-and-prescription-drug-spending/.
---------------------------------------------------------------------------
      Generic dispensing rates near 90 percent;\16\
---------------------------------------------------------------------------
    \16\ Ibid.
---------------------------------------------------------------------------
      An average of more than 26 Part D plan sponsor options;\17\
---------------------------------------------------------------------------
    \17\ Ibid.
---------------------------------------------------------------------------
      A 50-percent reduction in medication non-adherence due to 
affordability;\18\ and
---------------------------------------------------------------------------
    \18\ Diebold, Jeffrey. ``The Effects of Medicare Part D on Health 
Outcomes of Newly Covered Medicare Beneficiaries.'' The Journals of 
Gerontology: Series B, Volume 73, Issue 5, July 2018, pages 890-900: 
https://academic.oup.com/psychsocgerontology/article/73/5/890/2631953.
---------------------------------------------------------------------------
      Beneficiary satisfaction rates near 90 percent.\19\
---------------------------------------------------------------------------
    \19\ 2017 CMS Stars Report Card Master Table. Notes: ``Rating of 
Drug Plan.''

Despite the benefits realized by Part D beneficiaries, there are still 
seniors who struggle with the increasing cost of prescription drugs. 
This is especially true for the one million beneficiaries who are not 
eligible for the low-income subsidy (LIS) and reach the catastrophic 
phase of the benefit each year. These individuals generally spend an 
additional $3,041 annually in out-of-pocket costs for their 
prescription drug needs while in the catastrophic phase.\20\
---------------------------------------------------------------------------
    \20\ Kaiser Family Foundation. ``No Limit Medicare Part D Enrollees 
Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on 
Spending:'' https://www.kff.org/report-section/no-limit-medicare-part-
d-enrollees-exposed-to-high-out-of-pocket-drug-costs-without-a-hard-
cap-on-spending-issue-brief/; Kaiser Family Foundation. ``10 Essential 
Facts About Medicare and Prescription Drug Spending.'' January 29, 
2019: https://www.kff.org/infographic/10-essential-facts-about-
medicare-and-prescription-drug-spending/; Kaiser Family Foundation. 
``Medicare Part D in 2016 and Trends Over Time.'' September 16, 2016: 
https://www.kff.org/report-section/medicare-part-d-in-2016-and-trends-
over-time-section-4-the-low-income-subsidy-program/. Part D enrollment 
figures reflect 2016 enrollment.

As the committees contemplate changes to the Part D benefit, we 
respectfully request an examination of all policy tradeoffs to achieve 
the goal of reducing drug costs for beneficiaries and taxpayers. It is 
again imperative to recognize that drug manufacturers alone set list 
prices. Without robust policy changes that increase competition and 
provide plans with additional tools and negotiating leverage, as well 
as the development of new funding mechanisms to address the 
unsustainable costs of sole source specialty drugs, well-intended 
components of the discussion draft, aimed at reducing drug costs for 
---------------------------------------------------------------------------
beneficiaries and taxpayers, will fall short.

Specifically, while we support the committees' intention to protect 
beneficiaries from unaffordable out-of-pocket costs by establishing a 
MOOP in Part D, it is vital that this addition is thoughtfully 
designed. We strongly urge the committees to use earlier well-intended 
consumer-centric policy changes, such as the protected classes and The 
Orphan Drug Act, as a frame of reference for potential unintended 
consequences that could impact the market Both of these policies have 
limited competition, produced exorbitantly high drug list prices, and 
resulted in a refusal by manufacturers to entertain negotiated price 
concessions. Likewise, if manufacturers are not held responsible for 
the costs associated with establishing a Part D MOOP and restructuring 
reinsurance, manufacturer pricing strategies related to specialty drugs 
will continue their upward trajectory.

Humana's Efforts to Support Beneficiaries With Prescription Drug Costs

Humana is focused on providing seniors with the best care possible. As 
part of that goal, Humana has developed innovative solutions for 
ensuring that our members are informed when making decisions about 
their prescription drugs to reduce costs and improve health outcomes 
including:

      IntelligentRx: Humana was the first Part D plan to provide real-
time access to drug cost and formulary information to physicians and 
their patients through our IntelligentRx tool. IntelligentRx enables 
physicians and their patients to make joint treatment decisions based 
upon efficacy and cost for 3.1 million prescriptions annually. The tool 
is currently available to all 10 million Humana members, including 
individuals with Medicare, Medicaid, and employer coverage.
      Maximize Your Benefits (MYB) Program: Humana continuously 
analyzes our members' prescription drug claims to identify 
opportunities for them to save money by switching to a lower-cost drug 
or by pointing them to other savings programs such as foundation-based 
cost-sharing assistance. Based upon that analysis, we proactively reach 
out to our members and provide instructions on how to maximize their 
savings opportunities. We estimate that the program saved our members 
almost $200 million in 2018.
      Clinical Pharmacy Programs: Humana also ensures that seniors are 
taking the right combination of drugs necessary to improve their health 
through our clinical programs--medication therapy management (MTM) and 
medication reconciliation during transitions of care from facility to 
home. Through these programs, we help seniors by eliminating 
duplicative drugs, identifying lower-cost options, supporting 
medication adherence, and identifying possible adverse drug 
interactions. As a result of these initiatives, beneficiaries have 
increased medication adherence by as much as 13 percent and have 
experienced reduced emergency room visits, urgent care visits, and 
hospital admissions.

In the sections below we provide our assessment of current policy 
challenges facing Part D, our viewpoints on the specific policy 
questions and issues on which the committees are seeking feedback, and 
our recommendations on additional legislative actions the committees 
should contemplate as part of any proposal to modernize Part D. We look 
forward to hearing your feedback and to answering any questions you 
might have.

Sincerely,

Douglas Stoss
Vice President, Federal Affairs
Humana, Inc.

                                 ______
                                 

I. The Policy Challenges in Part D and the Prescription Drug Market

Policy Challenge #1: Impact of High Cost Specialty Drugs in Part D

The Kaiser Family Foundation analyzed the expected annual cost to 
beneficiaries related to select specialty drugs for cancer, hepatitis 
C, multiple sclerosis, and rheumatoid arthritis. Results of the 
analysis show that out-of-pocket costs to beneficiaries taking these 
medications could be as high as $16,551 a year.\21\
---------------------------------------------------------------------------
    \21\ Kaiser Family Foundation. ``10 Essential Facts About Medicare 
and Prescription Drug Spending.'' January 29, 2019. Available here: 
https://www.kff.org/infographic/10-essential-facts-about-medicare-and-
prescription-drug-spending/.

[GRAPHIC] [TIFF OMITTED] T0919.015


Humana's experience reflects the overall Part D program challenges 
highlighted in the Kaiser Family Foundation analysis. In 2016, 46 
percent of drugs on Humana's specialty tier triggered catastrophic 
coverage on the first fill. In 2018, two percent of Humana 
beneficiaries who utilized specialty drugs comprised 36 percent of 
total Part D spending. In 2 years, Humana projects that seniors 
utilizing specialty drugs could account for as much as 50 percent of 
total Part D spending. Additionally, research has demonstrated that the 
price of oral specialty drugs has increased by 20.6 percent between 
2008 and 2016 with 71.1 percent of that increase attributable to drugs 
that are new to the market.\23\ This trend of increasingly high launch 
prices has further exacerbated the challenges associated with specialty 
drugs in the Part D program.
---------------------------------------------------------------------------
    \22\ Ibid.
    \23\ Hernandez I. et. al. ``The Contribution of New Product Entry 
Versus Existing Product Inflation in the Rising Cost of Prescription 
Drugs.'' Health Affairs. 2019 38:1 available from: https://
www.healthaffairs.org/doi/abs/10.1377/hlthaff.2018.05147.

Additionally, seniors who reach the catastrophic phase are commonly 
taking high cost specialty drugs with little to no competition. The 
most recent Medicare Payment Advisory Commission (MedPAC) Report to the 
Congress from March 2019 echoed the challenges for the population of 
seniors with high drug costs:\24\
---------------------------------------------------------------------------
    \24\ ``March 2019 Report to the Congress: Medicare Payment 
Policy:'' http://medpac.gov/docs/default-source/reports/
mar19_medpac_ch14_sec.pdf?sfvrsn=0.

        Ten times the number of seniors reached the catastrophic phase 
        on first fill in 2016: The number of seniors who reached the 
        catastrophic phase through a single claim increased from 33,000 
        in 2010 to 360,000 in 2016. Non-LIS beneficiaries were more 
---------------------------------------------------------------------------
        likely to have this experience than LIS beneficiaries.

        Spending on specialty drugs accounted for four times as much of 
        total spend in 2017 compared to 2007: Specialty-tier drugs 
        accounted for 25 percent of Part D overall gross spending in 
        2017, an increase from 6 percent in 2007.

Some observers have suggested that Part D plan sponsors need to have 
more ``skin in the game'' through changes such as point-of-sale 
rebates. Even if point-of-sale rebates were instituted in Part D, there 
would still be a high degree of reinsurance spend because of the ever-
increasing launch prices of specialty drugs.

Policy Challenge #2: Anti-competitive Behavior by Drug Manufacturers

As numerous congressional hearings have highlighted, a major factor 
contributing to the increase in drug spending is the list price of 
prescription drugs. Drug manufacturers alone set the list price of 
prescription drugs. Drug manufacturers have also historically engaged 
in a host of tactics meant to delay generic competition, including 
preventing generic manufacturers from obtaining drug samples, utilizing 
the Risk Evaluation and Mitigation Strategy (REMS) process to block 
timely entry of generics, utilizing loopholes in the patent system to 
delay and thwart the market entry of lower cost competitors, and paying 
generic manufacturers to delay market entry. According to the Federal 
Trade Commission (FTC), these anti-
competitive ``pay-for-delay'' actions alone increase costs for seniors 
and American taxpayers by $3.5 billion annually.\25\
---------------------------------------------------------------------------
    \25\ See https://www.ftc.gov/sites/default/files/documents/reports/
pay-delay-how-drug-company-pay-offs-cost-consumers-billions-federal-
trade-commission-staff-study/100112payfor
delayrpt.pdf.

There are numerous additional examples where a brand drug manufacturer 
has delayed competition to preserve its monopoly, resulting in 
---------------------------------------------------------------------------
astronomically high drug prices:

      Humira, the highest-selling drug in the world, has received six 
different orphan drug designations since 2005. Its price increased by 
200 percent from 2012 to 2018, to $38,000 per patient.\26\
---------------------------------------------------------------------------
    \26\  FDA, https://www.accessdata.fda.gov/scripts/opdlisting/oopd/
listResult.cfm.
---------------------------------------------------------------------------
      The REMS for Thalomid, an earlier iteration of Celgene's top-
selling cancer drug Revlimid, has been patented over 14 times in order 
to delay the development of generics. The price for Revlimid rose from 
$6,195 in 2006 to $16,691 in 2017.\27\ The Medicare program spent an 
average of $88,437 per beneficiary for a year of Revlimid treatment in 
2017.\28\
---------------------------------------------------------------------------
    \27\ Alison Kodjak, ``How a Drugmaker Gamed the System to Keep 
Generic Competition Away,'' NPR, May 17, 2018.
    \28\ CMS 2017 Part D Drug Spending Dashboard, available here: 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-
Trends-and-Reports/Information-on-Prescription-Drugs/
MedicarePartD.html.

These actions by brand drug manufacturers weaken the ability of plan 
sponsors to negotiate lower costs for prescription drugs. Plan sponsors 
have been most successful negotiating lower drug costs on behalf of 
beneficiaries when there is sufficient competition in the market. In 
---------------------------------------------------------------------------
the past 2 years:

      Federal spending on retail prescription drugs has remained flat: 
For the second consecutive year, retail prescription drug growth has 
decreased; the 0.4-percent growth has been driven by a continued shift 
to lower-cost generic drugs and declines in generic drug prices.\29\
---------------------------------------------------------------------------
    \29\ CMS Office of the Actuary Releases 2017 National Health 
Expenditures, available online at: https://www.cms.gov/newsroom/press-
releases/cms-office-actuary-releases-2017-national-health-expenditures.
---------------------------------------------------------------------------
      Cost of drugs with limited competition has increased at double 
the rate of all drugs: Conversely, there have been significant price 
increases for drugs subject to limited or no competition. In 2016, the 
cost of single-source drugs with no generic alternatives increased at 
more than double the rate of average annual drug spending.\30\
---------------------------------------------------------------------------
    \30\ Blue Health Intelligence. ``Rising costs for patented drugs 
drive growth of pharmaceutical spending in the U.S.'' May 2017. 
Available here: https://www.bcbs.com/the-health-of-america/reports/
rising-costs-patented-drugs-drive-growth-pharmaceutical-spending-us.

The trend of increasing list prices for prescription drugs with limited 
competition is seen for prescription drugs administered in both 
clinical settings, where drugs are typically covered by Medicare Part B 
and generally considered specialty drugs, and those dispensed at the 
---------------------------------------------------------------------------
pharmacy counter, where drugs are typically covered by Medicare Part D.

      90 percent of the Medicare B drugs with the highest expenditures 
have no generic: A 2017 study performed by the Government 
Accountability Office (GAO) found that Medicare Part B drugs with the 
highest expenditures are predominantly single-sourced (84 percent) 
without a generic option (90 percent).\31\ This has resulted in a 
market where eight of the top ten high cost Part B drugs have an annual 
cost of $10,000 to $30,000.\32\
---------------------------------------------------------------------------
    \31\ GAO, ``Medicare Represented at Least Half of the Market for 22 
of the 84 Most Expensive Drugs in 2015,'' GAO-18-83: Published: Dec. 
18, 2017, available online at: https://www.gao.gov/assets/690/
689082.pdf.
    \32\ MedPAC, ``Medicare and the Healthcare Delivery System,'' 
available online at: http://www.medpac.gov/docs/default-source/reports/
jun17_reporttocongress_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------
      List prices increase beyond inflation for Part D drugs produced 
by fewer than five manufacturers: An analysis of 2017 Part D 
prescription drug spending found that prescription drugs with less 
competition were more likely to have list price increases than drugs 
with five or more manufacturers.\33\
---------------------------------------------------------------------------
    \33\ Based on Humana analysis of the CMS 2017 Part D Drug Spending 
Dashboard and Data, available online at: https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD.html. The CMS dashboard includes 
all Part D organizations and plan types. Part D PDE records were 
summarized by drug by linking National Drug Codes (NDCs) available in 
the PDE data to a commercially available database and aggregated across 
all strengths, dosage forms, and routes of administration to the drug 
brand name and generic name. CMS did not provide NDCs in the public use 
file. Over-the-counter drugs in the PDE data are excluded as well as 
NDCs with fewer than 50 claims in the current (2017) or previous year 
(2016). In addition, NDCs with large variations in reported units from 
year to year were reviewed by CMS on a case-by-case basis and data 
anomalies were excluded. Drug spending metrics for Part D drugs are 
based on the gross drug cost, which includes ingredient cost, 
dispensing fees, sales tax, and applicable vaccine administration fees. 
Part D drug spending represents total spending for the prescription 
claim, including amounts paid by the Medicare Part D plan and 
beneficiary payments. The Part D spending metrics do not reflect any 
manufacturers' rebates. For purposes of this analysis, we removed Part 
D covered supplies, such as syringes and alcohol swipes for diabetics, 
and weighted average change in spending per dosage unit by 2017 claim 
volume. Average 2017 inflation rate is sourced from the Bureau of Labor 
Statistics website.
---------------------------------------------------------------------------

Year Over Year Growth in Prescription Drug Costs Decreases With 
                    Competition in Part D 
                    [GRAPHIC] [TIFF OMITTED] T0919.016
                    
Policy Challenge #3: Unintended Consequences of Well-Intended Drug 
                    Policy Decisions That Have Affected Part D

Price competition for drugs in the Part D market has been inhibited by 
the unintended consequences of well-intended policy decisions. Policies 
crafted to maintain access have caused near-market failure for the 
population of drugs with little to no competition--ultimately providing 
manufacturers with a licensed monopoly to impose astronomically high 
prices on the American taxpayer. In these cases manufacturers have no 
incentive to lower prices, and plan sponsors, who have a mandate to 
cover the drugs, no longer have the tools to manage the cost of drugs. 
This is especially true when compared to the commercial market, where 
there is far more flexibility in formulary development. Some of the 
policies that contributed to this market reality include:\34\
---------------------------------------------------------------------------
    \34\ Ibid.

      FDA Accelerated Drug Approval: Due to the increasing costs of 
specialty drugs, clinically meaningful outcomes that result in actual 
savings to the health care system are essential for all new products 
being reviewed by the FDA. Manufacturers have historically focused drug 
development on safety and clinical efficacy compared to a placebo for 
regulatory approval. FDA accelerated approval is often based on 
surrogate markers as opposed to outcomes data which are directly tied 
to improvements in patient health. This is a very real issue in the 
treatment of oncologic diseases where products are approved with 
limited phase 2 clinical trial data which are not designed to assess 
outcomes for a broad patient population or long-term. In a review of 
the 93 cancer drug indications granted accelerated approval since 1992, 
only 19 drugs (20 percent) had improvement in overall survival while 19 
drugs (20 percent) simply met the original surrogate end point used in 
the accelerated approval.\35\ To support better health outcomes, the 
FDA approval process should be transformed from accelerated approval 
based on surrogate endpoints to a system based on outcomes and value 
that improves health. Such a shift in FDA approval of high cost 
specialty drugs would facilitate payment and reimbursement subject to a 
Coverage with Evidence Development (CED). CED would allow Medicare 
Advantage and Part D plans to provide coverage and reimbursement based 
on shared risk drug manufacturers with the condition that additional 
data is systemically produced by manufacturers through prospective 
registries or additional controlled trials to assess actual health 
outcomes that may be produced. Once sufficient data is reported, 
permanent coverage and reimbursement based on longer term health 
outcomes would be established.
---------------------------------------------------------------------------
    \35\ JAMA Intern Med. Published online May 28, 2019. doi:10.1001/
jamainternmed.2019.0462.

      Orphan Drugs: In order to incentivize manufacturers to invest in 
treatments for orphan drugs, longer exclusivity periods are provided as 
a result of the Orphan Drug Act of 1983. However, this policy has been 
abused by manufacturers who will obtain multiple orphan drug 
---------------------------------------------------------------------------
designations for the same drug in order to delay competition.

      Requirement of Two Drugs per Class: The Centers for Medicare and 
Medicaid Services (CMS) currently requires Part D plan sponsor 
formularies to cover at least two drugs in every Part D covered 
therapeutic category and class as long as there are at least two drugs 
available. When two drugs are mandated to be covered in a class, 
manufacturers of a drug with only one other competitor typically refuse 
to negotiate rebates or discounts in Medicare Part D because they know 
their products must be covered. The existing policy increases costs to 
the plan sponsor, which are passed through not only to individuals in 
the form of higher premiums, but also to the Federal Government in 
terms of increased direct subsidy payments.

      Protected Classes: CMS requires that there must be multiple 
treatment options in the protected classes. When negotiating with 
manufacturers for drugs in the protected classes, there are few tools 
that health plans can employ to lower prices. The drugs in the 
protected classes include treatments for conditions such as cancer and 
HIV, which are typically treated by high cost specialty drugs like 
Revlimid.

      Pharmacy Network Access Standards: CMS's current network 
adequacy standards focus on ensuring that beneficiaries have broad 
access to a wide range of pharmacies within two to fifteen miles of a 
beneficiary's residence. However, given the consolidation in the retail 
pharmacy market, the shift to consumers preferring online shopping and 
delivery, and the shift to the use of mail order pharmacies for 
convenience, these standards are now over inflating the size of the 
network due to the need to contract with most major retailers and 
community pharmacies to meet CMS's defined network access standards. 
The artificial inflation in pharmacy network size also comes with 
inflated costs that impact the cost of the program for both 
beneficiaries and taxpayers.
            II. The Committees' Draft Legislative Changes to Improve 
                    Part D

Proposal #1: Establishing a Part D Maximum Out-of-Pocket (MOOP)

The discussion draft contemplates a new maximum out-of-pocket (MOOP) on 
prescription drugs costs for Medicare beneficiaries in Part D based on 
the current catastrophic threshold. This policy is aimed at addressing 
the high costs created for the 8 percent of seniors who reach the 
catastrophic phase each year, mainly due to the use of high cost 
specialty drugs. Of those seniors who reach the catastrophic level, 
only 2.2 percent are non-LIS beneficiaries who do not currently have a 
MOOP in the Part D benefit.\36\
---------------------------------------------------------------------------
    \36\ MedPAC. ``March 2019 Report to the Congress: The Medicare 
Prescription Drug Program Status Report.'' March 2019. Available here: 
http://medpac.gov/docs/default-source/reports/
mar19_medpac_ch14_sec.pdf?sfvrsn=0.

The implementation of a MOOP is most likely to help non-LIS seniors who 
take patent-protected drugs that treat hepatitis C, diabetes, cancer, 
and various autoimmune disorders. Oliver Wyman modeled the cost 
implications of the implementation of a MOOP with $0 cost sharing for 
beneficiaries once they hit the catastrophic phase. The analysis 
estimates that adding a MOOP to the Part D benefit would result in a 
$59.3-billion decrease in OOP cost sharing over 10 years for the 2.2 
percent of non-LIS beneficiaries who reach the catastrophic phase of 
the benefit.\37\ Offsetting these savings, all beneficiaries would see 
a premium increase of $20 billion over 10 years resulting in a net 
$39.3 billion in savings for beneficiaries. Meanwhile, government 
spending would increase significantly with an additional $84.7 billion 
in spending over a 10-year period. The MOOP, while beneficial to 2.2 
percent of all Part D beneficiaries, will result in government spending 
over $2 for every $1 in beneficiary savings.
---------------------------------------------------------------------------
    \37\ Oliver Wyman. ``Part D Catastrophic Coverage--Financial 
Implications of Restructuring Liability.'' May 2019. Available here: 
https://www.ahip.org/wp-content/uploads/Restructuring-the-CMS-Federal-
Reinsurance-Program.pdf.


        Table 1. Estimated Costs Associated With Part D MOOP \38\
------------------------------------------------------------------------
                                                          Change  (in
                      Liability                            Billions)
------------------------------------------------------------------------
Premium                                                           $20.0
------------------------------------------------------------------------
\38\ Ibid.
Cost Sharing                                                    $(59.3)
------------------------------------------------------------------------
    Total Beneficiary Costs                                     $(39.3)
========================================================================
Direct Subsidy                                                    $63.8
------------------------------------------------------------------------
Reinsurance                                                       $34.3
------------------------------------------------------------------------
Low-Income Premium Subsidy                                      $(22.7)
------------------------------------------------------------------------
Low-Income Cost Sharing Subsidy                                    $9.3
------------------------------------------------------------------------
    Total Government Cost                                         $84.7
------------------------------------------------------------------------


Furthermore, according to CMS and HHS OIG guidance drug ``manufacturers 
may sponsor patient assistance programs (PAPs) that provide financial 
assistance or drug free product (through in-kind product donations) . . 
. to augment any existing prescription drug coverage.'' In other words, 
with some restrictions, PAPs can assist Part D enrollees.\39\ While 
these dollars do not contribute to the technical CMS Part D true-out-
of-pocket cost (TrOOP) calculation for plan payment purposes and 
determining the member's Part D phase progression (i.e., deductible 
phase vs initial coverage limit, etc.) they do shield the beneficiary 
from literally paying out of their own pocket.
---------------------------------------------------------------------------
    \39\ CMS, ``Pharmaceutical Manufacturer Patient Assistance Program 
Information,'' available online at: https://www.cms.gov/Medicare/
Prescription-Drug-Coverage/PrescriptionDrugCovGen
In/PAPData.html; and HHS OIG Advisory Opinion No. 06-03, available 
online at: https://oig.hhs.gov/fraud/docs/advisoryopinions/2006/
AdvOpn06-03F.pdf.

Available data indicates that manufacturers spend considerable amounts 
on PAPs. According to the Congressional Research Service, the Abbvie 
Patient Assistance Foundation received $1 billion in 2015; the Johnson 
& Johnson Patient Assistance Foundation received $662 million; and the 
Bristol Myers Squibb Patient Assistance Foundation received $620 
million.\40\ One independent analysis of tax records indicates that 
manufacturers spend approximately $7 billion per annum on PAPs.\41\ 
Manufacturers must be substantively responsible for financing a Part D 
MOOP or they will realize a windfall profit by transferring their PAP 
spending liabilities onto the Medicare Trust Fund, plans, and America's 
seniors.
---------------------------------------------------------------------------
    \40\ Congressional Research Service, ``Prescription Drug Discount 
Coupons and Patient Assistance Programs (PAPs) R44264,'' available 
online at: https://crsreports.congress.gov/product/pdf/R/R44264.
    \41\ Frerick, Austin. ``The Cloak of Social Responsibility: 
Pharmaceutical Corporate Charity.'' Tax Notes 153.9 (2016): 1151.

As the committees consider how to fund the MOOP for beneficiaries who 
exceed the catastrophic threshold, it is critical that any proposal is 
paired with prescription drug pricing reforms that meaningfully reduce 
prescription drug costs by improving competition in the pharmaceutical 
market. Without these types of reforms, it is likely the current trend 
in inflationary pricing will be exacerbated as there will continue to 
be fewer incentives for manufacturers to lower prices when beneficiary 
OOP costs are capped for high costs drugs that progress beneficiaries 
to the catastrophic phase of the benefit. Stated another way, the costs 
of implementing a Part D MOOP should be borne by the pharmaceutical 
---------------------------------------------------------------------------
industry.

As the committees have stated and we mention previously, the goal of 
the draft improvements to Part D is to decrease costs for beneficiaries 
and the Medicare Trust Fund. The MOOP proposal adds additional pressure 
to the Medicare Trust Fund through $84.7 billion in increased 
expenditures to reduce out-of-pocket costs for 2.2 percent of 
beneficiaries.\42\ The proposal does not address the true policy 
challenges in Part D--the role of specialty drugs, anti-competitive 
practices by manufacturers, and the impacts of past policy decisions. 
Once again, drug manufacturers alone set the list price of prescription 
drugs; nothing in the discussion draft compels drug manufacturers to 
lower the list price of drugs.
---------------------------------------------------------------------------
    \42\ Ibid.

Recommended legislative actions to lower list prices and address anti-
                    competitive behavior

The examples of anti-competitive pricing and the importance of 
competition require innovative policy approaches to enhance competition 
in the market, especially for specialty drugs. Humana strongly supports 
the introduction of HR. 965, the Creating and Restoring Equal Access to 
Equivalent Samples (CREATES) Act, as well as HR. 2375, the Preserve 
Access to Affordable Generics and Biosimilars Act. We believe the 
enactment of these bills will encourage the development of generic and 
biosimilar drugs that will infuse additional competition into the 
market, prevent brand drug manufacturer REMS abuses that block generic 
competition, and penalize brand drug manufacturers for engaging in pay-
for-delay agreements.

Furthermore, Humana strongly urges the committees to encourage CMS and 
other Federal agencies to remove barriers to prescription drug 
competition and regulations that are abused in anticompetitive ways and 
are harmful to affordable drug access for beneficiaries. We 
specifically have recommended that the administration take the 
following actions to address abuses of regulations and anticompetitive 
behaviors:

      Leverage CMS data to illustrate the cost impacts of 
anticompetitive behaviors such as patent ``evergreening''--CMS is best-
positioned to leverage its claims from Parts A, B, and D to empirically 
illustrate the Medicare Trust Fund and beneficiary impacts associated 
with these and other anticompetitive behaviors.

      Issue information regarding manufacturers' drug pipelines and 
anticipated drug prices prior to market launch--It is critical for Part 
D and MA plan sponsors and the CMS Office of the Actuary (OACT) to be 
aware of anticipated new drugs, new drug indications, and their 
potential launch prices. These data are necessary to make critical 
decisions about MA and Part D bidding parameters, to make special 
updates to the MA and Part D risk adjustment models, and for OACT to 
perform its long-term program cost estimation duties for the Medicare 
Trustees. With the right information, this decision-making will have a 
significant impact on our ability to provide lower drug costs and 
premiums for beneficiaries. While we understand there are proprietary 
data provisions and general uncertainty around approvals of new 
therapies, we believe that, between clinicaltrials.gov and PubMed, 
there is a notable opportunity to produce a transparent summary 
dashboard of the drug pipeline in one place. We ask that HHS ensure 
that the FDA works toward this goal and provides CMS and plan sponsors 
with this necessary information.

Proposal #2: Changes to Part D Plan Reinsurance Liability

The discussion draft contemplates a structure for Part D plans to 
better manage costs by reducing the government's share of catastrophic 
coverage from 80 percent to 20 percent over four years which has also 
been recommended by MedPAC and the President's FY 2019 and 2020 
budgets. These proposals have typically been accompanied by a 
recommendation to provide Part D plan sponsors with additional 
negotiating tools to lower costs. We note that the discussion draft 
does not include such proposals.

We also note a growing misunderstanding that, somehow, Part D plan 
sponsors are not negotiating with manufacturers to the fullest extent 
possible because the plans only have 15-percent liability in the 
catastrophic phase. We want to point out that even 15-percent plan 
liability in the catastrophic phase is significant. Under the current 
Part D structure, Humana does not negotiate any less vigorously for the 
lowest net drug cost because certain drugs may propel a beneficiary 
into the catastrophic phase of the benefit. Price concessions are 
negotiated with manufacturers 6 to 12 months in advance of a given plan 
year and enrollment and drug utilization is uncertain at the time of 
these negotiations. Nonetheless, plans are competitively motivated to 
have the lowest premium and we strive for the greatest price 
concessions that can be achieved to reach that goal regardless of the 
phase of the benefit in which drug utilization occurs.

Given our earlier comments and the significant role that manufacturers 
play in creating this issue in the first place, manufacturers must bear 
a significant percentage of the cost if Congress pursues policy changes 
in Part D reinsurance. In particular, if a MOOP is also implemented in 
the Part D benefit, such a policy is likely to be inflationary for 
pharmaceutical prices as there is essentially no incentive to lower 
prices without significant manufacturer liability.

Humana believes this reinsurance policy change would fail to address 
high cost specialty drugs, the primary Part B and D trend drivers, and 
would create a significant destabilization of the program, increase 
beneficiary premiums, and exacerbate incentives to avoid enrollment of 
high-cost beneficiaries without new tools and levers to manage 
utilization. Without any meaningful changes to the current Part D 
program rules to increase plan flexibility, Oliver Wyman estimates this 
proposal in isolation would increase Part D program costs for the 
government by $6.90 billion over 10 years.\43\ According to the 
analysis, the increase in spending will primarily be driven by plan 
sponsors factoring in additional risk margin due to the larger share of 
liability in the catastrophic phase of the benefit and smaller health 
plans purchasing private reinsurance to protect from a larger share of 
new risk. In this scenario, the analysis projects that beneficiary 
costs would also increase by approximately $5.9 billion over the same 
period--essentially further cannibalizing any savings incurred by the 
Part D program.\44\ In this scenario, beneficiaries are essentially 
paying for government savings in the catastrophic phase of the benefit 
through a premium increase of $5.9 billion.
---------------------------------------------------------------------------
    \43\ Oliver Wyman. ``Part D Catastrophic Coverage--Financial 
Implications of Restructuring Liability.'' May 2019. Available here: 
https://www.ahip.org/wp-content/uploads/Restructuring-the-CMS-Federal-
Reinsurance-Program.pdf.
    \44\ Ibid.


Table 2. Estimated Costs Associated With Part D Reinsurance Reallocation
                                  \45\
------------------------------------------------------------------------
                                                          Change  (in
                      Liability                            Billions)
------------------------------------------------------------------------
Premium                                                           $5.90
------------------------------------------------------------------------
 \45\Ibid.
Cost Sharing                                                      $0.00
------------------------------------------------------------------------
    Total Beneficiary Costs                                       $5.90
========================================================================
Direct Subsidy                                                  $733.70
------------------------------------------------------------------------
Reinsurance                                                   $(724.20)
------------------------------------------------------------------------
Low-Income Premium Subsidy                                      $(2.60)
------------------------------------------------------------------------
Low-Income Cost Sharing Subsidy                                   $0.00
------------------------------------------------------------------------
    Total Government Cost                                         $6.90
------------------------------------------------------------------------

While the 4-year phase-in of increased plan liability in the 
catastrophic phase of the benefit should soften beneficiary premium 
increases and program disruption, increasing plan reinsurance liability 
without adding additional tools to manage the benefit will not reduce 
program costs. The proposed mechanism to offset these increased Part D 
program costs is increased plan incentive to manage high cost drugs to 
remain competitive. It is important to note that while the funding 
mechanism varies through the benefit phases, the benefit itself and the 
coverage requirements do not. For example, the formulary and 
utilization management policies are not altered when a beneficiary 
enters the catastrophic phase. By changing the reinsurance liability, 
plan sponsors will not gain any additional flexibility to better manage 
the use of high cost drugs. Many high cost drugs are sole source and 
required to be covered due to CMS protected class status, must be 
covered due to Part D formulary outlier rules, and have limited 
utilization management opportunities. In addition, the LIS population 
comprises a significant proportion of high cost drug utilization where 
cost sharing is statutorily limited and cannot be meaningfully used to 
manage utilization.

As the committees have stated previously, the goal of the proposed 
improvements to Part D is to decrease costs for beneficiaries and the 
Medicare Trust Fund. The proposed changes to plan reinsurance liability 
achieve neither of these goals in a substantive way as proposed_they 
only fuse more risk into the market and shift current government 
liabilities to seniors.

Policy Recommendations for Additional Plan Flexibility

Any changes to the allocation of reinsurance should be accompanied by 
additional tools to support the management of high cost drugs, lessen 
barriers to outcomes based contracting, and allow for additional 
formulary flexibility. We recommend the following policy actions:

Providing Seniors With More Options

      Allow Plan Sponsors to Offer More Than Three PDPs: Proprietary 
market research performed on behalf of Humana indicates that 
beneficiaries are interested in greater variation in the products 
offered in Part D. The research found that beneficiaries believe the 
optimal number of choices in Part D would include five different PDPs 
spanning across health status complexity and customer service 
variation. An increasing number of seniors have indicated that they are 
interested in a more convenient and service oriented PDP. Conversely, 
there was still a significant portion of beneficiaries who were driven 
by lowest possible cost. These findings were reinforced by market 
actions in 2019 when 28 percent of PDP enrollees in regions with new 
products were enrolled in a new PDP offered as a result of elimination 
of the meaningful difference requirement for enhanced alternative (EA) 
PDPs.\46\
---------------------------------------------------------------------------
    \46\ Humana analysis of CMS State County Contract Enrollment File 
from January 2019, available here: https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
MCRAdvPartDEnrolData/Monthly-PDP-Enrollment-by-State-County-
Contract.html.

      High Cost Specialty Drugs: As discussed previously, two percent 
of our beneficiaries who utilized specialty drugs comprised 36 percent 
of total Part D spending in 2018. In two years, Humana projects that 
seniors utilizing specialty drugs could account for as much as 50 
percent of total Part D spending. We welcome the opportunity to explore 
potential solutions for alternative pooling or funding mechanisms for 
this growing category of products.

Lessening Barriers to Outcome-Based Contracting

      Outcome (or Value-Based) Contracts: Outcome-based contracting 
should be leveraged and reserved for disease states with limited or no 
competion and serve as a feedback loop to answer the uncertainies that 
exist around first-in-class agents, accelerated approval drugs, and 
orphan drugs approved in small populations in order to inform future 
formulary and coverage decisions. Three disease states account for 70 
percent of the pharmaceutical industry's drug pipeline--oncology, 
infectious diseases, and central nervous system (CNS) disorders.\47\ 
And the proportion of new therapies approved as orphan drugs has 
ballooned. In 2015, 21 orphan drugs were approved, accounting for 47 
percent of all new medicines, up from just 29 percent in 2010; in 2016, 
nine more orphans won approval, 40 percent of the total.\48\ These 
drugs are typically fast tracked, offered breakthrough status, and 
approved on phase 2 trials without the rigorous standards other drug 
classes are held to. These are the areas of focus where outcome-based 
contracting would be most helpful. Lastly, as more and more drugs with 
$500k-$1M price tags reach the market, there is a need to ensure that 
the prices of such drugs are commensurate with their benefits. While 
the reward may be curing a genetic disease or cancer, and failures may 
be limited (i.e., less than 5 percent), it is critical that payers 
gather data and identify which specific populations fail to benefit 
from a given therapy and that manufacturers cover costs where therapies 
fail to deliver the intended health outcomes.
---------------------------------------------------------------------------
    \47\ See https://www.clinicalleader.com/doc/top-three-therapy-
overall-pharmaceutical-industry-pipeline-gbi-research-0001.
    \48\ See https://khn.org/news/drugmakers-manipulate-orphan-drug-
rules-to-create-prized-monopolies/.

      Manufacturers Should Take on Meaningful Risk in Outcome-Based 
Contracting: Our experience is that the vast majority of manufacturers 
are only willing to enter into outcome-based contract arrangements that 
align with a product's clinical trial data and FDA approval. As such, 
the findings from such agreements add little or nothing to the existing 
evidence base and virtually assure a positive outcome for the 
manufacturer. In most cases, manufacturers seek outcome-based contracts 
for products in drug classes where robust competition already exists, 
indicating that the manufacturer is more interested in gaining a 
competitive advantage or preferred formulary access as opposed to 
advancing the medical evidence around the safety and efficacy of their 
product in a real-world environment. It is our view that outcome-based 
contracting remains the exception--and not the norm--in determining the 
ultimate value of prescription drugs. They do not produce the best 
arrangement in every situation. In competitive disease areas where 
multiple drug manufacturers offer well-established treatments or where 
generics are prevalent, such as the markets for oral diabetes drugs, 
multiple sclerosis, and hepatitis C, the ordinary effects of 
traditional price concession negotiations afforded by robust 
---------------------------------------------------------------------------
competition produce the lowest costs.

      Medicaid Best Price Is a Barrier to Outcome-Based Contracting: 
In our negotiations with drug manufacturers, they often cite Medicaid 
Best Price as the primary reason for refusing to take on more 
significant downside risk in outcome-based contracts. Although we 
cannot empirically validate that Best Price is a limiting barrier--only 
drug manufacturers can speak to that question--just over 30 percent of 
our executed outcomes-based contracts apply solely to our Medicare Part 
D plans, which are statutorily excluded from manufacturers' Best Price 
calculations. The products associated with these outcomes-based 
contracts are predominantly high-cost specialty drugs and include 
therapies for auto-immune/inflammatory conditions (rheumatoid 
arthritis, psoriasis), cardiovascular disease, diabetes, infectious 
disease, and cancer. The remaining 70 percent of our outcome-based 
contracts apply equally to our commercial and Medicare lines of 
business. Recently published reports have found that though Medicaid 
Best Price is an understandable concern for manufacturers determining 
whether to pursue value-based contracts, particularly in the commercial 
market, its effect can be mitigated and is not the immutable obstacle 
to value-based contracting that some manufacturers' claim.\49\ We 
encourage CMS to review this research and determine if additional 
guidance is necessary to clarify the treatment of outcome-based 
agreements relative to manufacturer calculations of Best Price. CMS may 
also wish to consider using its demonstration authority to explore 
opportunities to ameliorate manufacturers' concerns regarding the 
impact of outcome-based contracting on Medicaid Best Price 
calculations. For example, CMS could develop a limited pilot program to 
test whether excluding outcome-based contracts from Medicaid Best Price 
results in manufacturers taking on more significant downside risk, and 
whether that in turn creates net savings for the Federal Government and 
beneficiaries.
---------------------------------------------------------------------------
    \49\ Sachs, Bagley, and Lakdawalla, ``Innovative Contracting for 
Pharmaceuticals and Medicaid's Best-Price Rule,'' Journal of Health 
Politics, Policy, and Law (2018) 43 (1): 5-18, https://doi.org/10.1215/
03616878-4249796; Duke Margolis Center for Health Policy, ``Overcoming 
the Legal and Regulatory Hurdles to Value-Based Payment Arrangements 
for Medical Products,'' White Paper (December 2017), https://
healthpolicy.duke.edu/sites/default/files/atoms/files/
overcoming_legal_and_regulatory_hurdles_to_value-
based_payment_arrangements_for_medical_
products.pdf?_sm_au_=iHV1FMvjM0SN08HN.
---------------------------------------------------------------------------

Providing Additional Formulary Flexibility

      Modernize Protected Classes: Humana has long supported these 
policy changes and has identified opportunities to create competition 
in the market and lower drug costs for beneficiaries. Internal analysis 
estimates that the lack of competition due to the protected class 
policy collectively increased beneficiary premiums by an estimated 
$2.79 per-beneficiary per-month (PBPM, $34 per-beneficiary-per-year) in 
2018. Additional flexibility with respect to formulary development will 
enable sponsors to effectively drive competition in the market and 
lower drug costs for their beneficiaries.

      Eliminate the Requirement That Part D Plan Sponsors Cover at 
Least Two Drugs in Each Therapeutic Category or Class: CMS's current 
policy to cover at least two drugs in every Part D covered therapeutic 
category and class as long as there are at least two drugs available 
limits the ability of plan sponsors to negotiate with manufacturers. 
Since two drugs are mandated to be covered in a class, manufacturers of 
a drug with only one other competitor typically refuse to negotiate 
rebates or discounts in Medicare Part D because they know their 
products must be covered. This policy ultimately increases costs across 
the system.

III. Committees' Request for Additional Information

Question #1 and #2: Elimination of the Coverage Gap and Associated 
                    Liability in the Catastrophic Phase

The discussion draft solicits comments on fundamentally changing the 
structure of the Part D benefit by changing or eliminating the 
distinction between the initial coverage phase and the coverage gap 
discount program while reallocating the share of costs attributed to 
the government, Part D plans, and manufacturers in the catastrophic 
phase.

As discussed previously, two percent of our beneficiaries who utilized 
specialty drugs comprised 36 percent of total Part D spending in 2018. 
In two years, Humana projects that seniors utilizing specialty drugs 
could account for as much as 50 percent of total Part D spending. In 
2018, only 6.9 percent of Humana's total membership reached the 
catastrophic phase of the benefit (2.5 percent of non-Low-Income 
Subsidy members and 18.4 percent of Low-Income Subsidy members). We 
welcome the opportunity to explore potential solutions for alternative 
pooling or funding mechanisms for this subset of Part D beneficiaries. 
We recommend that the committees employ the following guiding 
principles:

      Establish a MOOP through policy changes to curb anti-competitive 
actions: Protect beneficiaries from excessive out-of-pocket costs 
associated with specialty drug costs through a Part D MOOP that is 
funded from policy changes that curb and eliminate anti-competitive 
drug manufacturer pricing practices.
      Maintain affordable premiums: Ensure that changes to improve 
Part D, mitigate any premium increases, and hold manufacturers 
accountable by discouraging manufacturer price increases and high 
specialty drug launch prices.

Additionally, it is important to consider the complexities of the Part 
D program and the unique funding mechanisms that have been established 
for different populations in each phase of the benefit. As changes are 
made--as with all policy decisions--there is risk for unintended 
consequences that could undermine the success of the benefit for the 
majority of seniors who participate in the program. Once again, we 
would welcome the opportunity to have detailed discussions with the 
committees.

Question #3: Rewards and Incentives for Low-Income Part D Beneficiaries 
                    for Out-of-Pocket Costs Below the Catastrophic 
                    Level and All Beneficiaries Above a Part D Maximum 
                    Out-of-Pocket

The Part D program provides ``extra help'' to dual-eligible and other 
low-income beneficiaries to make prescription medications more 
affordable. While the subsidy makes prescription drugs accessible and 
affordable to a vulnerable population, it has created some 
disincentives that result in excessive or inefficient utilization of 
brand name drugs, increasing costs for the Medicare program and 
beneficiaries who aren't eligible for the low income subsidies. The 
generous subsidies negate conventional benefit design mechanisms 
employed by plan sponsors to improve the quality and affordability of 
care. For example, cost sharing for low income beneficiaries is 
subsidized based on whether a drug is a brand or generic (in 2020, for 
a full-benefit dual eligible below 100 percent of the FPL, generic 
drugs cost $1.30 and brand drugs cost $3.90). While these low member 
cost shares help patients afford prescription medications, they do 
little to encourage utilization of lower cost choices. One option for 
increasing the use of lower cost alternatives is to allow rewards and 
incentives in Part D for LIS beneficiaries. In some cases, rewards or 
incentives may be able to reduce financial burdens while also 
increasing the health and wellness of beneficiaries. Any reward or 
incentive system must be based on the desired behavior change to be 
economically feasible. However, generic dispensing rates for LIS 
members are still above 85 percent. The rewards and incentives would 
not result in savings if they were applied to the total population that 
is already taking a generic. In addition, any rewards and incentives 
tests would need to closely monitor any initial conversions that 
subsequently converted back to the higher cost drug. In some cases, 
this may be warranted, but in general, sponsors should reward based on 
long term behavior change that results in an increase in medication 
adherence. Since the LIS program within Part D is unique, and since 
rewards and incentives are not currently allowed in Part D, there is 
not a set of baseline data to predict the success of any reward or 
incentive programs. As such, sponsors could be given the flexibility to 
test alternate strategies and designs to determine what best drives 
sustainable, long-term behavior change. Examples of potential reward 
and incentive programs include:

      Gift cards at the point of sale: Gift cards would likely provide 
the greatest incentive for LIS beneficiaries to switch to lower-cost 
alternatives. This could either be done at the point of sale (in 
conjunction with the pharmacy), or administered by plan sponsors by 
sending the reward to the member soon after claims adjudication. 
Although this option would likely provide an immediate impact, 
precautions would need to be taken to assure the system did not drive 
excess utilization, or could otherwise be manipulated or abused. An OIG 
waiver would likely be needed to avoid potential violation of 
inducement regulations.

      Provide other health-related rewards: While not as motivating as 
gift card equivalents, health related rewards still provide meaningful 
incentives for LIS beneficiaries to utilize lower cost alternatives. In 
addition, the focus on health items limits exposure to potential abuse. 
It also allows the flexibility to provide near immediate feedback and 
maximize the impact to behavior change.

      Create a point system/rewards program: In addition to 
encouraging lower cost alternatives, such a program could also strongly 
promote other healthy behavior changes such as healthy foods, exercise, 
etc. Many of these programs are already operational relative to MAPD 
and commercial business, which may speed up any implementation. The 
risk of abuse is also low for this model and the focus on longer term 
goals may mitigate issues related to a one-time action. While a rewards 
program encourages appropriate behavior change, the delay between the 
action and the reward may limit the effectiveness of the program 
relative to other alternatives.

                                 ______
                                 
              Prepared Statement of Hon. Chuck Grassley, 
                        a U.S. Senator From Iowa
    Good morning. This hearing will come to order. Today, the committee 
continues its look at why prescription drug costs are so high and what 
can be done to bring them down.

    I'd like to welcome our witnesses, who are top executives from 
major pharmacy benefit managers, or PBMs.

    Medicare prescription drug plans hire PBMs to manage Part D 
benefits. In Medicaid, State and managed care organizations also employ 
PBMs. We know that drug companies set the list price, and our February 
hearing with CEOs of major manufacturers focused on those high prices. 
We now turn our attention to PBMs.

    PBMs negotiate with the drug companies, as well as pharmacies, to 
arrive at a price for a drug and its ultimate cost. This system of 
private entities negotiating is what I envisioned as an author of the 
Part D program. I still believe this is absolutely the right approach. 
I oppose any effort to undue the ``non-interference clause'' currently 
in statute. However, it's our duty to understand how the system is 
working today and what we can do to improve it.

    In addition to negotiating prices, PBMs also determine what drugs 
are covered and what patients pay out of pocket. Despite this vast 
influence over what often amounts to life and death, many consumers 
have very little insight into the workings of PBMs. PBMs report rebates 
and other price concessions to the Centers for Medicare and Medicaid 
Services (CMS), but the statute severely restricts what can be done 
with that information. More transparency is needed.

    The current system is so opaque that it's easy to see why there are 
many questions about PBMs' motives and practices. One question we must 
ask is whether PBMs prefer a high-cost drug with big rebates over a 
cheaper drug. Some even argue that PBMs force drug companies to raise 
their list price.

    Senator Wyden and I are investigating pricing and rebating 
practices related to insulin. This will help us more broadly determine 
whether PBMs and manufacturers today are focused on patients or their 
own bottom line. Mergers and vertical integration is another area that 
has increasingly prompted concern. All of the PBMs here today are owned 
by or affiliated with an insurance plan. In many cases, the combined 
company also owns pharmacies and other players in the health industry.

    It's important we look to see whether such integration actually 
helps patients and consumers, or whether it just opens the door for 
anti-competitive behavior. Last year I sent the Federal Trade 
Commission a letter on this very issue and asked them to keep me 
apprised of their work. I am putting my letter and the response into 
the record.

    I realize I've raised many issues. I look forward to hearing the 
witnesses providing insight and helping us find solutions.

    Ranking Member Wyden and I are committed to working on a bipartisan 
basis to bring drug costs down. Our next step is to work with committee 
members to develop policies to help Medicare and Medicaid patients and 
protect the taxpayers.

                                 ______
                                 

                          United States Senate

                       committee on the judiciary
                       washington, dc 20510-6275

                            August 17, 2018

The Honorable Joseph Simons
Chairman
Federal Trade Commission
600 Pennsylvania Ave., NW
Washington, DC 20580

Dear Chairman Simons:

    I write with regard to the Federal Trade Commission's recent 
inquiry into intermediaries in the pharmaceutical supply chain, 
including pharmacy benefit managers (PBMs) and group purchasing 
organizations (GPOs). As you know, the pharmaceutical supply chain is 
currently witnessing significant consolidation and vertical 
integration, by way of the proposed mergers of Cigna Corp. with Express 
Scripts Holding Co. and CVS Health Corp. with Aetna Inc. The resulting 
entities would have considerable market share in the provision and 
management of prescription drug benefits.

    According to a new report from the Kaiser Family Foundation, the 
two combined entities, along with UnitedHealth and Humana, would cover 
71% of all Medicare Part D enrollees and 86% of stand-alone drug plan 
enrollees.\1\ Moreover, these transactions would result in substantial 
vertical integration within the pharmaceutical supply chain, with the 
three largest PBMs all vertically integrated with insurance companies. 
Vertical integration, like the proposed transactions, can often result 
in increased efficiencies and consumer benefits, and should be 
evaluated accordingly.
---------------------------------------------------------------------------
    \1\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.

    Such integration, however, can also lead to higher barriers to 
entry for competition in each standalone market, leading to further 
consolidation. These risks have been highlighted by key administration 
stakeholders. According to President Trump's Council of Economic 
Advisers, ``[p]olicies to decrease concentration in the PBM market and 
other segments of the supply chain (i.e., wholesalers and pharmacies) 
can increase competition and further reduce the price of drugs paid by 
consumers.''\2\ Further, Food and Drug Administration Commissioner 
Scott Gottlieb recently warned that ``consolidation and market 
concentration make the rebating and contracting schemes [of PBMs] all 
that more pernicious. And the very complexity and opacity of these 
schemes help to conceal their corrosion on our system--and their impact 
on patients.''\3\
---------------------------------------------------------------------------
    \2\ The Council of Economic Advisers, ``Reforming Biopharmaceutical 
Pricing at Home and Abroad'' (February 2018), available at https://
www.whitehouse.gov/wp-content/uploads/2017/11/CEA-Rx-White-Paper-
Final2.pdf.
    \3\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients'' (March 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.
htm (emphasis added).

    Accordingly, it is critical for Congress to understand the FTC's 
perspective on these issues, including the potential impact of 
concentration on the marketplace, and more broadly, whether the 
presence of PBMs and other intermediaries in the pharmaceutical supply 
chain tends to reduce, control, or increase the cost of health care in 
the United States. In the past, the FTC has asserted that allowing 
competition among PBMs will yield more benefits than contract terms 
mandated by government.\4\ Further, a 2005 FTC study of PBMs that own 
mail-order pharmacies found that such ownership arrangements 
``generally did not disadvantage plan sponsors'' and that ``competition 
in this industry can afford plan sponsors with sufficient tools to 
safeguard their interests.''\5\
---------------------------------------------------------------------------
    \4\ FTC Staff Comment to the Honorable James L. Seward Concerning 
New York Senate Bill 58 on Pharmacy Benefit Managers (PBMs) (March 31, 
2009), available at https://www.ftc.gov/sites/default/files/documents/
advocacy_documents/ftc-staff-comment-honorable-james-l.seward-
conceming-new-york-senate-bill-58-pharmacy-benefit-managers-pbms/
v090006newyorkpbm.pdf.
    \5\ FTC, ``Pharmacy Benefit Managers: Ownership of Mail-Order 
Pharmacies'' ii (August 2005), available at http://www.ftc.gov/reports/
pharmbenefit05/050906pharmbenefitrpt.pdf.

    The pharmaceutical industry, however, has experienced significant 
changes and consolidation in the intervening years. In light of these 
changes, and of the Commission's recent roundtable discussion on these 
complex issues, I respectfully request written answers to the following 
---------------------------------------------------------------------------
questions by no later than September 17, 2018.

      1.  At its November 2017 roundtable entitled ``Understanding 
Competition in Prescription Drug Markets: Entry and Supply Chain 
Dynamics,'' the FTC invited comment on the following question:

         a.  What role do intermediaries, such as pharmacy benefit 
managers (PBMs) and group purchasing organizations (GPOs) play in 
prescription drug pricing, consumer access, and quality? What are the 
benefits and costs of intermediaries in the pharmaceutical supply 
chain? Has consolidation affected price, access, or quality?

          What specific conclusions has the FTC drawn from the comments 
and dialogue it received in response to the above question?

      2.  At its November 2017 roundtable, the FTC invited comment on 
the following question:

         a.  How do companies assess the benefits, costs, and risks of 
contracting with intermediaries? How well do consumers understand 
intermediaries' roles? Is more information necessary?

          What specific conclusions has the FTC drawn from the comments 
and dialogue it received in response to the above question?

      3.  What specific actions does the FTC intend to take as a result 
of its November 2017 roundtable? Please provide a detailed description 
of any relevant forthcoming actions--including policy proposals, 
additional research or roundtable discussions, consumer education 
efforts, or enforcement actions--that Congress should be aware of at 
this time.

      4.  Based on recent market consolidation and integration efforts, 
does the FTC believe there is sufficient competition in the various 
markets of the pharmaceutical supply chain?

      5.  What specific legal or regulatory obstacles, if any, is the 
FTC currently facing in its efforts to ensure a competitive and 
transparent marketplace in the pharmaceutical supply chain, including 
but not limited to the PBM marketplace?

      6.  What specific legislative actions, if any, should Congress be 
considering at this time to increase transparency in the pharmaceutical 
supply chain and to best ensure that cost savings or efficiencies are 
actually passed onto consumers?

    Thank you for your attention to this matter, and I look forward to 
your response. If you have any questions, please contact Ryan Dattilo 
or Kyle McCollum of my Judiciary Committee staff at 202-224-5225.

            Sincerely,

Charles E. Grassley
Chairman
Committee on the Judiciary

                                 ______
                                 

                        FEDERAL TRADE COMMISSION

                          WASHINGTON, DC 20580

                           September 27, 2018

The Honorable Charles E. Grassley
Chairman
Committee on the Judiciary
U.S. Senate
Washington, DC 20510

Dear Chairman Grassley:

    Thank you for your letter regarding the Federal Trade Commission's 
recent inquiry into intermediaries in the pharmaceutical supply chain, 
including pharmacy benefit managers (``PBMs'') and group purchasing 
organizations (``GPOs''). As you have recognized, a number of changes 
are occurring in this sector. I appreciate your concerns about the 
potential impact on competition and consumers. Although I cannot 
comment on any particular acquisition or company, I assure you that the 
Commission continues to examine competition in pharmaceutical markets, 
and this will remain a high priority under my leadership.

    As you mentioned, the Commission hosted a workshop in November 
2017, ``Understanding Competition in Prescription Drug Markets: Entry 
and Supply Chain Dynamics.'' The purpose of that workshop was to 
identify continuing obstacles to generic competition in prescription 
drug markets. Thirty years ago, Congress passed the Hatch-Waxman Act to 
expedite generic entry. In 2010, Congress enacted the Biologics Price 
Competition and Innovation Act (``BPCIA'') to expedite biosimilar drug 
approval. The Hatch-Waxman Act has largely succeeded in lowering 
patent-related entry barriers for small-molecule generic drugs, and 
biosimilars are slowly proceeding through the BPCIA pathway. Still, 
concerns about rising drug prices have led the FTC and others to 
question whether other obstacles, beyond patents, are suppressing 
generic and biosimilar entry.

    With this question in mind, participants at the November 2017 
workshop examined considerations that may limit entry into generic drug 
markets after relevant patents have expired. The program included a 
keynote address by FDA Commissioner Scott Gottlieb, as well as panel 
discussion featuring a number of academics, researchers, and industry 
stakeholders. In addition, the FTC received and reviewed more than 600 
public comments. Panelists and commenters identified issues related to 
niche patient populations, complex manufacturing processes, 
consolidation, drug shortages, and Risk Evaluation and Mitigation 
Strategies (``REMS'') restrictions. They also evaluated how contractual 
relationships between intermediaries, manufacturers, and health plan 
sponsors can affect the prices that consumers pay for prescription 
drugs. Participants discussed the unique market structures through 
which drugs get to consumers, which include manufacturers, wholesalers, 
retailers, pharmacy benefit managers, group purchasing organizations, 
and health plans.

    These panel discussions, and review of the related comments, 
offered the FTC a better understanding of modem competitive dynamics, 
which in turn has informed the agency's enforcement, policy, and 
advocacy efforts. For example, the FTC relied on this learning when 
developing our response to the Department of Health and Human Services' 
(``HHS'') call for public comments on the Blueprint to Lower Drug 
Prices and Reduce Out-of-Pocket Costs.\1\ Among other things, the FTC 
comment identified how branded pharmaceutical manufacturers' misuse of 
REMS may impede pharmaceutical competition, which was a topic raised at 
our workshop. We continue to analyze the workshop record and consider 
next steps.
---------------------------------------------------------------------------
    \1\ Statement of the Federal Trade Commission to the Department of 
Health and Human Services Regarding the HHS Blueprint to Lower Drug 
Prices and Reduce Out-of-Pocket Costs (July 16, 2018), https://
www.ftc.gov/system/files/documents/advocacy-documents/statement-
federal-trade-commission-department-health-human-services-regarding-
hhs-blueprint-lower/v180008_
commission_comment_to_hhs_re_blueprint_for_lower_drug_prices_and_costs.p
df.

    I particularly appreciate your concerns about market consolidation 
and the potential for anticompetitive conduct in the health care 
sector. I share your belief that vigorous antitrust enforcement is 
critical to ensuring competitive markets and protecting consumers. One 
of the FTC's highest priorities is enforcing the antitrust laws against 
anticompetitive mergers and conduct among firms throughout the 
pharmaceutical supply chain. The FTC has brought many cases challenging 
mergers among pharmaceutical companies and distributors, and has been 
at the forefront of challenging anticompetitive conduct--such as 
reverse payment settlements or sham litigation--that creates obstacles 
to generic competition.\2\
---------------------------------------------------------------------------
    \2\ For a summary of the FTC's antitrust actions in the 
pharmaceutical industry, see ``Overview of FTC Antitrust Actions in 
Pharmaceutical Products and Distribution'' (April 2017), https://
www.ftc.gov/system/files/attachments/competition-policy-guidance/
overview_pharma_april_20
17.pdf.

    During my nomination process, I expressed my concerns about whether 
merger enforcement has been too lax. As I stated then and continue to 
believe now, the FTC may need to take corrective action if close study 
reveals that the Commission has indeed been too cautious in challenging 
---------------------------------------------------------------------------
mergers, including those involving PBMs that resulted in actual harm.

    The Commission therefore is conducting an ambitious program of 
Hearings on Competition and Consumer Protection in the 21st Century. 
These public hearings are designed to seek input on whether broad-based 
changes in the economy, business practices, and technology, as well as 
international developments, require any adjustments to competition and 
consumer protection enforcement and policy. This effort harkens back to 
the Global Competition and Innovation Hearings undertaken in 1995 
during the Chairmanship of Robert Pitofsky. As part of this project, 
the Commission is inviting public comment on a broad range of antitrust 
and consumer protection topics, including evaluating the state of 
antitrust law and enforcement, evaluating the competitive effects of 
corporate acquisitions and mergers, best approaches for performing 
merger retrospective studies, and identifying industries that are 
conducive to these analyses. We will keep you apprised regarding any 
recommendations or other initiatives that come out of our hearings 
project.

    Thank you again for your interest in promoting effective 
competition in U.S. pharmaceutical markets. If you have any questions, 
please feel free to have your staff call Jeanne Bumpus, the Director of 
our Office of Congressional Relations, at (202) 326-2195.

            Sincerely,

            Joseph J. Simons
            Chairman

                                 ______
                                 
          Prepared Statement of Mike Kolar, Interim President 
                    and CEO, Prime Therapeutics, LLC
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, thank you for the opportunity to discuss how pharmacy 
benefit managers (PBMs) and, in particular, Prime Therapeutics LLC, 
provide value to the health-care system.

    I am Mike Kolar, and I serve as the Interim President and CEO of 
Prime. At Prime, our mission is to make health care work better by 
helping people get the medicine they need to feel better and live well. 
We do this by managing pharmacy benefits for health insurers, 
employers, and government programs including Medicare and Medicaid. Our 
goal is to ensure that the members and beneficiaries of these plans and 
programs get the medication most appropriate for their condition at a 
cost that is the most affordable in the context of their overall 
insurance benefit. This mantra of ``right drug, for the right person, 
at the right time, and at the right cost,'' guides our actions every 
day.

    We appreciate the committee's efforts to thoroughly examine issues 
related to the problem of high drug costs. We see firsthand the 
challenges that these costs cause for our plans, for their members and 
beneficiaries and for taxpayers. In 2018, drug costs represented 27 
percent of total health-care costs for our commercial clients. A 
portion of this increased spend results from newly introduced 
therapies, which have the potential to improve outcomes and avoid 
medical costs for payers and individuals. But it is the price and value 
of these new therapies as well as existing therapies, as set by pharma 
and pharma alone, that needs to be effectively questioned, checked and 
balanced. As a unique, transparent pharmacy benefits manager, our value 
lies in applying our clinical expertise to serve as an effective hedge 
against otherwise unmitigated pricing behaviors and to make medication 
more affordable.

    We agree that high drug costs present a problem for individuals and 
society. We look forward to sharing more about our how our unique, 
transparent approach and the clinical value we provide addresses the 
problem as it exists today. We will provide our thoughts on how the key 
issues of transparency and manufacturer rebates should be viewed in 
framing solutions to the problem of high drug costs. And we will share 
our views on other effective means of reducing the high cost of 
prescription drugs for the benefit of plans, employers, patients and 
taxpayers.
                  prime represents a unique pbm model
    Prime Therapeutics was formed in 1998 by two Blue Cross and Blue 
Shield Plans seeking to more effectively manage plan and member drug 
costs. Starting with only a few million members, Prime has grown over 
the last 20 years to provide pharmacy benefits to over 28 million 
individuals, from 23 Blue Cross Blue Shield plans as well as Federal 
employees served by the Federal Employee Program (FEP'). 
Prime's growth has been driven by our ability to effectively manage 
drug costs for these plans and their members as a trusted, transparent 
partner. Our integration with our Blue Cross and Blue Shield clients 
allows us to leverage our view into both pharmacy and medical data to 
improve care and reduce costs. This helps our plans to best serve the 
specific needs of their respective local communities.

    Today Prime is owned and controlled solely by 18 not-for-profit 
Blue Plan clients. This makes us the only major PBM with a primary 
mission focused on driving savings instead of margins. We are not 
beholden to the short term, quarterly need to report earnings to Wall 
Street shareholders. We are free to focus on delivering the lowest net 
cost on prescription medicines and driving lowest overall cost of care 
for our clients and their members. We are driven to get the right drug, 
for the right person, at the right time, and at a cost that is as 
affordable as possible in the context of a member's overall insurance 
benefit to help ensure sustainability and optimal health outcomes.
    prime applies extensive clinical expertise to reduce drug costs
    The core value we provide our clients and their beneficiaries is 
based upon our deep clinical pharmacy expertise. We employ pharmacists 
and physicians and engage an independent Pharmacy and Therapeutics 
(P&T) Committee made up of 26 actively practicing, nationally 
recognized medical and pharmacy experts to evaluate the safety, 
efficacy, and value of existing and emerging drug therapies. This 
expertise allows us to advise our plan clients regarding drug coverage 
decisions, utilization policies, and adherence, intervention and 
therapy management programs to lead to better patient outcomes, ensure 
quality and patient safety, and manage costs. The common misperception 
that Prime and other PBM's are simply transactional ``middlemen'' 
entirely ignores the immense value we provide in helping to ensure 
clinically appropriate drug utilization to drive better outcomes.

    The retail prices of some of the most popular prescription drugs 
older Americans take to treat everything from diabetes to high blood 
pressure to asthma increased by an average of 8.4 percent in 2017, far 
exceeding the 2.1-percent inflation rate for other consumer goods and 
service.\1\ Rising costs from specialty drugs and high prices of new 
specialty drugs have had an even more significant impact on overall 
drug prices. These specialty drugs treat complex, chronic conditions, 
like multiple sclerosis and rheumatoid arthritis. These drugs are 
usually injected or infused. They require careful oversight from a 
health-care provider and require special handling. Over half of all 
drugs approved by the FDA in 2018 were specialty drugs.\2\ According to 
a recent report from the Pharmacy Benefit Management Institute, less 
than 5 percent of commercially insured patients use specialty 
medications, but they constitute half of overall drug costs.\3\ Prime 
predicts that specialty drugs will be 60 percent of all drug spend by 
2021.
---------------------------------------------------------------------------
    \1\ Bunis, Dena. ``Retail Prices of Brand-Name Drugs Continue to 
Skyrocket,'' September 26, 2018, AARP, https://www.aarp.org/health/
drugs-supplements/info-2018/prices-rising-for-name
-brand-drugs.html.
    \2\ Healthinsurance.org ``Glossary,'' https://
www.healthinsurance.org/glossary/specialty-drug/ and https://
www.pcmanet.org/pcma-cardstack/what-is-a-specialty-drug/.
    \3\ Pharmacy Benefit Management Institute, ``2019 Trends in 
Specialty Drug Management,'' https://www.pbmi.com/
ItemDetail?iProductCode=SPECIALTY_2019&Category=SPECIALTY.

    While pharmaceutical companies keep introducing new drugs at high 
prices and raising prices on existing drugs, we work hard to counter 
these rising costs by appropriately managing utilization and 
negotiating for lower net reimbursement. Prime's management tools are 
critical to managing both drug trend and quality. The results of our 
efforts can be shown by the savings we generate. Despite rising costs 
overall, Prime's programs delivered nearly $3.4 billion in incremental 
value to our health plan clients in 2018. In an environment of rising 
prices and new, high-cost drug introductions, Prime has a long track 
record of successfully managing overall drug trend. Trend defines the 
difference of drug spend between one year and the next. It is affected 
by the number of people using which drugs (utilization) and the prices 
of those drugs. Prime's commercial clients experienced a drug trend of 
only 3.3 percent in 2018, and experienced a negative trend in 2017. 
Prime was similarly successful in managing drug trend in government 
program markets. Here, where full utilization of our clinical and 
negotiating tools is significantly limited by current regulations, we 
achieved a 4.7 percent trend in Medicare and 7.3 percent in Medicaid 
for 2018, and -0.8 percent and -5.4 percent, respectively for 
2017.\4\, \5\
---------------------------------------------------------------------------
    \4\ ``Prime Therapeutics Keeps High Drug Cost Trends at Bay: Annual 
Trend Reports Released,'' March 19, 2019, https://
www.primetherapeutics.com/en/news/pressreleases/2019/release-2018-drug-
trend.html.
    \5\ ``Prime Releases Proves PBM's Value: Delivers Negative Drug 
Trend in 2017,'' February 20, 2018, https://www.primetherapeutics.com/
en/news/pressreleases/2018/drugtrend-2017-release.html.

    We achieve these results by leveraging our clinical expertise to 
advance quality, optimize utilization and manage net price for our 
---------------------------------------------------------------------------
clients and their members and beneficiaries through:

          Formulary management, including pipeline management and 
        formulary development. Our P&T Committee evaluates the clinical 
        efficacy and safety of new and existing medications and 
        approves and regularly reviews our clinical recommendations for 
        each drug, including coverage, clinical appropriateness and 
        safety. Our P&T Committee meets quarterly and reviews all drug 
        categories annually. We also make formulary recommendations 
        regarding preference or ``tiering'' using a lowest net drug 
        cost approach. That occurs only after our initial clinical 
        safety and efficacy determinations, and with an additional 
        concern for minimizing member impacts across any transitions.

          Utilization management, including prior authorization, step 
        therapy, and quantity limits.

              When a provider prescribes a drug that could 
        potentially be misused in an unsafe or ineffective manner, 
        prior authorization serves as an additional check, in 
        collaboration with the care provider, to confirm that the drug 
        is appropriate for the particular patient and their condition. 
        This is done to ensure safety and avoid unnecessary costs for 
        the plan and the patient.

              Step therapy programs similarly help avoid 
        unnecessary costs for the payer and patient by recommending 
        effective, lower cost, ``first line'' therapies prior to 
        administration of a costlier alternative.

              Quantity limits also help avoid waste and 
        manage cost for all parties by recommending limited initial 
        trial quantities of a medication to ensure it achieves the 
        intended outcome and/or does not result in harmful side effects 
        before additional doses are dispensed and paid for by the plan 
        and patient.

          Our GuidedHealthTM program, promoting optimal 
        member medication management through retrospective drug 
        utilization reviews. GuidedHealth (GH360) is a population 
        health database and clinical rules engine that uses integrated 
        medical and pharmacy data to identify opportunities to lower 
        drug and medical costs. Prime identifies these opportunities 
        and intervenes with doctors, members and pharmacies through a 
        multi-channel communication strategy (e.g., pharmacist case 
        management, direct messaging to prescribers via electronic 
        medical records (EMR), phone, text, email, mail) to help guide 
        better drug therapy. Examples of opportunities include 
        medication non-
        adherence, gaps in care, drug safety concerns, drug/condition 
        management issues, high cost specialty drug management 
        interventions and chronic disease management programs. In our 
        experience, each dollar spent on these types of programs yields 
        up to $8 in cost savings for our plan clients and their members 
        or beneficiaries, totaling more than $350M in savings, and 
        growing, each year.

          Pharmacy network management, designed to ensure access, 
        quality and affordability for beneficiaries and plans. Prime 
        maintains contracts with over 60,000 retail pharmacies 
        nationwide representing in aggregate over 91 percent of all 
        pharmacies in the United States. Prime highly values the role 
        of the local pharmacist in serving patients and ensuring 
        appropriate medication therapy, including pharmacists' role in 
        counseling patients on drug administration, interactions, 
        adherence and safety. We partner closely with pharmacists and 
        local pharmacies in these activities. In constructing networks 
        of local pharmacies to serve members and beneficiaries, we 
        drive both higher quality and more affordable costs for the 
        benefit of patient.

          Fraud, waste, and abuse (FWA) programs that aggressively 
        combat activities that burden plans, members and taxpayers with 
        costs that are wholly unnecessary, and not infrequently, have a 
        basis in criminal activity. Our activities in rooting out 
        fraud, waste and abuse resulted in $268M in savings in 2018 
        alone for our clients, their members and beneficiaries.

          Value-based contracting (VBC), designed to hold a 
        pharmaceutical manufacturer accountable for the overall 
        effectiveness of its drug. Prime's goal with VBC strategies 
        includes evaluating the effectiveness and value that a drug has 
        on a member's total cost of care, including both pharmacy and 
        medical costs. Our value-based contracts focus on all aspects 
        of care, including channel management, persistency and 
        compliance, health monitoring, diagnostic testing, and health 
        outcomes assessments. We signed our first VBC contract in 2010. 
        Since then, we have contracted with pharmaceutical 
        manufacturers for value-based arrangements in therapeutic areas 
        that affect large groups and gaps in care (e.g., diabetes, 
        cardiovascular disease, chronic migraine) as well as those that 
        are high cost for our clients' members (e.g., hepatitis, 
        rheumatoid arthritis, ulcerative colitis, multiple sclerosis).

              One example of our value-based contracting is 
        our arrangement with the manufacturer of an oral type 2 
        diabetes medicine indicated to reduce the risk of 
        cardiovascular death in adults with type 2 diabetes and 
        established cardiovascular disease. Our contract evaluates the 
        incidence and total cost of care for certain cardiac events 
        among patients taking this medication and links payment for the 
        drug to improved outcomes. We believe that this type of 
        evidence-based, outcome-driven reimbursement model underscores 
        the unique value that Prime can bring in the drug market to 
        ensure that prices become more aligned with quality and 
        economic value.

    We believe that these capabilities and additional capabilities 
under development provide significant value for our clients and their 
members and beneficiaries. We welcome opportunities to expand the 
application of our programs to drive additional savings in government 
programs. Specifically, Prime supports the August 2018 CMS change that 
allows plans to create indication-based formularies--formularies that 
cover specific drugs for specific indications--for Medicare beginning 
in 2020. Indication based formularies are currently used in our 
commercial business. The ability to bring this expertise to Medicare 
will provide plans additional flexibility and choice in formulary 
design, and will improve drug affordability for plans and 
beneficiaries.

    Beyond cost control, our clinical expertise plays a key role in 
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. A 
2012 study found slightly more than one-third of patients use multiple 
pharmacies to fill their prescriptions.\6\ A more recent study of Part 
D patients reported that even more--38 percent--used multiple 
pharmacies.\7\ Individual physicians may also not know all the 
medication their patients use. According to a recent Consumer Reports 
survey, over half (53 percent) of Americans who take prescription drugs 
get them from more than one health-care provider, which increases the 
risk of adverse drug effects.\8\ PBMs like Prime play an important role 
in identifying inappropriate utilization and adverse drug interactions. 
Prime's concurrent drug utilization program screens medicines at the 
point of sale for potential drug therapy problems such as drug-to-drug 
interactions, inappropriate refill timing and potential overuse or 
misuse. If an issue is flagged, Prime collaborates with the local 
pharmacist to address the issue with the patient and to provide 
clinically appropriate guidance on how to proceed.
---------------------------------------------------------------------------
    \6\ Eder, Rob, ``Why Patients Use Multiple Pharmacies,'' Drugstore 
News, August 28, 2012, https://www.drugstorenews.com/news/why-patients-
use-multiple-pharmacies/.
    \7\ Z.A. Marcum et al., ``Impact of Multiple Pharmacy Use on 
Medication Adherence and Drug-drug Interactions in Older Adults With 
Medicare Part D,'' J Am Geriatr Soc. 2014 Feb.; 62(2): 244-252. 
Downloaded from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4115075/.
    \8\ ``Americans Taking More Prescription Drugs Than Ever,'' 
HealthDay Reporter, August 3, 2017, https://www.webmd.com/drug-
medication/news/20170803/americans-taking-more-prescription-drugs-than-
ever-survey.

    As health care becomes more complicated, and as personalized 
medicine and companion diagnostics (i.e., a laboratory genomic test 
whose result determines therapy) become more prevalent, we see 
additional opportunities to use our clinical expertise to collaborate 
with physicians and allied health professionals to manage medication 
therapies. The clinical expertise and tools of a PBM like Prime can 
help to continue to ensure the right patient gets the right therapy at 
the right time even as science and research continue to advance.
                     prime believes in transparency
    From our inception 20 years ago, our business model was built on 
transparency, and we understand the importance of transparency in the 
health-care system overall. We believe that the right kind of 
transparency within the PBM model can improve outcomes and lower costs 
for members and beneficiaries. We would caution, however, that the 
wrong kind of transparency will ultimately lead to higher drug prices.

    In Prime's view, there are five audiences for the right kind of 
transparency:

        (1) client transparency;
        (2) patient transparency;
        (3) government transparency;
        (4) physician/prescriber transparency; and
        (5) pharmacy transparency.

    Client Transparency: Client transparency is the hallmark of Prime's 
unique business model. Unlike the clients of other PBMs, Prime's 
clients see their respective drug costs at a unit cost level. Prime 
also shows clients all the savings Prime generates on their behalf, 
including pharmacy savings and rebates. Savings are passed back to 
clients to offset the cost of services and to help keep premiums 
affordable. To be clear, Prime's model is to send the entire rebate 
back to our clients.

    Enrollee/Patient Transparency: Prime believes it is vitally 
important that its members make informed choices. Presently, Prime has 
tools that are available to patients to enable them to more easily 
understand their pharmacy benefits. We maintain a website at 
MyPrime.com that allows members access to pharmacy benefit information. 
MyPrime.com is a personalized platform where members can find 
pharmacies, understand coverage and tiering, and find actual prices for 
prescription drugs, including their applicable cost share. We share 
information about MyPrime.com with members upon plan enrollment and 
thereafter in other beneficiary communications.

    We also support efforts to advance adoption of a real-time benefit 
tool (RTBT). This provides an easy-to-use, complete view of a 
beneficiary's prescription benefit information including cost, 
formulary alternatives, and utilization management requirements at the 
point of prescribing. This allows both the patient and his or her 
prescriber to make informed decisions using both clinical and pricing 
information. To drive rapid adoption and widespread use, we believe 
that RTBTs should be based upon a standardized platform, such as the 
in-process standard being finalized by the National Council for 
Prescription Drug Programs (NCPDP). This standard will provide the 
guardrails to ensure consistent, thorough, and quality communication of 
prescription benefit information. This will aid practitioners and 
patients in making informed, real-time drug decisions at the point of 
prescription, eliminating surprises and delays that adversely impact 
medication utilization and adherence, and, ultimately, health outcomes.

    Government Transparency: The Center for Medicare and Medicaid 
Services (CMS) collects very detailed information from PBMs about Part 
D transactions through its mandatory Direct and Indirect Remuneration 
(DIR) reporting. CMS has a thorough line of sight into all rebates, 
fees, and payment adjustments, which are reported to CMS as DIR on a 
drug by drug basis. Further, each plan submits bids annually to CMS by 
the first Monday in June. Those bids reflect the plan's expected 
benefit payments plus administrative costs after they deduct expected 
Federal reinsurance subsidies, and the level of CMS payment to plan 
sponsors is derived from actual plan bids.

    Prime supports legislation recently introduced by Senators Cornyn, 
Cortez Masto, Carper, and Cassidy that would allow the Medicare Payment 
Advisory Commission and the Medicaid and CHIP Payment and Access 
Commission access to CMS's DIR data to inform Congress's decision-
making on Part D policy. Our support is based upon the important 
protections for proprietary data included in the legislation that will 
mitigate the risk of adverse, anti-competitive consequences that could 
cause drug prices to increase.

    Physician and Allied Health Professional Prescriber Transparency: 
Prime provides prescribers with access to formularies and regularly 
communicates changes in formularies and other coverage information, and 
we believe that adoption of RTBTs will provide an enhanced user 
experience and more rapid transparency to aid prescribers in making 
informed prescription decisions.

    In addition to supporting RTBTs, we also support electronic 
prescribing directly to patients' pharmacies. This vastly improves 
efficiency for health-care professionals and pharmacy interactions for 
patients. We were pleased that last year's SUPPORT Act, Pub. L. 115-
271, included a requirement that Part D plans use electronic prior 
authorization (ePA).

    Pharmacy Transparency: In our relationships with pharmacies we seek 
to ensure quality by scoring pharmacy performance on key metrics as 
such as medication adherence and generic dispensing rates, which aid in 
improving a member's health outcomes and reduce costs. Prime provides 
quarterly results to the pharmacies and includes data for 
reconciliation. In our quality based networks, pharmacies earn 
incentives based upon their performance on key metrics that are 
relevant to the CMS Stars ratings. Prime uses EQUIPP, an industry 
standard dashboard that allows pharmacists to track their performance 
and predict their likely results. Prime meets with pharmacies monthly 
to review their performance and discuss improvement options. Price 
concessions earned because of underperformance on quality metrics are 
remitted in full to our plans for member-facing premium reductions and 
quality programs, and for reporting to CMS.

    Misguided Transparency: Many aspects of transparency are laudable. 
These are already fully present in Prime's business model, and aid in 
better managing drug spend for clients and their members and 
beneficiaries. But we believe proposals that would require disclosure 
or visibility into actual negotiated rebates would have an adverse 
impact and would likely result in an increase in overall drug costs.

    Our view is supported by the Federal Trade Commission (FTC), which 
has studied the issue and found that such disclosure creates a risk for 
anti-competitive behavior by manufacturers that would increase prices. 
Currently, manufacturer rebates to PBMs are confidential, and competing 
manufacturers do not know the rebate offered by their competitors. When 
rebates are disclosed, the FTC warns that this type of price 
transparency may ``allow competitors to figure out what their rivals 
are charging, which dampens each competitor's incentive to offer a low 
price or increases the likelihood that they can coordinate on higher 
prices.'' \9\ In the brand drug market, where a limited number of 
manufacturers offer similar products within a therapeutic class, net 
price transparency may cause these manufacturers to raise prices.
---------------------------------------------------------------------------
    \9\ Koslov, TI, Jex, E, ``Price transparency or TMI?,'' Federal 
Trade Commission, July 2, 2015, https://www.ftc.gov/news-events/blogs/
competition-matters/2015/07/price-transparency-or-tmi.
---------------------------------------------------------------------------
    rebates effectively offset, rather than cause, high list prices
    One of the key PBM levers for creating competition and value is 
drug rebates. A rebate is an after-the-fact (usually quarterly), 
percent reduction off the full list price of a drug given to the end 
purchaser whether that be a government entity, an employer or an 
insurer. They are a powerful tool used by PBMs to offset the list 
prices set by pharma. The 2018 Medicare Trustees' report credited PBM-
negotiated rebates, in part, for bringing Part D spending lower than in 
the Trustees' 2017 Report.\10\ Similarly, a recent Oliver Wyman study 
found that Part D plan-negotiated manufacturer rebates have resulted in 
$34.9 billion in premium savings for enrollees from 2014 to 2018.\11\ 
As rebates are an effective tool to manage and mitigate pharma pricing 
behaviors for the benefit of plans and members, we strongly believe 
that they cannot and should not be curtailed or eliminated without 
viable, concrete and equally effective means of placing similar 
competitive pressure on manufacturers and holding them accountable for 
drug pricing.
---------------------------------------------------------------------------
    \10\ https://www.cms.gov/newsroom/press-releases/medicare-trustees-
report-shows-lower-spending-projections-medicare-part-d.
    \11\ Oliver Wyman, ``Premium Impact of Removing Manufacturer 
Rebates From the Medicare Part D program,'' July 6, 2018, downloaded 
from https://www.pcmanet.org/wp-content/uploads/2018/07/OW-Part-D-
Manufacturer-Rebate-Premium-Impact-FINAL.pdf.

    While rebates are an important savings tool, they are not Prime's 
first consideration in making formulary recommendations. Prime's 
formulary selection process is tied to safety and efficacy 
consideration before accounting for competitive pricing. In considering 
competitive pricing, we take a ``low net cost'' approach: Prime will 
often forgo rebates on a certain drug in favor of a clinically 
equivalent, lower-cost medication. In Medicare Part D, Prime has more 
than a 90 percent generic dispensing rate, and generic drugs generally 
do not offer rebates. In situations in which a rebated drug is covered 
and rebates are earned, Prime's model is to pass back 100 percent of 
---------------------------------------------------------------------------
the value of rebates we negotiate to our clients.

    The relationship of rebates to drug prices and the role of rebates 
is very much misunderstood. Prime disputes the idea that rebates are 
the primary cause of high list prices. Indeed, many drugs have high and 
significantly increasing list prices without offering any rebates. The 
HHS OIG found that 39 percent of Part D drugs offered no rebates in 
2015.\12\ Additionally, there are very limited rebates in Part B, and 
Part B has nonetheless seen significant price increases in the drugs 
the program covers, including drugs that increased in price from 2012 
to 2017 by between 76 and 3,449 percent.\13\ Pharmaceutical companies 
could lower list prices on these drugs today but have generally not 
chosen to do so. Where pharmaceutical companies have lowered list 
prices, there is generally little effect on net costs to the payer or 
the products are ``minor.''\14\
---------------------------------------------------------------------------
    \12\ HHS OIG, ``Increases in Reimbursement for Brand-Name Drugs in 
Part D,'' Data Brief OEI-03-15-00080, June 4, 2018, downloaded from 
https://oig.hhs.gov/oei/reports/oei-03-15-00080.asp.
    \13\ Visante, ``Reconsidering Drug Prices, Rebates, and PBMs,'' 
downloaded from https://www.pcmanet.org/wp-content/uploads/2018/08/
Reconsidering-Drug-Prices-Rebates-and-PBMs-08-09-18.pdf.
    \14\ Thomas, Katie, ``Merck Is Lowering Drug Prices. There's a 
Catch,'' New York Times, July 18, 2018, https://www.nytimes.com/2018/
07/19/health/merck-trump-drug-prices.html.

    Instead of rebates making drugs less affordable, the lack of 
rebates for certain drugs makes them less affordable. In general, 
pharmaceutical manufacturers do not pay rebates on cancer drugs since 
plans typically do not implement traditional formulary management tools 
for these therapies. However, we continue to experience increases in 
price. As an example, in Medicare Part D in 2018, Prime's clients saw 
the greatest increase in spending for oral cancer drugs stemming from 
both an increase in price and utilization. The trend grew from 3.3 
---------------------------------------------------------------------------
percent in 2017 to 19.4 percent in in 2018 for this class.

    As this cancer example illustrates, there is no correlation between 
rebate levels and manufacturer list prices.\15\ The determining factor 
of whether a given brand drug will offer a rebate is the 
competitiveness of the therapeutic class.\16\ As MedPAC states in its 
March 2019 report:
---------------------------------------------------------------------------
    \15\ Visante, ``Reconsidering Drug Prices, Rebates, and PBMs,'' 
downloaded from https://www.pcmanet.org/wp-content/uploads/2018/08/
Reconsidering-Drug-Prices-Rebates-and-PBMs-08-09-18.pdf.
    \16\ Medicare Payment Advisory Commission, Report to the Congress: 
Medicare Payment Policy, March 2019, Chapter 14: ``The Medicare 
prescription drug program (Part D): Status report.''

        In general, the extent to which a manufacturer of a specific 
        drug can raise its price depends on many factors--for example, 
        whether there are generics or brand therapeutic alternatives, 
        how many competitors there are in the given market, and whether 
        their competitors cover all the same indications. Competition 
        within a therapeutic class can result in restraint in list-
---------------------------------------------------------------------------
        price growth or in higher post sale rebates and discounts.

    Where there is no competition in a therapeutic class or if a drug 
demonstrates clinical superiority over existing therapies, there may 
either be no rebate or just a very small rebate.\17\ In Medicare's 
protected classes, plan sponsors have limited options to not cover or 
restrict access to certain drugs. When there are limited options to 
treat a specific disease state, PBMs have little ability to influence 
pharma pricing. Drugs in high-cost specialty classes like oncology, 
hemophilia, and hereditary angioedema generally do not have rebates. In 
classes where products are deemed clinically interchangeable, such as 
insulins, diabetes medications (SGLT, DPP-IV), and respiratory drugs to 
treat asthma and COPD, competition drives greater rebates that can be 
leveraged for the benefit of payers, members and beneficiaries.
---------------------------------------------------------------------------
    \17\ Medicare Payment Advisory Commission, Report to the Congress: 
Medicare Payment Policy, March 2019, Chapter 14: ``The Medicare 
prescription drug program (Part D): Status report.''

    One of the concerns over rebates is that patient cost-sharing in 
certain plan designs is determined by the list price of a drug rather 
than the net price. Over the past decade, the patient's role in sharing 
in prescription drug costs has evolved considerably. The advent of 
high-deductible health plans and greater use of coinsurance has 
increased the proportion of health-care costs consumers must pay out of 
pocket. While such benefit designs were intended to give beneficiaries 
more control, a very real consequence has been increased exposure to 
the extreme drug pricing behavior of manufacturers. Patients are 
justifiably frustrated with the unacceptably high drug prices and 
unjustified price increases set by pharma, which drive up their costs 
---------------------------------------------------------------------------
without providing additional health value.

    Prime offers commercial health plan clients and employer groups the 
option to adjust the prices of drugs in their benefit plans to reflect 
rebate savings, including the option of applying the rebate savings at 
the point of sale when a member receives a prescription from a 
pharmacy. This plan offering allows members with high deductibles and 
coinsurance to benefit from rebates at the point of sale, but there is 
a trade-off between premiums and a point-of-sale rebates. Point-of-sale 
rebates help those who face high coinsurance or deductibles but may 
cause an increase in premium.

    In the commercial market, the majority of members served by Prime 
are not affected by high list price influenced cost-sharing. They pay 
flat dollar copays rather than coinsurance (i.e., a percentage of the 
list price). Indeed, only 1 percent of the commercial membership served 
by Prime is subject to coinsurance with no out-of-pocket maximum, while 
56 percent of the members we serve are enrolled in plans with a flat 
copay without a deductible and 4 percent are in plans with a flat copay 
with low deductibles. Neither of these latter two groups are 
meaningfully affected by the list price of a drug.

    Similarly, in Medicare Part D, many beneficiaries do not face 
significant cost-sharing. Cost-sharing is minimized for the 29 percent 
of Part D beneficiaries that receive low-income subsidies, also called 
``Extra Help,'' who pay flat, nominal amounts for drugs including 
brands.\18\ Prime realizes that a small percentage of beneficiaries are 
challenged by the current Part D benefit design due to the high cost of 
certain medications. As MedPAC reports, in 2016, approximately 360,000 
Part D beneficiaries filled a prescription for which a single claim 
would meet the maximum out-of-pocket threshold, up from 33,000 in 
2010.\19\ Prime welcomes the opportunities to work with policymakers, 
beneficiaries and plans to help Part D enrollees who face high cost-
sharing. At the same time, we recognize that that Part D enrollees are 
very premium sensitive, and are generally pleased with their benefit: a 
recent nationwide survey found that 85 percent of Part D enrollees are 
satisfied with their Medicare Part D prescription drug coverage, with 
over 8 out of 10 also saying that their Part D plans provide ``good 
value.'' The same survey research indicates that 78 percent of seniors 
feel that their copays and coinsurance are affordable.\20\ Another 
recent survey of seniors in Part D found that they are satisfied with 
their out-of-pocket costs by a 67 percent to 30 percent margin.\21\
---------------------------------------------------------------------------
    \18\ J. Cubanski, A. Damico, and T. Neuman, ``Medicare Part D in 
2018: The Latest on Enrollment, Premiums, and Cost Sharing,'' May 17, 
2018, downloaded from https://www.kff.org/medicare/issue-brief/
medicare-part-d-in-2018-the-latest-on-enrollment-premiums-and-cost-
sharing/.
    \19\ Medicare Payment Advisory Commission, Report to the Congress: 
Medicare Payment Policy, March 2019, Chapter 14: ``The Medicare 
prescription drug program (Part D): Status report.''
    \20\ http://medicaretoday.org/2018/08/85-percent-of-u-s-seniors-
are-satisfied-with-their-medicare-part-d-prescription-drug-coverage-
according-to-nationwide-survey/.
    \21\ North Star Opinion Research, National Survey of Seniors 
Enrolled in Part D, March 2019, https://www.pcmanet.org/wp-content/
uploads/2019/03/NSO-PCMA-Senior-Part-D-Survey-Memo-March-6.pdf.

    As we work towards policy solutions to further address high drug 
costs, we believe that the important role rebates play in managing cost 
requires careful study. The lack of a proven link between list price 
and rebates, the need for plan flexibility in designing benefits and 
keeping premiums low, and the need for an equally effective means of 
holding pharma accountable must all be considered before enacting 
measures that would mandate redirection or cause rebates to be 
curtailed or eliminated.
                     prime offers policy solutions
    Prime welcomes the opportunity to partner with the committee and 
other Federal policymakers to advance initiatives to lower drug prices 
and improve health care. For instance, we support changes to anti-
kickback law and Medicaid best price that would catalyze further value-
based contracting and provide greater regulatory certainty around such 
contracts.

    We believe that high list prices are the central issue driving the 
drug cost problem, and that PBMs are the most effective organizations 
capable of bringing down drug costs for payers and patients. An 
optimally competitive drug marketplace helps us to fully deploy our 
tools to lower costs for our plans, for their members and beneficiaries 
and for taxpayers. We therefore support such policies as:

          Addressing Part D's protected classes: Designating ``classes 
        of clinical concern'' in Part D, where all or substantially all 
        drugs in a class must be covered allows drug manufacturers to 
        name their price. CMS already applies careful plan formulary 
        coverage checks to assure proper coverage in all drug classes. 
        Prime supports a CMS proposal to moderate the effect of 
        protected classes--not eliminate them--that would save $2 
        billion over 10 years.\22\
---------------------------------------------------------------------------
    \22\ Owermohle, Sarah, Politico Prescription Pulse, ``CMS Takes on 
`Protected Classes in Part D,' '' November 27, 2018, https://
www.politico.com/newsletters/prescription-pulse/2018/11/27/cms-takes-
on-protected-classes-in-part-d-431017.

          Modify the requirement for two drugs per class. The 
        requirement that Part D plans cover two drugs per class is 
        outmoded. It has encouraged manufacturers to argue for ever 
        more granular classes and reduced competition, increasing Part 
        D costs. Modifying the requirement by requiring plans to ensure 
        access to therapies based on conditions or disease states 
        instead would reduce costs without reducing access to needed 
---------------------------------------------------------------------------
        drugs.

          Apply Part D management tools to Part B drugs. PBM tools 
        such as value-based formularies, manufacturer negotiation, 
        prior authorization, and step therapy have proven indispensable 
        in improving patient safety and lowering costs in outpatient 
        prescription drug plans like Part D. Adding Part D management 
        tools to the Medicare fee-for-service program and building on 
        efforts in Medicare Advantage for Part B drugs would make drugs 
        more affordable on Medicare's medical side. We also believe 
        policymakers should explore using economic value assessments to 
        ensure that payments for drugs are based on cost savings and 
        quality outcomes for patients.

          Eliminate pay-for-delay agreements: Patent settlements 
        involving ``pay-for-delay'' agreements allow drug patent 
        holders to pay off potential competitors who would otherwise 
        produce a competing generic or biosimilar drug. These anti-
        competitive agreements should be eliminated.

          End risk evaluation and mitigation strategy (REMS) abuses. 
        Brand drug manufacturers have withheld drug samples from would-
        be generic manufacturers by citing REMS compliance as an 
        excuse. Enacting the CREATES Act or similar legislation would 
        prohibit these abusive practices used by a small minority of 
        brand drug manufacturers to keep competitors off the market.

          Address orphan drug exclusivity abuses. Orphan drug 
        exclusivities are meant to encourage research into therapies to 
        address rare diseases. However, the exclusivities afforded by 
        orphan status have been abused. In fact, six of the eight best-
        selling biologic drugs in 2017 have orphan approvals, but the 
        drugs have been widely used for non-orphan indications. Orphan 
        exclusivity periods should apply to only those drugs originally 
        approved by FDA under an orphan indication and only for the 
        orphan indication itself.

          Tackle patent ``ever-greening'' or patenting a small change 
        in an existing drug to prevent generic competition. The advent 
        of generic drugs, and particularly multiple generic drugs 
        brings down drug prices, and ever-greening blocks this 
        competition, keeping prices unnecessarily high. Brand patents 
        should not result in near-permanent exclusivity.

          Encourage faster FDA approval of ``me-too'' brands: 
        Increasingly the drugs FDA reviews and approves are reviewed 
        under accelerated approval to address ``unmet needs.'' The 
        imperative for greater competition to lower drug prices should 
        also be considered a type of unmet need.

          Promote biosimilar interchangeability: The FDA has yet to 
        finalize guidance on interchangeability. Such guidance would 
        allow substitution of biologics with biosimilars just as 
        pharmacists do today with brand name drugs to lower costs for 
        patients.

          Eliminate the tax deduction for direct-to-consumer (DTC) 
        drug ads. While DTC drug ads may encourage some people to see a 
        doctor, they drive up unnecessary utilization and the cost of 
        drug benefits and often encourage patients to demand a brand 
        name over a generic. Tax deductions should end for ads 
        mentioning a specific product.
                               conclusion
    We appreciate the committee's interest in our perspectives on the 
problem of high drug costs, the role that PBMs and Prime play in 
helping to manage those costs, and our views on the issues of 
transparency, rebates and potential policy solutions that can 
effectively address the drug cost issue.

    We believe that the clinical expertise and solutions we offer 
create significant value for our clients and their members and 
beneficiaries by ensuring that the right drugs are accessible and 
affordable, in the context of overall benefit designs, at the right 
time and for the right patients.

    We are a unique PBM. We are owned solely by Blue plans and are 
designed to serve their needs through a transparent, lowest net cost 
model to enable them to serve their members and communities. We are 
hopeful that our perspective is useful in the dialogue and in leading 
to constructive solutions.

                                 ______
                                 
            Questions Submitted for the Record to Mike Kolar
               Questions Submitted by Hon. Chuck Grassley
      collection, use, and sharing of personal health information
    Question. Consumers are becoming more and more concerned about the 
data collection and sharing practices of companies. While these issues 
have been most prevalent in the social media and tech industry, 
companies in the pharmaceutical supply chain also have access to 
tremendous amounts of sensitive, personal health information of the 
individuals they serve. For example, the company Livongo partners with 
CVS Caremark to provide low-cost or no-cost blood sugar meters to 
diabetic patients. The meters are always ``connected'' to Livongo's 
``Diabetes Response Specialists.'' As the company's website states, 
``When readings are out of range, our Diabetes Response Specialists 
call or text [the individual] within minutes.'' While these innovations 
may be highly beneficial for individuals in managing their health, it's 
also important for this committee to fully understand what types of 
information is collected, how or why it's stored or shared, and for 
what purposes PBMs themselves and other affiliated drug supply chain 
participants (such as insurers) use the information.

    Health information is extremely sensitive. It's the most personal 
of all the information we share. So I want to know more about each of 
your companies' data collection, sharing, and protection practices.

    Does your company collect and store health information from the 
end-users of the prescriptions you provide? For example, information or 
records of a diabetic individual's blood sugar levels.

    Answer. Yes. While facilitating a patient's pharmacy benefit, Prime 
may receive and store protected health information about that patient. 
Prime has policies designed to ensure that any use or disclosure of 
health information occurs only as permitted by HIPAA and as directed by 
patients and Prime's health plan clients.

    Question. Does your company make any treatment, cost, or coverage 
decisions based on the health information you collect from an 
individual?

    Answer. Yes, we may make utilization management decisions in 
accordance with the health plan's pharmacy benefit. Such information 
can result in approval of a drug that had been subject to prior 
authorization thereby expediting patient access to appropriate therapy.

    Question. Does your company share health information with third 
parties? And, if so, does your company profit from that sharing?

    Answer. Yes to the first question and no to the second. Prime 
shares health information with third parties only as authorized by 
HIPAA and as necessary to facilitate services Prime provides to 
patients and Prime's health plan clients. Prime's customers 
contractually limit and control the ways in which Prime may use health 
information. Prime does not sell data, and does not profit from sharing 
data.

    Question. Do you believe customers are fully aware of your 
information collection and sharing practices?

    Answer. Yes. Prime is owned by many of its health plan customers. 
Prime's customers contractually limit the ways in which Prime may use 
health information.
  impact of vertical integration between pbms and insurance companies
    Question. The PBM industry has experienced significant 
consolidation within the past 10 years, which has contributed to 
concerns about the potential abuse of market power, barriers to market 
entry, and exclusionary practices. In 2012, for example, Express 
Scripts acquired Medco Health Solutions--a nearly $30-billion 
transaction that merged two of the country's three largest PBMs.\1\ 
More recently, PBMs are also vertically integrating with insurers/
payers, reflected by the 2018 acquisitions of Express Scripts Holding 
Co. (a PBM) by Cigna Corp. (a payer) and of Aetna Inc. (a payer) by CVS 
Health Corp. As a result, the three largest PBMs are all vertically 
integrated with insurance companies. According to a report from the 
Kaiser Family Foundation, the two combined entities, along with 
UnitedHealth and Humana, will cover 71 percent of all Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees.\2\ 
Vertical integration can result in increased efficiencies and consumer 
benefits. I can also, however, lead to higher barriers to entry for 
competition, leading to further consolidation. FDA Commissioner Scott 
Gottlieb recently warned that ``consolidation and market concentration 
make the rebating and contracting schemes [of PBMs] all that more 
pernicious. And the very complexity and opacity of these schemes help 
to conceal their corrosion on our system--and their impact on 
patients.''\3\
---------------------------------------------------------------------------
    \1\ See ``FTC Closes Eight-Month Investigation of Express Scripts, 
Inc.'s Proposed Acquisition of Pharmacy Benefits Manager Medco Health 
Solutions, Inc.,'' Federal Trade Commission (April 2, 2012), available 
at https://www.ftc.gov/news-events/press-releases/2012/04/ftc-closes-
eight-month-investigation-express-scripts-incs.
    \2\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.
    \3\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients'' (March 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.htm.

    I'd like to talk about consolidation, including the recent 
integration of PBMs with insurance companies. Last year, I wrote to the 
Justice Department on this issue. It's reported that the three largest 
PBMs--who are before us today--now cover 71 percent of Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees.\4\ Such 
market power has raised concerns. FDA Commissioner Scott Gottlieb said, 
``the consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious.''\5\
---------------------------------------------------------------------------
    \4\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.
    \5\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients'' (March 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.htm.

    I want to hear briefly from each of you on whether the PBM industry 
is competitive. For example, are there high barriers to entry for new 
---------------------------------------------------------------------------
competitors?

    Answer. Yes, the PBM industry is competitive. Despite 
consolidation, there continue to be more than 30 PBMs operating today 
in the U.S.\6\ (not including the multitude of other related players, 
e.g., specialty drug management carve-out vendors.) Additionally, new 
players regularly enter the market, including recent technology-focused 
PBMs like RxAdvance and SmithRx, in addition to Flipt in 2019.
---------------------------------------------------------------------------
    \6\ Drug Channels Institute (2019, March), The 2019 Economic Report 
on U.S. Pharmacies and Pharmacy Benefit Managers.

    Question. I'm also interested in what effect the most recent 
consolidations of PBMs and insurers has had on the bottom line for the 
---------------------------------------------------------------------------
government and consumer.

    Do these arrangements result in a lower cost to the government--as 
a payer--and the consumer? Please explain.

    Answer. The health-care industry is facing an unprecedented amount 
of change via a variety of market trends, all with the potential to 
both individually and jointly impact government and consumer costs. In 
addition to consolidation, other key market forces include: rising 
consumerism in health care, movement towards outcomes-based models, and 
adoption of new technologies--e.g., artificial intelligence.

    Given the varying intertwined market dynamics, it is nearly 
impossible to isolate the effects of consolidation. However, data shows 
PBMs have and are expected to continue to leverage strategies, 
including consolidation, to help control the rising cost of drugs.

    Recent drug trend reports show that Prime and several other PBMs 
are controlling pharmacy costs at low, single-digit levels,\7\ while 
health-care costs overall are inflating.\8\
---------------------------------------------------------------------------
    \7\ Drug Channels Institute (May 22, 2019), ``Which PBM best 
managed drug spending in 2018: CVS Health, Express Scripts, MedImpact, 
or Prime Therapeutics?'' Retrieved from https://www.drugchannels.net/
2019/05/which-pbm-best-managed-drug-spending-in.html.
    \8\ PwC Health Research Institute (June 2018), ``Medical cost 
trend: behind the numbers.'' Retrieved from https://www.pwc.com/us/en/
industries/health-industries/library/behind-the-numbers.html.

    Integrated Managed Care Organization (MCO) + PBM models are also 
aimed at creating more efficiency and driving to the lowest net cost of 
care. The recent wave of MCO + PBM consolidation is essentially aimed 
at attempting to duplicate the same integrated and cost-efficient Blue 
+ Prime model that Prime pioneered over 20 years ago. Today, through 
organic growth and strategic alignment with other system players, this 
model continues to evolve and deliver high quality pharmacy benefit 
---------------------------------------------------------------------------
management and care while effectively controlling costs.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
                           manufacturer money
    Question. What is the total dollar amount that you obtain from 
pharmaceutical manufacturers in any form such as rebates, fees, etc.?

    What is the total dollar amount that you remit to health plans?

    Answer. Prime's default business model passes through 100 percent 
of manufacturer rebates and administrative fees to clients, except in 
instances where clients have negotiated to have Prime retain a portion 
of manufacturer administrative fees to offset fees that Prime's clients 
pay it for PBM services.
                              biosimilars
    Question. Managed Care Organizations are on record as widely 
supportive of the potential of biosimilars. However, most MCOs have 
continued to support originator brand products and have not preferred 
and often excluded less expensive biosimilars. For example, most MCOs 
have kept Remicade (a treatment for rheumatoid arthritis and other 
diseases) as the preferred agent on their formularies, and in most 
cases to the exclusion of its biosimilar, Infliximab.

    Why do you tout support for biosimilars while, at the same time, 
inhibiting adoption of these less expensive products?

    Answer. Prime has encouraged the use of biosimilars. Prime manages 
drugs to the lowest net cost for our health plans, and there may be 
instances where biosimilars will not be the lowest net cost product.

    Biosimilars are treated the same way as brands for purposes of 
formulary consideration (e.g., evaluated for safety, efficacy, and then 
for lowest net cost and member transition considerations).

    Other factors outside a PBM's control often inhibit adoption of 
less expensive products such as regulations (e.g., interchangeability, 
step therapy rules), provider buy-and-bill practices, patient 
acceptance, and prescriber practices.

    The FDA has just recently approved final guidance on 
interchangeability. Only one manufacturer has submitted an application 
for this designation. Without interchangeability designation, a 
provider must write a prescription for a specific biosimilar product. 
This slows adoption of biosimilar use. Furthermore, many biosimilar 
agents are indicated for chronic conditions, where patients have been 
stable on the branded product for many years. Patients and physicians, 
alike, are resistant to the idea of switching stable patients to a 
different therapy, even biosimilars.

    Step Therapy Legislation: If the review of a medical policy or 
utilization management policy results in an approval of a branded 
product for a certain timeframe, it can be difficult to switch patients 
while they are covered under that approval. Without an 
interchangeability designation, each product must be considered a 
unique brand and the patient can remain on that therapy for the 
duration of the policy approval. This too, slows the adoption of 
biosimilar use. In addition, some States have enacted step therapy 
mandates that prohibit plans from requiring members to utilize low-cost 
effective medications prior to being approved on high cost branded 
medications.

    Physician buy-and-bill contracts: Physician groups often have their 
own contracts with manufacturers. If their billing practices make it 
more lucrative to dispense the brand, it can be difficult to move 
market share.

    Question. HHS may broaden the scope of its proposed rule and 
eliminate rebates between Medicare Advantage plans and manufacturers 
for Part B drugs.

    Would this realign incentives to encourage preferred access for 
lower-cost drugs, such as biosimilars?

    Answer. No, the removal of rebates will not encourage access to 
lower-cost drugs because there is no guarantee that pharma will lower 
their list prices. Prime will always recommend the lowest net cost drug 
inclusive of rebates.

    Question. What changes can we recommend/make to help you prefer 
lower-cost drugs, such as biosimilars, without rebates?

    Answer. Prime would support the following changes to increase the 
adoption of lower cost biosimilar drugs by its health plan clients:

    (1) Interchangeability: Designation being granted upon biosimilar 
drug approval.

    (2) Removal of the following anti-competitive practices that delay 
biosimilars from coming to market: (a) pay-for-delay deals between 
brand and biosimilar manufacturers (currently there are pay-for-delay 
deals between brand and biosimilar manufacturers; (b) patent thickets; 
(c) branded manufacturers preventing biosimilar manufacturers from 
obtaining samples for testing; and (d) sham citizen petitions.

    Question. Why is there such a disparity in reimbursed pharmacy 
prices for specialty generic drugs in Part D (e.g., Imatinib)? Does 
ownership of specialty pharmacy influence your reimbursement decision?

    Answer. Under CMS guidelines there is no current definition of a 
``specialty pharmacy,'' which means that any pharmacy regardless of 
pharmacy type, services offered or accreditation may dispense a 
specialty medication.

    While Medicare guidelines require standard terms and conditions for 
pharmacies to participate in a Medicare network, the CMS guidelines do 
not require each pharmacy to agree to the same financial terms. In 
fact, CMS has acknowledged that pharmacies may have different financial 
terms due to their purchasing power or rural location.

    Prime has implemented a specialty fee schedule for medications 
dispensed by participating network pharmacies that aligns with the 
pricing that Prime negotiated with the specialty pharmacy in which 
Prime has joint ownership. Many pharmacies in the retail network have 
refused to agree to the additional specialty drug fee schedule and 
therefore are reimbursed at their retail rates. Prime's pharmacy 
agreement outlines reimbursement for any drug dispensed by the pharmacy 
and not the type of drug (specialty or traditional) in the situation 
when the pharmacy did not agree to the specialty drug fee schedule. The 
negotiation schedule also varies with pharmacies based upon each 
pharmacy's renewal date which can create variability in pricing.

    In addition, Prime's agreement with pharmacies establishes that 
Prime will pay the pharmacy the lesser of the (a) pharmacy's usual and 
customary price; (b) the pharmacy's submitted cost plus dispensing fee; 
(c) the maximum allowable cost plus a dispensing fee; or (d) the 
negotiated price plus a dispensing fee. Prime's goal is to ensure that 
the member pays the lowest price (amount) possible. Therefore, 
depending upon how the pharmacy prices the drug and our lesser of 
logic, the same drug may be reimbursed differently by the pharmacy.

    Prime's goal is always to offer the lowest net cost to our clients, 
members and health plans. Prime implemented a specialty drug fee 
schedule for medications dispensed by a participating network pharmacy 
that was in addition to our standard financial terms that would align 
with the pricing that Prime negotiated with the specialty pharmacy in 
which Prime has joint ownership. In fact, Prime's joint ownership of a 
specialty pharmacy enables Prime to have clearer insight into the 
marketplace pricing of a drug by manufacturers and wholesalers to 
establish pricing models that are effective for members, health plans 
and pharmacies.

    Question. I'm concerned with the recent trend of PBM's allowing 
brand companies to ``pay for position'' on insurance formularies, which 
results in seniors losing access to lower-cost generics and 
biosimilars.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs?

    Answer. Prime's clients may exclude generic or biosimilar 
competitors from a formulary if there are safety concerns or the 
generics or biosimilars are not the lowest net cost relative to the 
brand or base biologic.

    With regards to high-cost generics, formulary evaluation of new-to-
market generics is the same as the evaluation for any new drug. The 
Pharmacy and Therapeutics (P&T) Committee considers safety, efficacy, 
and uniqueness, and then the drug is evaluated based on cost. In 
certain circumstances, the net cost of a generic drugs may be 
significantly higher than the brand because of the lack of generic 
competition in the market. In these circumstances, the generic may be 
placed at a higher tier than the brand until more lower cost generic 
competition is available to avoid an increase in cost to the health 
plan. Once the generic is available at a lower cost than the brand, the 
health plan may add the generic to formulary or the drug tier lowered. 
In these scenarios members pay the lowest net cost, regardless of brand 
or generic status and the tier placement of the medication. Thus, the 
plan ensures the most cost-effective medication at the best price is 
available to the member. With regards to medications with potential 
safety concerns, brand and generic medications may be excluded to 
minimize adverse health outcomes and encourage the use of clinically 
effective safer alternatives available.
                 delays and denials in cancer treatment
    Question. I have received stories of cancer patients facing delays 
or denials for their treatment due to PBM actions. Data shows that 
breast cancer patients who experienced a 3-month or more delay in 
treatment had a 12-percent lower 5-year survival rate compared with 
breast cancer patients with only a 0- to 3-month delay.

    What percent of patients experience a 14-day or longer delay in 
receiving an oral oncolytic prescribed by their oncologist?

    Answer. When medications are subject to prior authorization, 
reviews are completed and decisions rendered, on average, within 4 days 
for standard requests and 1 day for request marked as urgent. Outcomes 
are communicated to the providers either through electronic prior 
authorization (ePA) or fax over 95 percent of the time.

    Question. What are the primary reasons patients experience delays 
or denials for their treatments?

    Answer. The primary reasons a patient may experience delays include 
off-label, non-FDA approved use or for use in cancers that are not 
addressed in guidelines. Our health plan clients' utilization 
management policies allow for use of oncology medications for 
indications approved in FDA labeling and/or supported by National 
Comprehensive Cancer Network (NCCN), Drugs and Biologics compendia with 
a category 1 or 2A recommendation, AHFS (http://
www.ahfsdruginformation.com/about-us/), or DrugDex level of evidence of 
1 or 2A.

    Question. What percent of determinations to delay or deny treatment 
for cancer patients are made by an oncologist or health-care 
professional with oncology training?

    Answer. Any determination or delay in care is based on the 
formulary and utilization management for drug safety and efficacy 
concerns and published FDA appropriate uses for the drug (i.e., either 
label or recognized compendia). In general, initial reviews are not 
specifically reviewed by an oncology specialist. A specialist will 
review any appeal level of review.

    Question. Why is a PBM-owned specialty pharmacy better qualified to 
manage a cancer patient's adherence and side effects than a community 
cancer clinic with a medically integrated pharmacy?

    Answer. The PBM-owned specialty pharmacy has view of all the 
members medications via data from the PBM; this gives a comprehensive 
view of the member that may have additional issues other than cancer 
and seeing multiple physicians. A larger national based pharmacy such 
as a PBM-owned specialty pharmacy will use clinically reviewed 
assessment algorithms to address side effects and to track adherence 
and also work very closely with the drug manufacture in reporting back 
any trends that may be seen with a broad number of patients. The 
pharmacy can also update the teaching and training for the member based 
on new information being reviewed. Oncology centers should have oral 
oncology medication management practices (education, toxicity 
management, financial, etc.) in place for these patients, regardless of 
where care is delivered as part of both nursing and oncologist society 
quality measures standards. Depending on resources, the extent and 
quality of those services vary greatly. This is where a specialty 
pharmacy can consistently delivery these resources to every patient. 
Increasing touch points and access to healthcare providers for these 
services to patients, especially education, only enhances the care 
being delivered.
              direct and indirect remuneration (dir) fees
    Question. Many community-based cancer clinics have established 
medically integrated pharmacies so patients can access their oral 
chemotherapy prescriptions or other medications at the point of care. 
These practices are often assessed large DIR which are based on certain 
quality measures targeted toward primary care.

    Shouldn't pharmacies be evaluated on the type of drug dispensed and 
disease managed rather than a one-size fits-all approach?

    Answer. Under current law, there is no easy way to distinguish 
among types of pharmacies. CMS regulations allow any participating 
pharmacy in a Part D plan's Medicare network to dispense both 
traditional (non-specialty) and specialty medications. Prime's pharmacy 
price concessions models (DIR) applies the same metrics to all 
participating pharmacies in our Medicare networks to be consistent with 
the CMS any willing provider provisions. Therefore, a specialty 
pharmacy that participates in Prime's Medicare network must meet the 
same terms and conditions as a non-specialty pharmacy.

    Question. Does assessing large DIR fees on medically integrated 
pharmacies drive patients to PBM-owned specialty pharmacies?

    Answer. No. Most patients pay fixed copayments amounts for the 
patient cost share portion and these copayments do not vary by 
pharmacy. In addition, if the patient utilizes an out of network 
pharmacy, the patient may pay more as there are no contracted 
negotiated prices with an out of network pharmacy.

    Question. According to CMS, from 2012 to 2017 PBMs imposed a 45,000 
percent increase in the amount of DIR fees pharmacies had to pay PBMs 
and PDPs under Part D, and revenues earned from these fees increased 
225 percent per year during this period.\9\ I thought PDPs and PBMs 
were supposed to pay pharmacies for dispensing drugs to patients. Why 
do pharmacies have to pay DIR fees to PBMs at all?
---------------------------------------------------------------------------
    \9\ CMS Proposed Rule: Modernizing Part D and Medicare Advantage to 
Lower Drug Prices and Reduce Out-of-Pocket Expenses, 83 Fed. Reg. 
62152, 62174 (November 30, 2018).

---------------------------------------------------------------------------
    Why are pharmacies forced to pay DIR and other fees to PBMs?

    Answer. DIR is a technical term created by CMS that is specific to 
the Medicare Part D program to account for performance and quality 
measures that cannot be reasonably determined at point of sale (POS)--
i.e., at the time a medicine is dispensed. DIR is reported to CMS after 
the contract year to which the DIR relates. As a performance-based 
assessment program, DIR helps drive high quality clinical and pharmacy 
performance. Metrics vary but can include generic dispensing rates, 
medication adherence, reducing inappropriate drug use (such as high-
risk medicines e.g., controlled substances), diabetes disease 
management, audit performance and error rates, cost-effective 
dispensing rates, and align with Medicare Star Ratings that Part D 
plans are held to. CMS annually issues DIR reporting guidance and 
provides careful oversight to the program. DIR fees are utilized for 
quality programs including lower member premiums by the plan. Prime 
passes 100 percent of the DIR fee to the health plan and the DIR fee is 
reported to CMS. DIR fees are part of the larger movement to measure 
quality across the provider spectrum of care.

    Question. According to CMS, PBMs justify DIR fees as adjustments to 
improve quality. CMS also found that PBMs and PDPs withhold 
substantially more in reductions in payments than as rewards paid to 
pharmacies.\10\ Aren't so-called ``quality adjustments'' that collect 
more for ``poor performance'' than they pay out for ``high 
performance'' just another way for PBMs to collect even more money from 
pharmacies?
---------------------------------------------------------------------------
    \10\ Id. at 62174.

    Why do PBMs collect more in quality payment adjustment than they 
---------------------------------------------------------------------------
pay pharmacies under Part D?

    Answer. For Prime's clients, there are many claims where less is 
taken in pharmacy adjustments than what the pharmacies are paid under 
Part D. There are some low-cost claims, where more is collected than 
they were paid, and lastly, there are some claims paid at Usual and 
Customary Rates, where no DIR adjustments are made.

    DIR fees help to reduce premiums and improve quality. A 2017 
Milliman report, ``Value of Direct and Indirect Remuneration (DIR): 
Impact on Medicare Part D Prescription Drug Plan (PDP) Program 
Stakeholders'' found that by encouraging pharmacies to meet contractual 
``pay-for-performance'' standards based on measures such as the generic 
dispensing rate (GDR), pharmacy DIR can have a significant effect on 
savings. For instance, a one percentage point increase in the GDR for 
prescription drug plans would have saved the Part D program and its 
beneficiaries an estimated $15.3 billion since the inception of the 
program. Over the next 10 years, that savings increases to an estimated 
$68.9 billion for a 1 percentage-point improvement in the GDR. Gaps in 
the standards of quality and treatment patients receive ultimately 
increases the burden of illness and health costs nationwide.
                  formulary placement/generic tiering
    Question. In 2011, 71 percent of generic drugs in Part D were on 
the lowest tier designed for generics; by 2019, that number decreased 
to only 14 percent of generics. According to an Avalere study, this 
practice cost seniors $22 billion in higher out-of-pocket costs since 
2015, costs that could have been avoided through the proper formulary 
placement of lower-cost generics. This practice, known as ``paying for 
position,'' allows brands to block uptake of lower-cost generics and 
biosimilars, thereby unnecessarily increasing out-of-pocket costs for 
seniors.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs? Do you ever consider portfolio or bundled rebates with brand 
manufacturers?

    Answer. Prime evaluates all drugs including new-to-market generics 
for clinical efficacy, safety, and member transition issues before 
considering costs. Prime's clients may exclude and/or place drugs on 
higher tiers based on cost or safety concerns. In certain 
circumstances, generic drugs remain at a higher net cost relative to 
the brand due to a lack of generic competition. In these instances, 
Prime may recommend to our clients that the generic be delayed until 
more lower cost generic competition is available. Once the generic is 
available at a lower cost than the brand, the generic is added to 
formulary. In scenarios where the brand is preferred over the generic 
Prime recommends that the member's cost share for the brand is set 
equal to the lower generic cost sharing tier. Prime may consider the 
added incremental benefit from a package of drugs, but this bundling is 
not a primary driver of decision-making.

    Question. When you place generics on your formularies, do you place 
that generic favorably to brand products--in other words, on generic-
only tiers?

    Answer. Prime evaluates all drugs including generics for clinical 
efficacy, safety and member transition issues before considering costs. 
Generics are generally given a favorable status over their brand 
counterpart on Prime's clients' formularies assuming that they are the 
lower net cost products.

    Question. When a generic becomes available, do you place it on your 
formularies immediately?

    Answer. Formulary placement of a new generic product will depend on 
whether or not the brand is currently covered on the formulary. If the 
branded product is currently on formulary, the generic is immediately 
added if it is available at a lower net cost to the plan. If the 
branded product has been excluded or non-formulary, the generic would 
also not be available until it is reviewed by the P&T Committee. In 
scenarios where the brand is preferred over the generic Prime 
recommends that the member's cost share for the brand is set equal to 
the lower generic cost sharing tier.

                                 ______
                                 
                 Question Submitted by Hon. John Thune
    Question. You've all shared your ability to leverage technology 
such as real-time benefit tools to help patients and providers 
understand drug costs at the point of prescribing, as well as how 
technology can be used to help identify opportunities to provide 
enhanced support and medication management for enrollees. What policies 
can we consider to incentivize greater uptake of these tools?

    Answer. On May 23, 2019, CMS released a final Part D rule, 
``Modernizing Part D and Medicare Advantage to Lower Drug Prices and 
Reduce Out of Pocket Expenses'' (CMS-4180-F) requiring all Medicare 
plans to have a real-time benefit tool in place and connected to one 
EHR by January 1, 2021. This is a great start for Medicare but many 
additional steps are necessary to ensure universal access, 
interoperability, and adoption.

    Additional policy is necessary to require accessibility of real 
time benefit tools across Medicare, Medicaid, Commercial, and 
Marketplace plans so all citizens can benefit from the technology. The 
Medicare rule sets a threshold requiring connectivity to one EHR. 
Members whose providers use other EHRs will not have access to the 
information. There are no requirements in the rule to ensure access at 
the members preferred provider or to require provider group 
connectivity to a solution. This may limit the availability of 
information at the point of prescribing. Developing these connectivity 
requirements would ensure that plans are connected to the EHR systems 
and provider groups that their members use.

    Interoperability is a challenge in the current environment because 
the plan/PBM must establish connectivity with multiple vendors due to 
exclusivity contracts that are in place between EHRs and vendors that 
provide real time benefit inquiry solutions. To provide thorough and 
complete access to all beneficiaries at any physician they choose, PBMs 
will need to contract and connect to many vendors. Limiting the use of 
exclusivity agreements and clearly defining connectivity and access 
requirements is necessary.

    The largest barrier to adoption at the provider level is 
inconsistent and inaccurate information being presented at the point of 
prescribing. This issue is the result of varying proprietary methods of 
real time benefit inquiry that exist in the industry. Mandating 
provider and plan use of the National Council for Prescription Drug 
Programs, (NCPDP) standard for real time benefit check currently in 
development would ensure all relevant information is presented in real 
time including: coverage, pricing for the selected drug, therapeutic 
alternatives, and alternate pharmacy channels. Standardization would 
allow the use of real time benefit information to be measured so 
providers can be incentivized to act on the information and prescribe 
the lowest-cost drug.

                                 ______
                                 
                Questions Submitted by Hon. Richard Burr
    Question. Pharmacy benefit managers (PBMs) offer a variety of 
contract designs to health insurance plans, allowing the insurer or 
client to choose the best structure for their customers. During the 
Finance Committee hearing on April 9, 2019, each witness stated that, 
in the contracts structured to allow for the passthrough of rebate 
dollars at the point of sale, PBMs do not keep any portion of the 
rebate. If the PBM does not keep a portion of the rebate, what type of 
revenue do PBMs receive from these contracts? What percent of your 
contracts are point of sale and what percent utilize a structure 
providing a percentage of the rebate back to the PBM?

    Answer. Prime offers commercial health plan clients and employer 
groups the option to adjust the prices of drugs in their benefit plans 
to reflect rebate savings, including the option of applying the rebate 
savings at the point of sale when a member receives a prescription from 
a pharmacy. When clients deploy a partial POS rebate, Prime's general 
practice is to return the remainder of the rebate to the client. As 
Prime's general business model to pass through all revenue received 
from manufacturers to clients, Prime's primary source of revenue is 
client administrative fees. However, in some cases, clients have 
negotiated to have Prime retain a portion of manufacturer 
administrative fees to offset fees that Prime's clients pay it for PBM 
services.

    In the commercial market, the majority of members served by Prime 
are not affected by high list price influenced cost-sharing. They pay 
flat dollar copays rather than coinsurance (i.e., a percentage of the 
list price). Indeed, only 1 percent of the commercial membership served 
by Prime is subject to coinsurance with no out of pocket maximum, while 
56 percent of the members we serve are enrolled in plans with a flat 
copay without a deductible and 4 percent are in plans with a flat copay 
with low deductibles. Neither of these latter two groups are 
meaningfully affected by the list price of a drug.

    Similarly, in Medicare Part D, many beneficiaries do not face 
significant cost sharing. Cost sharing is minimized for the 29 percent 
of Part D beneficiaries that receive low-income subsidies, also called 
``Extra Help,'' who pay flat, nominal amounts for drugs including 
brands.

    It is Prime's business model to pass back 100 percent of the 
manufacturer rebates we negotiate to our health plan clients. For some 
clients we may retain a portion of the rebates in lieu of a higher 
administrative fee. Clients use these rebates to help offset premiums. 
If a client chooses to offer POS rebates directly to all or any subset 
of their members, that is the client's decision. POS rebates are a 
newer offering and currently only a couple of our clients have chosen 
to adopt our POS product. While the majority of plan sponsors continue 
to use rebates as an effective mechanism to control premium costs or 
reducing costs for all members through benefit designs such as lower 
copays, POS rebates are used by approximately 5 percent of our 
commercial clients' members today. It presents flexibility and an 
alternative for those who want to do to so. However, it should be noted 
that not all branded drugs receive rebates, so the reduced pricing is 
limited to select brand medications and not every member may realize 
the benefits. Currently, we do not have a POS rebate option in Medicare 
Part D.

    Question. It is our understanding that contracts with 
pharmaceutical manufacturers may also take a variety of forms. In 
calendar years 2016, 2017 and 2018, what was the total dollar amount 
that you obtained from pharmaceutical manufacturers in any form such as 
rebates, fees, etc.? What is the total dollar amount that was passed on 
to health insurance plans with which you have an agreement or contract?

    Answer. This question requests proprietary data. Prime's default 
business model passes thru 100 percent of manufacturer rebates and 
administrative fees to clients, except in instances where clients have 
negotiated to have Prime retain a portion of manufacturer 
administrative fees to offset fees that Prime's clients pay it for PBM 
services.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. One challenge that I see, when considering the medical 
treatment marketplace, is that we have a new wave of life-saving 
treatments--of incredible cures we could never have dreamed of, even 10 
or 15 years ago--for which cost, by necessity, is going to be a major 
issue. You look, for instance, at a condition like sickle cell disease. 
For the average SCD patient who reaches age 45, lifetime treatment 
costs are at roughly $1 million--and there are complications that can 
make that figure even higher. Now that we see therapies coming down the 
pipeline that could erase those long-term costs and drastically improve 
the quality of life for sickle cell patients, the question becomes, how 
can our current payment systems adapt to--and absorb--the high costs 
necessary to bring treatments like these to market and to ensure that 
we continue to see innovations like these ones moving forward?

    Answer. Prime believes value based agreements (VBA) are a promising 
approach to ensuring high cost treatment, especially one-time 
treatments like gene therapies, are bringing value commensurate to the 
price. As these high cost therapies have unknown durability and long-
term safety, VBAs that allow for a value warranty ameliorate some of 
the price to value concern and create acceptability for the up-front 
high cost. In developing VBAs, Prime engages all aspects of member care 
such as health monitoring/diagnostic testing, appropriate therapy, 
adherence, health outcomes, and total cost of care. However, current 
Medicaid best price rules and limited anti-kickback safe harbors 
restrain and limit the value of these arrangements. We recommend 
Congress and/or HHS create a VBA safe harbor to protect innovative, 
value based arrangements and address the Medicaid best price rules.

    A potential adaptation of the current payment system for high cost 
one-time treatments is to have separate federally subsidized program 
like those created for End Stage Renal Disease and Vaccination Injury 
Compensation Program. These programs ensure continued access to life 
saving vaccines and dialysis, when costs are substantial.

    Another potential adaptation is the ``Netflix'' model, in which a 
single-source manufacturer is contracted to provide a specific drug to 
an entire population's utilization in exchange for a monthly capitated 
payment set using a baseline utilization rate. This model also employs 
a manufacturer rebate to reimburse the contracting entity for claim 
payments exceeding the capitated rate. This model is actively being 
piloted in Medicaid State programs in Louisiana and Washington State. 
Application outside of Medicaid may require an exemption from Medicaid 
Best Price calculation.

    Question. And along the same lines, beyond creating some much-
needed clarity around value-based arrangements--which I've been working 
with Senators Cassidy and Warner to accomplish legislatively--are there 
steps that Congress could take to facilitate these innovative payment 
models?

    Answer. Please see response to the previous question. In summary, 
Prime requests VBAs be exempt from Medicaid Best Price calculations or 
a Medicaid Best Price Safe Harbor be created. Currently, there is no 
anti-kickback statue safe harbor or Medicaid Best Price safe harbor for 
VBA. We urge you to have the HHS create safe harbors, or for Congress 
to enact legislation allowing exempting VBAs from anti-kickback 
statutes and Medicaid Best Price calculations.

    Question. I'm also interested in the role that technology can play 
in helping to drive down drug costs--as well as to increase medication 
adherence. Some estimates suggest that between 50 and 75 percent of 
patients don't take their medications as prescribed, and that one in 
five new prescriptions go unfilled. And study after study shows that 
cost is a key factor here. As a consequence, we see roughly 125,000 
deaths from non-adherence every year, along with more than $100 billion 
in excess costs to the health-care system. To what extent can 
technology help providers and patients to make more informed and cost-
effective choices about prescriptions--and to then adhere to these 
prescriptions?

    Answer. Prime is using technology to provide real time, member-
specific benefit coverage and drug cost information to providers, 
patients and pharmacists, helping all of them make better, more cost-
effective decisions. Specifically, for new prescriptions, patients can 
use smart phone or web sites to access their own benefit plan, see if a 
particular drug is covered and, if so, at what amount they will have to 
pay out of pocket and what price they will pay at local pharmacies or 
via mail order. From this electronic source, patients can evaluate what 
a drug would cost if it were filled today--and see any other lower 
cost, covered drugs that might also be available under their benefit 
plan. When doctors go to start a new prescription for a patient, Real 
Time Benefit Check (RTBC) will show the member specific coverage and 
benefit information for the selected drug, as well as for therapeutic 
alternatives that may also be covered. By presenting lower cost, 
covered drugs and the cost associated with each, prescribers can also 
help save cost for their patients and the insurance payers.

    For existing prescriptions, before a scheduled doctor appointment, 
Prime evaluates the complete list of drugs taken by that patient, 
looking for lower cost options that are covered by the patient's 
benefit plan. The doctor is sent a report of drug savings 
opportunities, based on that member's drug list. Then, during that 
patient's appointment the doctor can review this with the patient and 
assess (and make) changes based on the lower cost covered drugs that 
address the member's condition.

    Prime is piloting technology to proactively review long term 
prescriptions to assess if lower cost options might be available for 
patients. If a lower cost alternative is found, then the savings 
opportunity is presented to the patient--who can request their 
prescription be changed to the new, lower cost drug.

    Technology makes it easier for patients and providers to track 
adherence to medications. One tool Prime is testing shows a member's 
cost share and any additional steps needed for filling the original or 
alternative drug, enabling providers to discuss options with members 
and make informed decisions together at the point of care. This 
technology helps providers select the most cost-effective drug the 
first time and helps members better manage their drug spend. Providing 
everyone in the delivery system with access to real-time prescription 
cost and benefit information can not only reduce unnecessary cost 
surprises when filling a prescription, but it can also drive medication 
adherence.

    Question. And maybe more to the point, to the extent that these 
technological tools are out there, what steps are you and your clients 
taking to encourage physicians and patients to use them?

    Answer. Prime is making prescribers and the health systems aware of 
the tools we offer, encouraging adoption of the technology. We work 
with our clients and partners to communicate the technology offerings 
described in response to Senator Scott's question above. In addition, 
Prime is training patients and providers on the new technology and the 
benefits of using the technology, and lastly Prime offers incentives to 
some provider groups via performance based incentives around medication 
adherence, lowering cost of care and drug spend. Where applicable, 
these tools are added incentives for providers to participate and 
utilize technology cost savings tools like these.

                                 ______
                                 
                Questions Submitted by Hon. Bill Cassidy
    Question. Are there ever cases where a patient in your health plan 
or one of the health plans for whom you negotiate as a PBM pays more 
for a medicine than the plan spends on a net basis, when you reimburse 
the pharmacy for that same medicine? In those cases, what entity 
receives the benefit of the difference between the amount the patient 
pays and the net amount the plan pays?

    Answer. Yes, depending on the benefit design there may be 
situations where a patient pays more for a medicine than the plan 
spends on the net basis. In those cases, the health plan receives the 
full benefit of the difference that can be used to manage premiums, 
benefit design and member programs.

    Question. In calendar years 2015, 2016, and 2017, what percent of 
your revenue was from fees paid by plans, fees paid by manufacturers, 
other fees, pharmacy spread, or rebates? Same question as to profits. 
Of all revenue generated from part D contracts, what percent did you 
retain?

    Answer. Part D regulations require all pharmacy discounts and all 
rebates be accounted for in what the plan paid the PBM. The pharmacy 
paid amount, by regulation, matches the amount charge to the plan (pass 
through). All rebates are reported on the annual DIR report that plans 
submit to CMS. CMS audits plans' financials, including the 
administrative fees charged to plan clients.

    Question. Should a patient ever pay more out of pocket for a 
medicine than what you pay the pharmacy for that medicine?

    Answer. Depending on the benefit design there may be situations 
where a patient pays more for a medicine than the plan spends on the 
net basis. In those cases, the health plan receives the full benefit of 
the difference that can be used to manage premiums, benefit design and 
member programs.

    Question. PBM revenue from fees has risen, illustrated below. 
Further, PBM's retained revenue as a percent of net retail drug spend 
has consistently increased. What do you attribute this increase to?

    Answer. As drug costs have risen, PBM fees have generally increased 
because they are a percent of a higher number. Prime is not focused on 
generating revenue, but on generating savings, and our default model is 
to pass 100 percent of rebates back to our owner clients.

    Question. How are bona fide service fees established? What was your 
revenue generated in part D by bona fide fees in 2015, 2016, and 2017?

    Answer. Prime does not collect any bona fide services fees in Part 
D. All manufacturer administrative fees are reported as DIR because 
they are passed back to clients directly or indirectly in lieu of 
higher PBM administrative fees.

    Question. A Health Affairs article suggests plans may prefer paying 
PBMs using rebates instead of fees, as ``Using retained rebates to 
cover PBM costs in lieu of fees could artificially lower reported 
administrative costs and make it easier to meet government medical loss 
ratio (MLR) requirements.'' Is it true that paying the PBM a percent of 
rebates would keep that revenue from counting towards a plan's MLR?

    Answer. Prime is not a health plan and not in a position to comment 
on internal MLR accounting matters.

    Question. Would you support an industry-wide standard set of 
performance metrics by which a PBM would set its pharmacy contracts, 
which would be tailored based on regional patient populations, to give 
certainty for local pharmacies?

    Answer. Prime would support the implementation of a standard set of 
quality measures using the Pharmacy Quality Alliance as the measure 
steward. See https://www.pqaalliance.org/our-story for more information 
about PQA and its multi-stakeholder membership. PQA is a public-private 
partnership with CMS. However, the PQA measures should be considered a 
standard baseline measure set and not prevent plans from competing on 
other measures that would encourage plans' development of innovative 
contracting strategies and experimenting with additional measures that 
can improve quality.

    Prime values measuring a pharmacy's quality performance to 
determine the pharmacy's effective management of their patients on such 
metrics as medication adherence, cost management, and health outcomes. 
We currently utilize the PQA measures for measuring and monitoring a 
pharmacy's quality performance. The pharmacy performance results on 
these PQA measures determine the amount of pharmacy price concessions 
that a pharmacy pays as well as the amount of incentive payments that a 
pharmacy receives from a plan.

                Questions Submitted by Hon. Steve Daines
    Question. In Medicare Part D, beneficiaries' deductible and 
coinsurance payments are calculated based on the price negotiated 
between the PBM and the pharmacy.

    Does this take into account rebates and discounts the PBM 
negotiates separately with pharmaceutical manufacturers?

    If yes, what percentage of the time is this the case?

    Answer. No, given the retrospective nature of rebates, the 
deductible and coinsurance does not take into account rebates and 
discounts the PBM negotiates separately with pharmaceutical 
manufacturers.

    Question. In calendar years 2016, 2017, and 2018, what share of 
brand prescriptions covered by the Part D plans you contract with were 
filled in the deductible or required beneficiaries to pay coinsurance? 
What was the total amount beneficiaries spent out-of-pocket for those 
prescriptions? What would beneficiaries' total out-of-pocket spending 
have been under the same cost sharing structure if their payments were 
based on the net price to the Part D plan, inclusive of rebates and 
other price concessions, rather than the price negotiated between your 
PBM and the pharmacy?

    Answer. In calendar year 2016, based on the standard CMS Part D 
Benefit, 100 percent of brand prescriptions filled required a member to 
pay a copay or coinsurance. Of all prescriptions filled, 10 percent 
were brand. The total amount of beneficiaries' out-of-pocket spend for 
those prescriptions accounted for $635 million in drug spend. The 
beneficiaries out of pocket spend based on the net price to Prime would 
have been $519 million. This accounts for an 18.4-percent decrease in 
cost per Rx, reducing the cost from $564 to $460.

    In calendar year 2017, based on the standard CMS Part D Benefit, 
100 percent of brand prescriptions filled required a member to pay a 
copay or coinsurance. Of all prescriptions filled, 9 percent were brand 
prescriptions. The total amount of beneficiaries' out-of-pocket spend 
for those prescriptions accounted for $689 million in drug spend. The 
beneficiaries out of pocket spend based on the net price to Prime would 
have been $555 million. This accounts for a 19.5-percent decrease in 
cost per Rx, reducing the cost from $637 to $513.

    In calendar year 2018, based on the standard CMS Part D Benefit, 
100 percent of brand prescriptions filled required a member to pay a 
copay or coinsurance. Of all prescriptions filled, 9 percent were brand 
prescriptions. The total amount of beneficiaries' out-of-pocket spend 
for those prescriptions accounted for $724 million in drug spend. The 
beneficiaries out of pocket spend based on the net price to Prime would 
have been $562 million. This accounts for a 22.4-percent decrease in 
cost per Rx, reducing the cost from $698 to $542.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
                       spread pricing in medicaid
    Question. A PBM practice that has come up quite a bit recently is 
the practice of spread pricing. Spread pricing occurs when PBMs charge 
health plans more for prescription drugs than they actually reimburse 
pharmacies, and then pocket the different as profit.

    Do you engage in spread pricing practices?

    Answer. We do not engage in spread pricing in Medicaid.
                             rebate demands

    Question. The use of rebates as a negotiating tool has led to 
problematic incentives in the prescription drug supply chain. For 
example, drug companies have argued that they increase list prices in 
response to demands from PBMs for high or increasing rebates.

    Does your company currently have, or has your company had since 
January 2013, any agreements with drug manufacturers that:

    Require equivalent rebates, even in the case of a drug for which 
the list price has been lowered.

    Answer. No.

    Question. Require advance notice of changes in the list price of 
drugs, including reductions or increases in list price?

    Answer. No.
                            revenue sources
    Question. Please provide an annual breakdown of the following 
components of the revenue you received from drug manufacturers from 
January 1, 2013 through December 31, 2018: dollar amount and percent of 
revenue from rebates; dollar amount and percent of revenue from 
administrative fees; dollar amount and percent of revenue from 
distribution fees; dollar amount and percent of revenue from marketing 
fees; dollar amount and percent of revenue from clinical case 
management fees; and all other sources of revenue from manufacturers 
not listed above.

    Answer. The answers to these questions require proprietary data.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Should the CREATES Act become law, what commitment can 
your company making to covering generics as soon as they are approved 
and passing those savings on to patients?

    Answer. Prime has long supported the CREATES Act. Prime evaluates 
all drugs including new to market generics for clinical efficacy, 
safety and member transition issues before considering costs, in the 
context of their impact to health plan costs and the premiums their 
members pay. In certain circumstances, generic drugs remain at a higher 
tier relative to the brand due to a lack of generic competition and 
significantly higher price point. In these instances, Prime may 
recommend to our clients that the generic be maintained at a higher 
tier or excluded until more lower cost generic competition is available 
to avoid an increase in member premiums. Once the generic is available 
at a lower cost than the brand, the generic is added to formulary or 
the drug tier lowered. In these scenarios members pay the lowest net 
cost, regardless of brand or generic status and the tier placement of 
the medication. Thus, the plan ensures the most cost-effective 
medication at the best price is available to the member. With regards 
to medications with potential safety concerns, brand and generic 
medications may be placed on a higher tier or excluded to minimize 
adverse health outcomes and encourage the use of clinically effective 
safer alternatives available.

    Question. What are your concerns with point-of-sale rebates, and 
what alternatives do you propose to such rebates to improve consumer 
savings at the pharmacy counter?

    Answer. If the full value of the rebate is passed on, there is the 
potential for pharmaceutical competitors to determine the value of a 
rebate given by competitors and create a situation rife with the 
opportunity for tacit collusion.

    Point-of-sale rebates help those who face high coinsurance or 
deductibles but may cause an increase in premium. In the commercial 
market, the majority of members served by Prime are not affected by 
high list price influenced cost-sharing. They pay flat dollar copays 
rather than coinsurance (i.e., a percentage of the list price). Indeed, 
only 1 percent of the commercial membership served by Prime is subject 
to coinsurance with no out-of-pocket maximum, while 56 percent of the 
members we serve are enrolled in plans with a flat copay without a 
deductible and 4 percent are in plans with a flat copay with low 
deductibles. Neither of these latter two groups are meaningfully 
affected by the list price of a drug.

    Question. What are the specific steps your company is taking to 
move PCSK9 inhibitors off the specialty tier in Medicare Part D and to 
fixed copay tiers given that prices went down by 60 percent and are no 
longer above the specialty tier threshold?

    Why haven't your plans moved it already, given that CMS allows 
plans to make positive mid-year formulary changes that improve patient 
access and affordability?

    Answer. Repatha is on Prime's clients' Medicare formulary on a 
preferred brand tier.

                                 ______
                                 
             Questions Submitted by Hon. Benjamin L. Cardin
              drug rebate rule and higher part d premiums
    Question. In January, the Department of Health and Human Services 
released a proposal to reform prescription drug rebates paid by 
pharmaceutical manufacturers to pharmacy benefit managers under 
Medicare Part D. The OIG proposal attempts to ban most rebates by 
eliminating their regulatory protections and creating two new safe 
harbor provisions: one to expressly protect discounts applied directly 
at the point-of-sale (POS) for consumers, and another to protect 
certain service fees that manufacturers pay to PBMs for services 
furnished to health plans. The only service fees that would be 
permissible under the proposal are those that are fixed, and not based 
on a percentage of sales and not based on volume or the value of other 
business generated between the parties. The proposed rule was designed 
to address the Department's concerns with the current rebate system, 
which HHS believes rewards high list prices, discourages the use of 
generics and biosimilars, and does not reflect patient out-of-pocket 
costs. For consumers, this proposal may result in lower costs at the 
pharmacy counter, but Part D premiums may increase as a result.

    Could you explain which Part D beneficiaries could see savings on 
their drug costs at the pharmacy counter and which Part D beneficiaries 
could not see lower drug costs?

    Answer. Point-of-sale rebates help those who face high coinsurance 
or deductibles but may cause an increase in premium.

    In Medicare Part D, many beneficiaries do not face significant 
cost-sharing. Cost-sharing is minimized for the 29 percent of Part D 
beneficiaries that receive low-
income subsidies, also called ``Extra Help,'' who pay flat, nominal 
amounts for drugs including brands.\11\ Prime realizes that a small 
percentage of beneficiaries are challenged by the current Part D 
benefit design due to the high cost of certain medications. As MedPAC 
reports, in 2016, approximately 360,000 Part D beneficiaries filled a 
prescription for which a single claim would meet the maximum out-of-
pocket threshold, up from 33,000 in 2010.\12\ Prime welcomes the 
opportunities to work with policymakers, beneficiaries and plans to 
help Part D enrollees who face high cost-sharing. At the same time, we 
recognize that Part D enrollees are very premium sensitive, and are 
generally pleased with their benefit. A recent nationwide survey found 
that 85 percent of Part D enrollees are satisfied with their Medicare 
Part D prescription drug coverage, with over eight out of 10 also 
saying that their Part D plans provide ``good value.''
---------------------------------------------------------------------------
    \11\ J. Cubanski, A. Damico, and T. Neuman, ``Medicare Part D in 
2018: The Latest on Enrollment, Premiums, and Cost Sharing,'' May 17, 
2018, downloaded from https://www.kff.org/medicare/issue-brief/
medicare-part-d-in-2018-the-latest-on-enrollment-premiums-and-cost-
sharing/.
    \12\ Medicare Payment Advisory Commission, Report to the Congress: 
Medicare Payment Policy, March 2019, Chapter 14: ``The Medicare 
prescription drug program (Part D): Status report.''
---------------------------------------------------------------------------
    perverse incentive to place more expensive drugs on formularies
    Question. In a Senate Finance Committee hearing had a few weeks 
ago, many pharmaceutical companies argued that the current rebate 
structure incentivizes high list prices. These companies argue that the 
higher the list price of the drug, the greater the rebates, and 
therefore, the more profit the PBM earns. While contracts between PBMs, 
Part D Plans, and pharmaceutical companies require PBMs to pass through 
100 percent of the negotiated rebate back to insurance plans, I worry 
that this structure could incentivize PBMs to favor a more expensive 
drug on the formulary because they could get a higher rebate.

    Is there an incentive for a PBM to place a higher cost drug on the 
Part D formulary because the PBM receives a larger rebate for that more 
expensive drug? Why or why not?

    Answer. No, Prime does not have such an incentive, but we cannot 
speak for all PBMs. While rebates are an important savings tool, they 
are not Prime's first consideration in making formulary 
recommendations. Prime's formulary selection process is tied to safety 
and efficacy consideration before accounting for competitive pricing. 
In considering competitive pricing, we take a ``low net cost'' 
approach: Prime's clients will often forgo rebates on a certain drug in 
favor of a clinically equivalent, lower-cost medication. In Medicare 
Part D, Prime has more than a 90-percent generic dispensing rate, and 
generic drugs generally do not offer rebates. In situations in which a 
rebated drug is covered and rebates are earned, Prime's model is to 
pass back 100 percent of the value of rebates we negotiate to our 
clients.
                 direct and indirect remuneration fees
    Question. I have heard from independent pharmacies in Maryland that 
have struggled with Pharmacy Benefit Managers and direct and indirect 
remuneration (DIR) fees. According to independent pharmacies, there are 
times when DIR fees are based on performance, and these fees range from 
$2-$7 for certain types of maintenance prescriptions and are often 
collected retroactively--weeks or even months after a prescription was 
filled. A PBM can take money back from the pharmacy when the pharmacies 
haven not met a PBM's performance standard. In these instances, the PBM 
claws back money and creates a situation where the pharmacy does not 
receive adequate reimbursement to cover its costs. As a result, DIR 
fees can be a significant financial loss to pharmacies and an 
additional cost burden to patients.

    Could you explain what performance measures are considered when 
determining a DIR fee?

    Answer. Prime includes performance metrics that are related to CMS 
Star ratings such as adherence to statin medications, statin use in 
persons with diabetes, adherence to auto immune medications, adherence 
to multiple sclerosis medications and metrics relative to cost such as 
generic dispensing rates and 90-day supply fill rates.

    Question. How is that performance measure communicated to the 
pharmacy?

    Answer. Performance measures are part of Prime's contracts with 
pharmacies either directly or through their pharmacy service 
administrative organizations (PSAOs). Prime uses EQUIPP, an industry 
standard dashboard that allows pharmacists to track their performance. 
Performance scores are communicated to pharmacies during the quarterly 
reconciliation process. In addition, Prime utilizes a national pharmacy 
quality platform that hosts the pharmacy performance score on the 
adherence metrics, and statin use in person with diabetes on which the 
pharmacy can view their performance.

    Question. How much does your company receive in DIR fees?

    Answer. One hundred percent of the collected performance related 
DIR fees in Part D are passed on to the health plan and reported to 
CMS.

    Question. How much does your company receive in performance-related 
DIR fees?

    Answer. One hundred percent of the collected performance related 
DIR fees in Part D are passed on to the health plan and reported to 
CMS.

    Question. Are those fees passed on to the consumer? If so, how?

    Answer. These fees are used to lower the premiums Medicare 
beneficiaries pay. A 2017 Milliman report, ``Value of Direct and 
Indirect Remuneration (DIR): Impact on Medicare Part D Prescription 
Drug Plan (PDP) Program Stakeholders,'' found that by encouraging 
pharmacies to meet contractual ``pay-for-performance'' standards based 
on measures such as the generic dispensing rate (GDR), pharmacy DIR can 
have a significant effect on savings. For instance, a one percentage 
point increase in the GDR for prescription drug plans would have saved 
the Part D program and its beneficiaries an estimated $15.3 billion 
since the inception of the program. Over the next 10 years, that 
savings increases to an estimated $68.9 billion for a one percentage 
point improvement in the GDR.
                             drug shortages
    Question. Currently there are over 270 drugs in shortage. Drug 
shortages happen for many reasons such as manufacturing and quality 
problems, natural disasters, and inventory practices of wholesalers and 
pharmacies. Drug shortages cause harm to providers, hospitals, and most 
importantly patients. Pharmacists and providers must spend significant 
amounts of time on researching alternative drug treatments for the 
patient, which may not always be the most optimal therapies.

    As a Pharmacy Benefit Manager, you have contractual agreements with 
pharmaceutical companies in order to place their drugs on a plan's 
formulary. While I understand that drug shortages happening in both the 
inpatient and outpatient settings, there may be a role PBMs can play in 
protecting patients.

    For the prescription drugs you negotiate to cover on a plan 
formulary, could you use your negotiating power to ensure a drug is 
available to a patient? Why or Why not?

    Answer. It is Prime's understanding from the FDA fall 2018 meeting 
on drug shortages that the majority of drug shortages occur in the 
hospital setting. Prime only negotiates drug discounts for the 
outpatient setting. Many shortages result from manufacturer 
deficiencies, which are beyond the reach of the PBM.

    Question. What do you do to ensure that patients have the drugs 
they need?

    Answer. When the preferred product is no longer available, we will 
generally recommend that our health plan clients move a previously non-
preferred drug into preferred status.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
                              biosimilars
    Question. During the hearing, each of you expressed support for 
biosimilars, and most of you indicated you try to take advantage of 
available biosimilars to help lower costs. When I asked each of you to 
identify solutions to help ensure a robust biosimilar marketplace here 
in the U.S, most of you mentioned things Congress or the administration 
could do to help ensure uptake of biosimilars--from lowering the 
exclusivity period for biologics to finalizing guidance on 
interchangability at the FDA. However, none of you offered any 
solutions or ideas for what your company could do to help ensure timely 
uptake of biosimilars, a robust U.S. biosimilars market, and a 
resulting cost savings to patients to taxpayers.

    Most of the biosimilars currently approved and on the market in the 
U.S. are reimbursed through the medical benefit. What are the 
similarities and differences in how rebates are passed onto patients 
and providers in the medical benefit versus pharmacy benefit. In your 
answer, please describe these similarities and differences across each 
of your books of business (i.e., commercial, Medicare, Medicaid).

    Answer. Prime has encouraged the use of biosimilars and has placed 
them in a parity position across our standard formularies. Prime 
manages drugs to the lowest net cost for our health plans and there may 
be instances where biosimilars will not be the lowest net cost product. 
Prime, along with the clients we support, evaluate market dynamics and 
ability to move market share in determining the lowest net cost 
products. There is not a significant difference in lines of business. 
Prime's general business model is to pass 100 percent of the rebates 
back to our clients regardless of benefit--medical or pharmacy.

    Question. Do any of your plans require the use of a higher list 
price, branded product over the use of a therapeutically equivalent 
lower list price generic or biosimilar product? Why? If a plan 
restricts the use of a biosimilar or generic product in lieu of an 
innovator or brand name product, do patients pay more out-of-pocket 
than they would if the biosimilar was preferred?

    Answer. In certain instances this may occur. Biosimilars may not 
have the lowest net cost product compared to the branded drug. In 
addition, moving enough market share to the biosimilar may be difficult 
and result in monetary losses for the health plan. Simply removing 
rebates may not result in the overall lowering of drug costs as there 
are many factors that impact biosimilar adoption in the market place 
such as interchangeability guidelines, ASP pricing, provider buy-and-
bill practices, resistance to migrating patients from stable therapies 
to a biosimilar and product availability.

    Question. Recognizing most biosimilars are paid for via medical 
benefit, please explain whether you use step-therapy to restrict access 
to biosimilars for your patients in any medical benefit you manage 
across each of your books of business (i.e., commercial, Medicare, 
Medicaid). What role do rebates playing in your consideration for 
patient access to biosimilars in each of these instances?

    Answer. Step therapy is a tool to ensure appropriate use of high-
cost therapies where there are potential lower-cost therapeutic 
alternatives, regardless of whether a drug is a branded biologic or 
biosimilar. Prime has encouraged the use of biosimilars and has 
recommended that our client's place them in a parity position across 
our standard formularies. Prime manages drugs to the lowest net cost 
for our health plans and there may be instances where biosimilars will 
not be the lowest net cost product. Prime, along with the plans we 
support, evaluate market dynamics and ability to move market share in 
determining the lowest net cost products.

    Question. How can and will your company help ensure a robust 
biosimilars market here in the U.S.?

    Answer. Prime is currently supporting the biosimilar market in 
several ways. We are working with biosimilar manufacturers to help 
ensure they are aware of our low net cost strategies. Next, we work 
with our health plans to develop medical policy and utilization 
management policies that can utilize step therapy as a lever to move 
market share to preferred products. Prime works with our health plans 
to manage other strategies that can move utilization to preferred 
products (e.g., site of care policies, reimbursement solutions). 
Finally, Prime is actively working to promote legislation that supports 
interchangeability at the State and Federal level.

    Question. I have heard concerns that ``rebate walls'' are 
responsible for keeping new biosimilars off of formularies, where a 
manufacturer offers conditional rebates on a bundle of their products 
in order to incentive PBMs to exclude a new biosimilar competitor from 
their formularies. Have you ever decided to place a drug on a preferred 
tier because of the rebates you receive for other drugs from that 
manufacturer? If you do not do this, do you support this practice being 
carried out by your competitors?

    Answer. Prime first uses our Pharmacy and Therapeutics Committee to 
make all clinical recommendations. Only after clinical and safety 
factors are considered do issues of cost arise. Our clients base 
decisions on the clinical evaluation of the drug and lowest net cost. 
We also assess the member disruption effects of making any formulary 
change. We consider each drug on its own merits or do not consider 
drugs in bundles in making financial recommendations.

    We cannot speak to our competitors' strategies.

    Question. What more can and will you do to counteract efforts to 
rebate-block or bundle rebates to block biosimilar formulary placement? 
Will you commit to taking these actions as more biosimilars become 
available in Part D?

    Answer. All decisions are made based on the clinical evaluation of 
the drug and lowest net cost. We do not consider products in bundles 
but consider drugs on a drug by drug basis after considering clinical 
and safety factors and issues of patient disruption first.
                            rebates vs. fees
    Question. During the hearing, Senator Cassidy asked each of you 
about the trend in PBM contracting where a larger share of your 
reimbursement and payment is a result of ``fees'' which you are able to 
pocket, as opposed to ``rebates'' which must be passed back to the 
plan/consumer.

    Please define the word ``rebate.'' As part of your definition, 
please clarify whether or not you consider administrative fees, 
inflation payments, product discounts, prospective rebates, care 
management fees, procurement fees or any other type of fee or payment 
that isn't a retrospective rebate to be a rebate.

    Answer. ``Rebate(s)'' means a retrospective discount paid by a 
pharmaceutical manufacturer to a PBM on behalf of a client for the 
pharmaceutical manufacturer's products dispensed to a member of a 
client's plan. Rebates do not include any manufacturer administrative 
fees paid to a PBM by a pharmaceutical manufacturer. All other 
remuneration that Prime receives from pharmaceutical manufacturers are 
included in this definition including inflation protection rebates. 
``Manufacturer administration fee'' means fees paid to a PBM by a 
pharmaceutical manufacturer for rebate services performed by the PBM on 
the pharmaceutical manufacturers' behalf.

    Question. Please provide, across your books of business (i.e., 
commercial, Medicare, Medicaid), a list of each of the different types 
of rebates, charges, and/or fees that you incorporate into your 
contracts.

    Answer. In each of these lines of business, Prime receives in the 
agreements with pharmaceutical manufacturers both Rebates and 
Manufacturer Administrative Fees as defined in the question above.

    Question. Rebates, by definition, must be passed along to the 
employer, health plan, or consumer. Please provide, across your books 
of business (i.e., commercial, Medicare, Medicaid), details on which of 
the rebates/fees detailed in my prior question are passed along to the 
consumer and/or plan and which are kept by the PBM.

    Answer. Prime's model is to pass through 100 percent of the rebates 
to owner clients and retain a portion of the manufacturer admin fees to 
offset costs for the PBM services provided to clients.
                             fiduciary duty
    Question. Each of you have argued that you are the one entity in 
the drug supply chain that exists to help lower the cost of 
prescription drugs. You claim that your value comes in saving 
taxpayers, plans, and consumers money.

    Would you be willing to accept a fiduciary standard in your 
contracts? In other words, do you believe you have a fiduciary duty to 
the plan or employer you contract with--to act in their best interest 
and not your own? If not, why not?

    Answer. Prime contracts primarily with Blue Cross Blue Shield non-
profit insurance companies. Prime provides a variety of services to 
these and other Clients at their direction through separate contracts. 
These contracts do not generally provide that Prime will have any 
fiduciary obligations. Prime does not believe that the law imposes 
fiduciary duties upon PBMs apart from the written terms of their 
contracts with clients and, therefore, imposing a blanket fiduciary 
responsibility on PBMs would be contrary to its contractual agreements 
with its clients and inconsistent with established law surrounding 
fiduciaries. Such regulation may also disrupt the reasonable 
expectations of clients that have contracted with Prime, and 
potentially increase Prime's costs in providing services to clients and 
the premiums that individual members pay for insurance.
                           paying pharmacists
    Question. Following a series of reports in The Columbus Dispatch, 
Ohio has taken a number of actions over the past year to crack down on 
several PBM practices. Efforts to date have included investigations, 
lawsuits, and policy changes to address the egregious use of spread-
pricing, alleged breaches of contract, accusations of anti-competitive 
behavior, a misuse of taxpayer dollars, and a general lack of 
transparency.

    PBMs are responsible for creating pharmacy networks, setting the 
price patients and health plans pay for prescription drugs, 
adjudicating claims, and reimbursing pharmacies for dispensed drugs. In 
addition, nearly all PBMs own proprietary pharmacies that directly 
compete with the PBM-created retail network. Do you design plans that 
incentivize or require patients to use a pharmacy owned by your 
affiliate over a competing retail pharmacy. If yes, do you believe this 
represents a conflict of interest? If yes, how do you ensure there is 
no resulting anticompetitive misuse of pharmacy and patient data?

    Answer. Some of Prime's clients have adopted benefit plans that 
offer lower member cost-share for preferred mail order and specialty 
pharmacies, including AllianceRx Walgreens Prime in which Prime has a 
45-percent ownership interest. Prime has policies and controls in place 
to prevent anticompetitive misuse. We do not believe this is a conflict 
of interest, and the FTC has concurred. See https://www.ftc.gov/news-
events/press-releases/2005/09/ftc-issues-report-pbm-ownership-mail-
order-pharmacies.

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. Can you answer the following questions to help us 
understand the pharmacy benefit manager business model and how you make 
formulary decisions?

    What percent of rebates are passed to the consumer under Medicare 
Part D?

    Answer. Prime passes 100 percent of rebates to its Medicare Part D 
plan sponsor clients who may use the rebates to lower premiums and 
benefit the consumer. In Medicare Part D, many beneficiaries do not 
face significant cost sharing. Cost sharing is minimized for the 29 
percent of Part D beneficiaries that receive low-income subsidies, also 
called ``Extra Help,'' who pay flat, nominal amounts for drugs 
including brands.

    Question. What percent of rebates are passed to the consumer in the 
private insurance market?

    Answer. Prime offers commercial health plan clients and employer 
groups the option to adjust the prices of drugs in their benefit plans 
to reflect rebate savings, including the option of applying a portion 
of the rebate savings at the point of sale when a member receives a 
prescription from a pharmacy. This plan offering allows members with 
high deductibles and coinsurance to benefit from rebates at the point-
of-sale, but there is a trade-off between premiums and a point-of-sale 
rebates. Point-of-sale rebates may help those who face high coinsurance 
or deductibles but may also cause an increase in premium. Whether a 
member benefits from point-of-sale rebates is highly dependent on the 
member's specific benefit plan, as well as the member's overall medical 
and pharmacy expenses.

    In the commercial market, the majority of members served by Prime 
are not affected by high list price influenced cost-sharing. They pay 
flat dollar copays rather than coinsurance (i.e., a percentage of the 
list price). Indeed, only 1 percent of the commercial membership served 
by Prime is subject to coinsurance with no out of pocket maximum, while 
56 percent of the members we serve are enrolled in plans with a flat 
copay without a deductible and 4 percent are in plans with a flat copay 
with low deductibles. Neither of these latter two groups are 
meaningfully affected by the list price of a drug.

    It is Prime's business model to pass back 100 percent of the 
manufacturer rebates we negotiate to our health plan clients who may 
use the rebates to offset premiums. If a client chooses to offer POS 
rebates directly to all or any subset of their members, that is the 
client's decision and Prime is indifferent to it. POS rebates are a 
newer offering and currently only a couple of our clients have chosen 
to adopt our POS product that passes rebates back through POS to 
members. While the majority of plan sponsors continue to use rebates as 
an effective mechanism to control premium costs or reducing costs for 
all members through benefit designs such as lower copays, POS rebates 
is available for approximately 5 percent of our commercial clients' 
members today. It presents flexibility and an alternative for those who 
want to do so. However, it should be noted that not all branded drugs 
receive rebates, so the reduced pricing is limited to select brand 
medications and not every member may realize the benefits. Currently, 
we do not have a POS rebate option in Medicare Part D.

    Question. Do you have any comments on how health plans should use 
their share of the rebates to lower drug prices for patients with high 
deductibles?

    Answer. We believe that health plan sponsors should have the 
flexibility to use rebate dollars in setting benefit designs and 
premiums in ways that best serve their respective members and market 
needs.

    Question. What is the process of deciding on which tier a generic 
will be placed in your formularies?

    Answer. For all drugs including generics, Prime's formulary 
selection process is tied to safety and efficacy consideration before 
accounting for competitive pricing. In considering competitive pricing, 
we take a ``low net cost'' approach: Prime will often recommend that 
clients forgo rebates on a certain drug in favor of a clinically 
equivalent, lower-cost medication.

    Question. Are generics always tiered as preferred (versus branded 
drugs)?

    Answer. In general, generics are given a favorable status on 
Prime's clients' formularies. However, there are a few exceptions made 
with regards to high cost generics and those with potential safety 
concerns.

    With regards to high cost generics, Prime evaluates new to market 
generics in the context of their impact to health plan costs and the 
premiums their members pay. In certain circumstances, generic drugs 
remain at a higher tier relative to the brand due to a lack of generic 
competition and significantly higher price point. In these instances, 
Prime may recommend to our clients that the generic be maintained at a 
higher tier or excluded until more lower cost generic competition is 
available to avoid an increase in member premiums. Once the generic is 
available at a lower cost than the brand, the generic is added to 
formulary or the drug tier lowered. In these scenarios members pay the 
lowest net cost, regardless of brand or generic status and the tier 
placement of the medication. Thus, ensuring the most cost-effective 
medication at the best price available to the member. With regards to 
medications with potential safety concerns, brand and generic 
medications may be placed on a higher tier or excluded to minimize 
adverse health outcomes and encourage the use of clinically effective 
safer alternatives available.

    Question. How quickly are generics placed on formularies once FDA 
clears them?

    Answer. Formulary placement of a new generic product will be 
dependent on if the brand is currently covered on the formulary and 
available at a lower net cost since patent cliff strategies can add to 
costs. If the branded product is currently on formulary, the generic is 
immediately added. If the branded product has been excluded or non-
formulary, the generic would also not be available until it is reviewed 
by the P&T.

    Question. Given the struggles we hear about patients accessing 
insulin, what measures are you taking to ensure that diabetes products 
and different types of insulin are placed on a preferred tier when 
establishing a formulary?

    Answer. Insulins are highly similar across branded products. 
Prime's clients ensure that there are adequate formulations available 
to treat the needs of all diabetic patients. Approving biosimilar 
insulin products will help provide even more options at a lower cost 
for these patients.

    Through our clinical evaluation process, Prime recommends to our 
clients that there are adequate formulations available on our 
formularies. We work towards coverage on health savings account (HSA) 
preventive drug lists and with pharmaceutical manufacturers to pull 
through clinical support programs such as free diabetes meter programs. 
Prime also has a number of adherence programs that ensure continued 
use.

    Prime members have seen relatively flat out of pocket payments over 
the past 5 years and have generally not been exposed to list prices in 
the news.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
               transparency, rebates, and spread pricing
    Question. During the hearing, I asked an initial question on spread 
pricing and wanted to follow up here. According to the Centers for 
Medicare and Medicaid Services (CMS), total gross spending in 2017 on 
prescription drugs was $154.9 billion in Medicare Part D, $30.4 billion 
in Part B, and $67.6 billion in Medicaid.

    One of the main challenges in lowering the price of prescription 
drugs is that there is a disturbing lack of transparency all along the 
supply chain, from research and development to what the patient is 
expected to pay at the counter. Further, the out-of-pocket costs for 
drugs varies greatly and unpredictably from patient to patient. That is 
why Senate Special Committee on Aging Chairwoman Collins and I 
introduced legislation that would codify the Drug Spending Dashboards 
at the CMS. The dashboards provide cost and spending information for 
drugs in the Medicaid, Medicare Part B, and Medicare Part D 
programs.\13\ With regards to transparency in the prescription drug 
supply chain, please provide answers to the following questions.
---------------------------------------------------------------------------
    \13\ S. 709, 116th Congress, Prescription Drug Pricing Dashboard 
Act, online at: https://www.congress.gov/bill/116th-congress/senate-
bill/709?q=%7B%22search%22%3A%22drug+dash
board%22%7D&s=1&r=1. Accessed April 23, 2019.

    Is it the policy and practice of your company to negotiate with 
drug manufacturers in good faith and obtain the best and lowest prices 
---------------------------------------------------------------------------
possible for patients and American taxpayers?

    Answer. Yes.

    Question. Is it the policy and practice of your company that 
patients, providers, researchers, policymakers, and the American people 
in general, know how taxpayer dollars are being spent in the Medicare 
and Medicaid programs?

    Answer. Prime supports transparency that is actionable and does not 
create risk to competition.

    CMS collects very detailed information from PBMs about Part D 
transactions through its mandatory Direct and Indirect Remuneration 
(DIR) reporting. CMS has a thorough line of sight into all rebates, 
fees and payment adjustments, which are reported to CMS as DIR on a 
drug by drug basis. Further, each plan submits bids annually to CMS by 
the first Monday in June. Those bids reflect the plan's expected 
benefit payments plus administrative costs after they deduct expected 
Federal reinsurance subsidies, and the level of CMS payment to plan 
sponsors is derived from actual plan bids.

    Prime supports legislation introduced by Senators Cornyn, Cortez 
Masto, Carper, and Cassidy that would allow the Medicare Payment 
Advisory Commission and the Medicaid and CHIP Payment and Access 
Commission access to CMS's DIR data to inform Congress's decision-
making on Part D policy. Our support is based upon the important 
protections for proprietary data included in the legislation that will 
mitigate the risk of adverse, anti-competitive consequences that could 
cause drug prices to increase.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by manufacturer list price?

    Answer. Our model is transparent as to rebates and costs, and we 
provide this information to our clients in the normal course of our 
business.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by rebate paid by the manufacturer 
to you (the PBM)?

    Answer. Our model is transparent as to rebates and costs, and we 
provide this information to our clients in the normal course of our 
business.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by the amount reimbursed to 
pharmacies by the PBM?

    Answer. Our model is transparent as to rebates and costs including 
pharmacy costs, and we provide this information to our clients in the 
normal course of our business.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by the amount insured and uninsured 
patients pay out of pocket before coupons, discounts, and other forms 
of patient assistance offered at the point of sale?

    Answer. Patients who have Prime's drug coverage can see what they 
will pay out of pocket on MyPrime.com. Medicare Plan Finder can also be 
used by Part D members shopping our clients' plans, and we provide 
accurate price information to help inform beneficiaries' choices. We do 
not have a relationship with uninsured patients.

    Question. If so, please provide useful and easily accessible links 
to where policymakers and the public can find such information. If not, 
please disclose how much each drug you work with clients to provide 
costs, broken down by: manufacturer list price; rebate paid by the 
manufacturer to you (the PBM); the amount reimbursed to pharmacies by 
the PBM; and the amount insured and uninsured patients pay out of 
pocket, before coupons, discounts, and other forms of patient 
assistance offered at the point of sale.

    Answer. As a PBM, we do not have a relationship with uninsured 
patients, and do not know what they pay. Pharmaceutical companies alone 
set list prices and could lower them for the benefit of all patients.

    Question. Please provide a list of actions your company has taken 
to ensure that pharmacists are enabled and allowed to communicate to 
patients how they can pay the lowest out-of- pocket cost possible for 
their prescription drugs.

    Answer. Prime does not currently and has not used gag clauses. 
Prime assists its clients in the development of the benefit plan so 
that, at the point of purchase, members pay the lower amount of either 
the pharmacy's submitted price or the amount of the applicable member 
cost share, as specified in the member's benefit plan.

                                 ______
                                 
  Prepared Statement of Steve Miller, M.D., Executive Vice President 
             and Chief Clinical Officer, Cigna Corporation
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, thank you for inviting me to testify at this hearing. I am 
Steve Miller, M.D., executive vice president and chief clinical officer 
at Cigna Corporation.

    I am a former transplant nephrologist and former vice president and 
chief medical officer for Washington University and Barnes Jewish 
Hospital. From 2005 to 2018, I served as senior vice president and 
chief medical officer at Express Scripts, leading the company's 
clinical, policy, quality, and performance efforts. In that role and 
currently as chief clinical officer at Cigna, I engage with all 
participants in the supply chain, ensuring that clinical quality and 
efficacy are a key focus of the company's negotiations with drug 
manufacturers. I also work closely with many of our clients, which 
include large employers, small businesses, labor unions, health plans, 
the Federal Government, and States, to find unique and innovative 
solutions to enable them to continue providing affordable and high 
quality coverage options.

    The United States drives the most innovation in health services. At 
Cigna, we believe we can do better by our citizens to achieve better 
health, with greater choice, affordability, and predictability. We 
challenge ourselves every day to identify solutions that achieve those 
goals. I appreciate the opportunity to testify on affordability and 
access to prescription drugs in the United States. Cigna supports the 
committee's efforts to make prescription drug prices more affordable, 
and new innovations more accessible, to all patients and payers in the 
United States.

    Cigna is a global health services company; our subsidiaries are 
major providers of medical, pharmacy, dental, disability and related 
products and services in more than 30 countries and jurisdictions 
around the world, including South Korea, China, India, the Middle East, 
and Europe. Cigna is also the largest provider of expatriate benefits 
in the world. In the United States, Cigna is one of the largest health 
services providers. We emphasize whole-person health and clinical 
quality to deliver choice, affordability and enhanced quality of life 
for our customers and clients. Key enablers of our success are 
collaborative relationships with providers, an emphasis on outcomes- 
and value-based reimbursement, robust patient support services, and 
transparency tools for customers and clients to make informed decisions 
that address their specific needs. We strive to be a constructive 
participant in public policy discussions and to contribute workable 
solutions to societal challenges in all of the countries, markets and 
jurisdictions in which we operate.

    Cigna completed its combination with Express Scripts in December 
2018. Express Scripts helps more than 80 million Americans achieve 
better care at a lower cost. We are proud to serve TRICARE, the health 
program for 9.4 million uniformed service members, retirees and their 
families, for more than 10 years. Express Scripts' tools include an 
innovative specialty pharmacy care model for costly and complex drugs; 
clinically based drug utilization reviews; clinically based formulary 
management; medical and drug data analysis; and specialized Therapeutic 
Resource Centers, with pharmacists specially trained on conditions such 
as diabetes, oncology, inflammatory conditions, multiple sclerosis, and 
pulmonary hypertension.

    The combination brings together industry-leading capabilities that 
are uniquely positioned to deliver better care, expanded choice, and 
greater affordability. Our combined company's 74,000 employees come to 
work every day to enhance the health, well-being and peace of mind of 
the more than 160 million customer relationships we serve globally.

    In an environment where many proposals would narrow or restrict 
choice in order to drive affordability, Cigna sees an opportunity to 
further expand customer choice, and to make it easier for people to 
access the health services they need, whether in a doctor's office, an 
urgent care center, a retail pharmacy setting, or employer clinic; or, 
for more acute needs, at a hospital or outpatient center. As customers 
increasingly choose to access health-care services at home or through 
digital platforms, we see these expanded, personalized engagement and 
delivery channels as a tremendous opportunity to expand choice and 
simplify health care.

    Pharmacy is the most frequently consumed aspect of health care for 
Americans. On average, people use their pharmacy benefit 11 times a 
year, making it the most widely used benefit employers and health plans 
offer. For illnesses that were once treated with surgery, prescription 
drugs have emerged as an effective front-line option. However, 
prescription drug spending is forecast to grow at 5.5 percent per year, 
on average, between 2018 and 2027.\1\ Over the past 10 years, the 
Consumer Price Index (CPI) has increased 15 percent.\2\ During that 
same time period, the prices for generic drugs have dropped by an 
average of 60 percent; conversely, these savings have been subsumed by 
an astonishing 208 percent increase in the cost of branded drugs.\3\
---------------------------------------------------------------------------
    \1\ https://www.cms.gov/research-statistics-data-and-systems/
statistics-trends-and-reports/nat
ionalhealthexpenddata/downloads/forecastsummary.pdf.
    \2\ https://www.statbureau.org/en/united-states/inflation.
    \3\ http://lab.express-scripts.com/lab/drug-trend-report//media/
29f13dee4e7842d6881b7e034f
c0916a.ashx.

    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. At Cigna, we are focused on 
accelerating solutions that support both innovation and price 
---------------------------------------------------------------------------
stability.

    We are already making good progress. Cigna and Express Scripts' 
solutions for driving lower drug spending and fostering the use of 
lower net cost treatments are making medications more accessible for 
Americans. In 2018, Express Scripts' 
clinical-first approach returned $45 billion in savings to our 
clients--employers, health plans, government programs, unions, and 
others.\4\ Because of our innovative solutions and approach to pharmacy 
care, our clients achieved the lowest drug trend in 25 years, just 0.4 
percent across employer-sponsored plans. Further, we delivered an 
unprecedented 0.3 percent decline in drug spending across Medicare 
plans. The average 30-day prescription cost Americans only 6 pennies 
more than in 2017. All of this was accomplished in an environment where 
manufacturers raised list prices 7.3 percent. We guide patients to 
effective, lower-cost therapies, and secure deep discounts from 
manufacturers and pharmacies.
---------------------------------------------------------------------------
    \4\ http://lab.express-scripts.com/lab/drug-trend-report/2018-drug-
trend-report.

    With that context as background, our statement today focuses on the 
---------------------------------------------------------------------------
following topics:

          Our efforts to drive improved affordability, predictability, 
        and accelerate value-based care for patients;

          The role of rebates in prescription drug costs; and

          Legislative and regulatory solutions to lower drug costs for 
        patients and payers.

     our efforts to drive improved affordability, predictability, 
              and accelerate value-based care for patients
    Cigna has a range of world class capabilities that promote clinical 
quality, reduce costs, and expand access to needed medications. We are 
focused on accelerating solutions that support both innovation and 
price stability, including:

          Treating the Whole Person. We support our clients in 
        maintaining or improving their health; emphasize early 
        intervention; and focus on treating the whole person through 
        medical, pharmacy, and behavioral health services.

          Consumer Support and Personalized Choices. Our combined 
        clinical and care teams support an individual's end-to-end 
        health journey by coordinating care and explaining choices 
        along the way. Our innovative tools allow us to personalize 
        options, simplify care, and expand choice.

          Partner of choice for providers. We work closely with 
        physicians and other providers to close gaps in care through 
        real-time information sharing and support that enables better 
        health outcomes.

          Value-based payment. Cigna prioritizes payment arrangements 
        with health-care providers and pharmaceutical manufacturers 
        that are outcomes-based. These arrangements enhance Cigna's 
        value-based provider collaboratives and Express Scripts' value-
        based manufacturer and retail collaborations, which improve 
        health outcomes at a lower cost.

          Lower total cost of care. We provide better tools and 
        information to keep people healthier and ensure they receive 
        efficient and effective care.

    At Cigna, we focus on the pursuit of value through integrated 
offerings that reduce costs and promote improved health outcomes:

          In the United States, 85 percent of our medical customers 
        are currently in transparent administrative services only 
        relationships.

          Through value-based arrangements, Cigna realized medical 
        cost savings of more than $600 million between 2013 and 
        2017.\5\ These efforts have allowed us to maintain the 
        industry's lowest medical trend for the past 6 years.\6\
---------------------------------------------------------------------------
    \5\ Cigna January 2019 analysis of national Accountable Care 
program groups with effective dates from 2013 through 2017. 
Reimbursements already paid to groups are subtracted from the savings 
to reflect overall investment.
    \6\ Cigna Corporation investor presentation, February, 1, 2019, 
https://www.cigna.com/assets/docs/about-cigna/CI-investor-kit.zip.

          The 2018 Cigna Value of Integration Study shows that clients 
        with Cigna medical, pharmacy, and behavioral benefits reduce 
        annual medical costs by an average of $645 for each person with 
        an identified health improvement opportunity--savings that can 
        increase to nearly $10,000 for individuals with certain chronic 
        conditions.\7\
---------------------------------------------------------------------------
    \7\ https://www.cigna.com/newsroom/news-releases/2018/cigna-study-
shows-improved-health-well-being-and-affordability-for-individuals-
with-integrated-medical-behavioral-and-pharmacy-benefits.

    Express Scripts uses their clinical expertise to negotiate lower 
drug costs with drug manufacturers, leveraging competition to help 
drive savings for their clients, which include employers, labor unions, 
health plans, the Federal Government, and States. These negotiations 
serve to create competition in the market for prescription drugs. The 
savings ultimately benefit patients in the form of lower premiums and 
reduced out-of-pocket costs. Additional savings are realized when 
clients take advantage of Express Scripts' clinical support services, 
---------------------------------------------------------------------------
which enable individuals to lead healthier and more productive lives.

    When it comes to prescription drugs, our goal is to achieve 
improved clinical outcomes at lower costs. Express Scripts offers 
several innovative programs to help us achieve that goal:

          Our SafeGuardRxSM programs allow us to help our 
        clients closely manage high-cost drug classes through a 
        holistic approach that combines clinical care with advanced 
        analytics, and patient engagement supported by technology. 
        Through SafeGuardRx Solutions, we have leveraged value-based 
        arrangements to take on some of the most challenging therapy 
        classes, including hepatitis C, high cholesterol, cancer, 
        inflammatory conditions, pulmonary conditions, and multiple 
        sclerosis.

          One of our SafeGuardRx programs--The Diabetes Care Value 
        Program--improves pharmacy care while controlling plan costs 
        for people with diabetes. Developed with drug makers and 
        launched in 2017, the program has reduced diabetes drug 
        spending by 19 percent--a total savings of $42.6 million. The 
        program combines specialized diabetes pharmacy care with 
        benefit strategies, such as utilization management and quality 
        pharmacy networks, and improved compliance with recommended 
        treatment guidelines.

          Our National Preferred Flex Formulary is a unique approach 
        that provides employers and health plans with the flexibility 
        to take advantage of the possibility of a drug manufacturer 
        choosing to lower the price of a drug by offering an authorized 
        generic alternative. Should the manufacturer offer an 
        authorized generic, that product can be added to the formulary. 
        This is a pathway to help give cash-paying patients immediate 
        access to more affordable medications. In the end, we care most 
        about the lowest net cost of a drug, not the rebate. We welcome 
        manufacturers lowering their list prices so that patients can 
        have greater access to medications.

          SmartShareRxSM offers employers and plan sponsors 
        more flexibility in how they use rebate savings. The program 
        was established to share estimated rebate savings on eligible 
        medications to combat patients' primary pain point: cost-
        sharing in the deductible phase. However, the program has 
        evolved to apply estimated rebate value to eligible medications 
        filled in all phases of the pharmacy benefit to reduce 
        patients' out-of-pocket costs at the pharmacy counter. Despite 
        the availability of point-of-sale rebate benefit designs in the 
        commercial market for years, we have had few employers and plan 
        sponsors take up this option. For more than 10 years, we have 
        offered the option to clients to provide rebate value at the 
        point-of-sale.

          Inside RxSM is a prescription savings program 
        launched in partnership with GoodRx to expand affordable access 
        to brand and generic medications for patients with no 
        insurance, high deductibles, or high out-of-pocket costs, by 
        offering discounts to these patients at the point-of-sale. 
        Since the launch of the program in May 2017, we have helped 
        patients save an estimated $400 million.

    Express Scripts builds products that fit a wide variety of use 
cases, working to uniquely partner across the health-care ecosystem to 
uncover opportunities, take action, and deliver better outcomes. Real-
time clinical alerts that reach physicians through electronic 
prescribing systems can turn data into actionable patient intelligence, 
helping people stay on their therapy regimen and avoid dangerous drug-
drug interactions. Express Scripts' Real Time Prescription Benefit, 
launched last November, helps to simplify the patient's experience with 
their prescriber and improve the transparency of drug costs. We provide 
patient-specific information and pricing information directly into the 
physician's Electronic Health Record (EHR) within seconds. Physicians 
using electronic prescribing can see the following information to 
inform prescribing decisions:

          Alternative drugs and associated details, such as generic 
        versus brand pricing;

          Coverage information, including electronic prior 
        authorization requirements, step therapy requirements, or 
        quantity limits; and,

          The patient's cost through each pharmacy dispensing channel: 
        retail, home delivery or specialty pharmacy.

    By providing drug cost information and reconciling coverage issues 
at the point of prescribing, we are eliminating confusion and pain 
points for patients at the pharmacy counter. A 2018 annual report by 
Surescripts on price transparency found that provider adoption of Real-
Time Prescription Benefits has grown by 1,338 percent, with monthly 
benefit checks growing to over 6 million by December 2018.\8\ 
Surescripts' data shows that Real-Time Prescription Benefits saved 
patients as much as $8,032 in out-of-pocket costs on a single 
prescription.\9\ These systems are delivering measurable savings to 
patients at the pharmacy counter, while ensuring providers and patients 
are communicating to make better-informed medication choices. 
Electronic prior authorization capabilities are improving as well, 
allowing prescribers to switch the drug 28 percent of the time and 
eliminating over 158,000 hours of potential wait time in December 2018, 
according to Surescripts' report.
---------------------------------------------------------------------------
    \8\ https://surescripts.com/news-center/press-releases/!content/
new-data-from-surescripts-shows-that-patients-are-getting-more-
affordable-prescriptions-faster-and-with-less-hassle.
    \9\ https://surescripts.com/news-center/press-releases/!content/
price-transparency-at-the-point-of-care-boosts-patient-savings-and-
prescriber-efficiency.

    Cigna and Express Scripts also provide patients real-time pricing 
information, customized to their individual plans, via our websites and 
mobile apps, so patients can choose the pharmacy that provides the most 
affordable dispensing option. Our innovations help better inform 
patients of their cost exposure and treatment options, improving 
---------------------------------------------------------------------------
affordability and predictability for patients.

    As we look ahead to gene therapies, a growing category of expensive 
drugs, we are actively developing new value-based payment models. For 
example, we have periodic payment agreements with manufacturers that 
are structured as value-based contracts to reward efficacy. Simply put, 
if a drug is working, the company gets a payment. If not, the payment 
stops. Similarly, we have worked to develop ``discontinuation'' payment 
arrangements that require payment to be returned if a patient does not 
see a benefit from the drug.

    Express Scripts' innovative pharmaceutical and pharmacy solutions 
position Cigna to offer even greater value to our clients, public 
health program partners, and patients. The combined company integrates 
Express Scripts' pharmacy benefit management with Cigna's health-care 
products and services.

    For example, over seven million Americans diagnosed with diabetes 
use insulin. For some patients, the increasing price of insulin limits 
access and adherence. When Cigna and Express Scripts announced the 
merger, we clearly stated we would improve choice, affordability, and 
predictability. Within the first 100 days of our combination, we were 
able to launch a new Patient Assurance Program which will bring 
additional affordability and predictability to customers who rely on 
insulin to manage their diabetes. Furthering Cigna and Express Scripts' 
respective historical efforts in diabetes disease management, the 
Patient Assurance Program establishes a lower fixed out-of-pocket cost 
for covered insulins, ensuring customers will pay no more than $25 out-
of-pocket when filling a 30-day insulin prescription at a retail 
pharmacy or through home delivery. This is an early example of the 
accelerated change and innovation our new company is positioned to 
drive in the financing and delivery of care.
       the role of rebates in the prescription drug supply chain
    Approximately 90 percent of all prescriptions we fill are generics. 
The remaining 10 percent are branded drugs, which represent 70 percent 
of the spending on prescription drugs. We believe there are targeted 
solutions to address this 70 percent. We work to do this through 
sophisticated, evidence-based negotiations for clinically equivalent 
therapies.

    Solutions for driving lower drug spending and fostering the use of 
lower net cost treatments often include negotiating discounts or 
rebates. The role of rebates in prescription drug pricing has been 
mischaracterized. Rebates are not the cause of increasing drug prices. 
Rebates are discounts paid by drug manufacturers after a patient 
receives a manufacturer's drug. In the system today, rebates are used 
to reduce health-care costs for consumers. Today, employers and others 
use the value of discounts to help keep premiums affordable, lower out-
of-pocket costs, and offer workplace wellness programs, just to name a 
few ways they put discounts to work.

    Most drugs do not involve a rebate structure. For example, rebates 
are not typically offered for generic medications, for drugs without 
market competition (i.e., sole-source brand drugs), or for drugs 
administered by a physician. According to a study of drugs covered 
under Medicare Part D by the actuarial firm Milliman, 81 percent of all 
drugs analyzed do not offer rebates and 64 percent of brand drugs 
analyzed do not offer rebates.\10\ Many sole-source, highly expensive 
specialty drugs, like drugs to treat cancer, do not offer rebates and 
continue to be priced higher and higher:
---------------------------------------------------------------------------
    \10\ Milliman, ``Prescription Drug Rebates and Part D Drug Costs.'' 
July 16, 2018. The Milliman analysis focused on approximately 1,300 
drug and therapeutic class combinations, reflecting 97 percent of 2016 
Part D gross drug spending.

          In 2017, non-rebated drugs treating depression, high-
        cholesterol, infertility, and other conditions all registered 
        price increases of more than 15 percent.\11\
---------------------------------------------------------------------------
    \11\ Express Scripts, ``Let's Talk About Rebates,'' May 15, 2018, 
http://lab.express-scripts.com/lab/insights/industry-updates/lets-talk-
about-rebates.

          List prices for oral oncology medications, which are not 
        rebated or discounted to any significant extent, doubled 
        between 2011 and 2016, from $20 per unit to $40 per unit.\12\
---------------------------------------------------------------------------
    \12\ Express Scripts, ``The Cost of Hope: 5 Things to Know About 
the Cost of Cancer Drugs.'' May 30, 2017, http://lab.express-
scripts.com/lab/insights/industry-updates/the-cost-of-hope-5-things-to-
know-about-the-cost-of-cancer-drugs.

          Looking at the 39 oral oncology medications on the market in 
        2010, six experienced 100-200 percent inflation between 2010 
        and 2016; one was greater than 300 percent and another one was 
        greater than 800 percent.\13\ Rebates are not available on 
        these drugs, but the manufacturers continue to increase list 
        prices. Under the recently proposed rebate rule, beneficiaries 
        using non-preferred and specialty drugs will see premiums 
        increase, and will not see a reduction in cost at the pharmacy 
        counter.
---------------------------------------------------------------------------
    \13\ http://lab.express-scripts.com/lab/insights/industry-updates/
sharing-smarter.

    Restricting or eliminating rebates does not assure improved 
---------------------------------------------------------------------------
affordability for patients or taxpayers:

          A study by the actuarial firm Oliver Wyman found that 
        rebates reduced overall costs in Medicare Part D by $34.9 
        billion from 2014 to 2018, and eliminating rebates would have 
        driven Part D premiums higher by 52 percent in 2018 alone.\14\ 
        From 2014 to 2018, the national average Part D premium 
        increased less than 2 percent per year. Manufacturer rebates 
        are one of the major contributors to holding premiums 
        relatively flat over the last 5 years.
---------------------------------------------------------------------------
    \14\ Oliver Wyman, ``Premium Impact of Removing Manufacturer 
Rebates From the Part D Program.'' July 2018, https://www.pcmanet.org/
wp-content/uploads/2018/07/OW-Part-D-Manufacturer-Rebate-Premium-
Impact-FINAL.pdf.

          The Centers for Medicare and Medicaid Services' (CMS) Office 
        of the Actuary (OACT), in reviewing the Department of Health 
        and Human Services' (HHS) recently proposed rule addressing 
        rebates in Medicare Part D and Medicaid, estimates that Part D 
        premiums will increase by as much as 25 percent and that 
        Federal spending will increase by $196 billion over 10 
        years.\15\
---------------------------------------------------------------------------
    \15\ https://aspe.hhs.gov/system/files/pdf/260591/
OACTProposedSafeHarborRegulationIm
pacts.pdf.

          Data released by CMS for 2019 Part D premiums, and national 
        average plan bids, show a negative trend for the first time in 
        more than a decade.\16\ CMS cites drug manufacturer and 
        pharmacy price concessions as a factor driving lower costs.
---------------------------------------------------------------------------
    \16\ 2019 Medicare Advantage ratebook and prescription drug rate 
information, https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Ratebooks-and-Supporting-Data-Items/
2019Rates.html?DLPage=1&DLEntries=10&DLSort=0&DLSortDir=descending.

          A Health Affairs analysis of the most recent National Health 
        Expenditures prescription drug forecast for 2017-2026 concluded 
        that increased rebates ``contributed to lower net prices for 
        many prescription drugs in recent years and are expected to 
        have dampened prescription drug spending growth in 2017.''\17\
---------------------------------------------------------------------------
    \17\ Health Affairs, ``National Health Expenditure Projections, 
2017-26: Despite Uncertainty, Fundamentals Primarily Drive Spending 
Growth.'' February 14, 2018, https://www.health
affairs.org/doi/10.1377/hlthaff.2017.1655.

          The actuarial firm Milliman found that on average, the 
        highest cost drugs have the lowest manufacturer rebates (as a 
        percentage of gross drug cost), for brand drugs with 
        rebates.\18\
---------------------------------------------------------------------------
    \18\ Milliman, ``Prescription Drug Rebates and Part D Drug Costs.'' 
July 16, 2018.

    In the Medicare Part D program, rebate savings are passed to Part D 
plan sponsors and are responsible for saving enrollees and taxpayers 
billions of dollars each year since the Part D program began. CMS 
requires plans to show how they are using rebates to deliver Part D 
coverage to their members. All Part D plan sponsors must submit to CMS 
detailed annual reporting of rebate amounts by drug and Part D plan. In 
addition to reporting individual drug rebates, plan sponsors must also 
report to CMS how much of the rebate amounts were retained by the 
pharmacy benefit manager (PBM) rather than being shared with the 
sponsor, rebate guarantee amounts, rebate amounts reflected at the 
point-of-sale, third-party payer claim rebate amounts, and any other 
rebate amounts not already reported. Not only are plan sponsors 
required to report these rebate amounts to CMS, but they must also 
report what the rebates are for, such as formulary or tier placement, 
market share targets, volume targets, inflation rebates, or rebate 
guarantees. Finally, plan sponsors must report any administrative fees 
charged to manufacturers.\19\
---------------------------------------------------------------------------
    \19\ Final Medicare Part D DIR Reporting Requirements for 2017. 
Accessed March 4, 2019 at: https://www.cms.gov/Research-Statistics-
Data-and-Systems/Computer-Data-and-Systems/HPMS/HPMS-Memos-Archive-
Weekly-Items/SysHPMS-Memo-2018-May-30th.html.

    In the commercial market, rebates are an effective tool that 
employers and health plans use to generate more savings for 
prescription drugs. Employers and other plan sponsors that work with 
Cigna and Express Scripts choose how rebates are used. Some use them to 
lower premiums and cost sharing, others choose to expand access, fund 
wellness programs, or provide discounts to consumers at the point of 
sale. Nearly half of Express Scripts' clients have opted for 100 
percent pass-through of rebates. Express Scripts passes approximately 
95 percent of rebates, discounts, and price reductions back to its core 
---------------------------------------------------------------------------
PBM commercial and health plan clients and their customers.

    Cigna welcomes the opportunity to work with policymakers to bring 
down drug costs for patients at the pharmacy counter. There are a 
number of opportunities to address high list prices and patient 
exposure at the pharmacy counter that address competition, access to 
generics, and benefit designs. However, legislative or regulatory 
efforts to eliminate or restrict the ability of plan sponsors or PBMs 
to negotiate lower overall costs will lead to higher drug prices not 
only for Medicare beneficiaries and taxpayers, but also for millions of 
individuals who access health benefits through their employers.

    We believe there are more direct and effective ways to deliver 
relief to patients most in need without disrupting coverage for 
millions. For example, in addition to the policy opportunities 
discussed later, we believe a better way to address patient out-of-
pocket costs is to allow payers and their PBMs to use the power of 
benefit designs to limit beneficiary exposure while ensuring payers 
continue to have all of the tools at their disposal to negotiate lower 
costs. For individuals in high-deductible health plans, this could 
include changes to the tax code to allow coverage of chronic care 
treatments and other services pre-deductible, for example. 
Additionally, many have discussed possible changes to the Medicare Part 
D benefit design to achieve lower patient out-of-pocket costs, and 
Cigna and Express Scripts welcome the opportunity to be a constructive 
participant in those efforts for both Medicare Part D beneficiaries and 
patients in the commercial market.
 legislative and regulatory solutions to lower drug costs for patients
    We support efforts by Congress and the administration to use 
market-based solutions that put downward pressure on prescription drug 
prices through competition, consumer choice, and open and responsible 
drug pricing. For example, last year we endorsed legislation authored 
by Senators Stabenow, Cassidy, Ranking Member Wyden, and others to 
ensure patients are told the lowest cost option available to them at 
the pharmacy counter. We were pleased the legislation became law, and 
included a provision to provide more transparency into so-called ``pay-
for-delay'' agreements that prevent biosimilar drugs from entering the 
marketplace.

    Looking to the future, we believe efforts to address out-of-control 
drug pricing through legislative and regulatory actions should include:

          Speeding generics and biosimilars to market:

              Enacting the Creating and Restoring Access to 
        Equivalent Samples (CREATES) Act, introduced by Chairman 
        Grassley, which aims to lower drug prices by ending restricted 
        access to samples by manufacturers of brand-name drugs, and 
        help to speed generics to market. According to the 
        Congressional Budget Office, its passage would save $3.9 
        billion over 10 years.\20\
---------------------------------------------------------------------------
    \20\ https://www.cbo.gov/system/files/2018-09/s974.pdf.

              Prohibiting patent settlements that include 
        so-called ``pay-for-delay'' arrangements, which delay the 
        availability of lower-cost generics and biosimilars. 
        Legislation to address these arrangements was recently 
        introduced by Senators Klobuchar and Grassley, and we hope 
        Congress will enact authority to block these anti-competitive 
        agreements, removing barriers to competition and expanding the 
        availability of lower-cost generics and biosimilars. According 
        to a Federal Trade Commission (FTC) study, these 
        anticompetitive deals cost consumers and taxpayers $3.5 billion 
        in higher drug costs every year.\21\
---------------------------------------------------------------------------
    \21\ https://www.ftc.gov/news-events/media-resources/mergers-
competition/pay-delay.

              Encouraging the FDA to finalize guidance on 
        biosimilar naming standards, improve the efficiency of the 
        biosimilar product development and approval process, and 
        develop effective communication tools to educate providers and 
---------------------------------------------------------------------------
        patients about the safety and efficacy of biosimilars.

              Preserving the ability of the Inter Partes 
        Review (IPR) process at the U.S. Patent and Trademark Office to 
        invalidate patents that do not represent true innovation. 
        Legislative and regulatory efforts to weaken this process will 
        extend patent monopolies for pharmaceutical and biological 
        products, resulting in higher prices for patients.

              Considering changes to provisions in the 
        United States-Mexico-Canada Agreement (USMCA) that would extend 
        exclusivity for biological products in Mexico and Canada for 10 
        years. These provisions will limit the ability of Congress to 
        address the 12-year exclusivity period for brand-name 
        biologics.

          Advancing price transparency for patients and providers in 
        public programs:

              We strongly support the concept of providing 
        information about the price of drugs, therapies, and the cost 
        of care to beneficiaries and their providers as a means of 
        improving price transparency, educating consumers, and 
        incentivizing the efficient use of care throughout the health-
        care system. We support efforts by CMS to move toward a system 
        in which Part D enrollees and their providers have access to 
        real-time benefit check and electronic prior authorization 
        tools, while ensuring appropriate standardization and time 
        frames for implementation.

          Advancing value-based arrangements in public programs:

              It is essential to bring the benefit of 
        value-based payment to spending in public programs. Such 
        arrangements may involve outcomes-based payments that cannot be 
        determined until well after the plan year concludes. Changes to 
        existing laws and/or regulations would allow for such 
        arrangements in all settings and help improve the overall value 
        of national spending for pharmaceuticals. The specific changes 
        Cigna believes are needed include:

                  Modifying Medicaid Best Price (MBP) rules to 
        exclude outcomes-based pharmaceutical contracts from inclusion 
        in MBP calculations in certain situations where failure to 
        achieve a desired outcome leads a manufacturer to refund the 
        full (or majority) cost of the drug, or where payment is 
        contingent on the health outcomes of individual patients;

                  Creating additional flexibility under the Anti-
        Kickback Statute (AKS) to support value-based contracts and 
        other innovative programs; and,

                  Revising Part D regulations to explicitly permit 
        and provide guidance for how outcomes-based contracting should 
        be accounted for in plan bids or between plan sponsors when the 
        outcome measurement period spans plan years, or when outcomes 
        can only be measured at the end of a plan year.

          Prioritizing reforms to lower costs and protect patient 
        access in Medicare:

              Public programs must have the ability to 
        leverage the commercial market's successful utilization 
        management tools that lower costs while protecting patient 
        access. We support efforts to modify the six protected 
        ``classes of clinical concern'' in Part D, where all or 
        substantially all drugs in a class must be covered, allowing 
        drug manufacturers to name their price with little negotiation. 
        CMS's plan to only moderate the effect of protected classes--
        not eliminate them--would save $2 billion over 10 years.

              There are also clear opportunities to achieve 
        savings in the Medicare Part B program, including introducing 
        Part D utilization management tools into Part B and potentially 
        shifting some Part B drugs to Part D. Because of the complexity 
        involved with identifying the ``candidate'' drugs for moving 
        into Part D, along with assessing the consequences and impacts 
        of doing so for both programs, we strongly recommend CMS engage 
        stakeholders through a work group-type process where sample, 
        de-identified data could be shared for mutual evaluation.

              We also support efforts to ensure the 
        Medicare Payment Advisory Commission (MedPAC) and the Medicaid 
        and CHIP Payment and Access Commission (MACPAC) have access to 
        de-identified information currently submitted by PBMs, Part D 
        sponsors, and Medicare Advantage plans to CMS. Legislation to 
        address this issue was recently introduced by Senators Cortez 
        Masto, Cornyn, Carper, and Cassidy.

          Stopping Orphan Drug Act abuses:

              Pharmaceutical manufacturers have been 
        accused of abusing the Orphan Drug Act, which was introduced to 
        incentivize drug manufacturers to prioritize the development of 
        ``orphan drugs,'' drugs used to treat an illness or disease 
        that affects fewer than 200,000 people. We support efforts to 
        ensure that this pathway is used for true orphan designations, 
        and not, as some observers say, as a legal cover to seek 
        specious orphan drug designations.\22\
---------------------------------------------------------------------------
    \22\ https://khn.org/news/drugmakers-manipulate-orphan-drug-rules-
to-create-prized-monopolies/.

    Thank you for the opportunity to be here today, and for the 
consideration of our views. We look forward to working with you and 
others to ensure medical innovation continues to be a hallmark of the 
United States. Many of the proposals highlighted in my testimony are 
achievable if we work collaboratively, throughout the system, to 
overcome the challenges facing public and private stakeholders, and the 
---------------------------------------------------------------------------
health of our Nation.

    I welcome the opportunity to discuss these issues with you and look 
forward to your questions.

                                 ______
                                 
        Questions Submitted for the Record to Steve Miller, M.D.
               Questions Submitted by Hon. Chuck Grassley
  impact of vertical integration between pbms and insurance companies
    Question. The PBM industry has experienced significant 
consolidation within the past 10 years, which has contributed to 
concerns about the potential abuse of market power, barriers to market 
entry, and exclusionary practices. In 2012, for example, Express 
Scripts acquired Medco Health Solutions--a nearly $30-billion 
transaction that merged two of the country's three largest PBMs. More 
recently, PBMs are also vertically integrating with insurers/payers, 
reflected by the 2018 acquisitions of Express Scripts Holding Co. (a 
PBM) by Cigna Corp. (a payer) and of Aetna Inc. (a payer) by CVS Health 
Corp. As a result, the three largest PBMs are all vertically integrated 
with insurance companies. According to a report from the Kaiser Family 
Foundation, the two combined entities, along with UnitedHealth and 
Humana, will cover 71 percent of all Medicare Part D enrollees and 86 
percent of stand-alone drug plan enrollees. Vertical integration can 
result in increased efficiencies and consumer benefits. It can also, 
however, lead to higher barriers to entry for competition, leading to 
further consolidation. FDA Commissioner Scott Gottlieb recently warned 
that ``consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious. And the very 
complexity and opacity of these schemes help to conceal their corrosion 
on our system--and their impact on patients.''

    I'd like to talk about consolidation, including the recent 
integration of PBMs with insurance companies. Last year, I wrote to the 
Justice Department on this issue. It's reported that the three largest 
PBMs--who are before us today--now cover 71 percent of Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees. Such 
market power has raised concerns. FDA Commissioner Scott Gottlieb said, 
``the consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious.''

    I want to hear briefly from each of you on whether the PBM industry 
is competitive. For example, are there high barriers to entry for new 
competitors?

    Answer. As you are aware, Cigna completed a merger with Express 
Scripts in December 2018. Our combination was premised on our deep 
belief that while neither company on its own could achieve the change 
needed to the U.S. health-care system, together we can make significant 
improvements to current approaches to caregiving, moving from episodic 
to holistic, disconnected to connected, and--critically--complicated to 
simple. The combined companies bring together approximately 74,000 
employees around the world with a joint mission to drive predictable, 
affordable, and high-quality care through connected, personalized 
solutions.

    We believe that PBMs operate in an incredibly competitive market, 
with over 60 \1\ different entities competing to deliver cost savings 
to customers, employers, and health plans. Employers and health plans 
therefore have a number of choices in contracting and designing 
pharmacy benefit options in the market, and we are constantly evolving 
and innovating with our offerings to remain competitive and affordable. 
Our transaction was subject to the review and approval of the 
Department of Justice and State regulators.
---------------------------------------------------------------------------
    \1\ https://www.pcmanet.org/wp-content/uploads/2019/04/Competitive-
PBM-Marketplace.pdf.

    Question. I'm also interested in what effect the most recent 
consolidations of PBMs and insurers has had on the bottom line for the 
---------------------------------------------------------------------------
government and consumer.

    Do these arrangements result in a lower cost to the government--as 
a payer--and the consumer? Please explain.

    Answer. The combination of Cigna and Express Scripts is 
accelerating the pace of positive changes we are bringing to the 
system. Together, the combined company is seeking to transform health 
care service--reducing costs, while improving the customer experience, 
care quality, and health outcomes. By bringing together the medical, 
behavioral, and health engagement (wellness) insights of Cigna and the 
broad pharmacy, specialty pharmacy, and clinical insights of Express 
Scripts, we can create integrated customer solutions that offer better 
care, reduce medical and pharmaceutical costs, and flatten the cost 
curve for health care to be in line with that of other consumer goods.

    For example, over 7 million Americans diagnosed with diabetes use 
insulin. For some patients, the increasing price of insulin limits 
access and adherence. When Cigna and Express Scripts announced the 
combination, we clearly stated we would improve choice, affordability, 
and predictability. Within the first 100 days of our combination we 
were able to launch a new Patient Assurance Program, which will bring 
additional affordability and predictability to customers who rely on 
insulin to manage their diabetes. Furthering Cigna and Express Scripts' 
respective historical efforts in diabetes disease management, the 
Patient Assurance Program establishes a lower, fixed out-of-pocket cost 
for covered insulins, ensuring eligible customers in participating 
plans will pay no more than $25 out of pocket when filling a 30-day 
insulin prescription at a retail pharmacy or through home delivery. 
This is an early example of the accelerated change and innovation our 
new company is positioned to drive in the financing and delivery of 
care.
      collection, use, and sharing of personal health information
    Question. Consumers are becoming more and more concerned about the 
data collection and sharing practices of companies. While these issues 
have been most prevalent in the social media and tech industry, 
companies in the pharmaceutical supply chain also have access to 
tremendous amounts of sensitive, personal health information of the 
individuals they serve. For example, the company Livongo partners with 
CVS Caremark to provide low-cost or no-cost blood sugar meters to 
diabetic patients. The meters are always ``connected'' to Livongo's 
``Diabetes Response Specialists.'' As the company's website states, 
``When readings are out of range, our Diabetes Response Specialists 
call or text [the individual] within minutes.'' While these innovations 
may be highly beneficial for individuals in managing their health, it's 
also important for this committee to fully understand what types of 
information is collected, how or why it's stored or shared, and for 
what purposes PBMs themselves and other affiliated drug supply chain 
participants (such as insurers) use the information.

    Health information is extremely sensitive. It's the most personal 
of all the information we share. So I want to know more about each of 
your companies' data collection, sharing, and protection practices.

    These are ``yes'' or ``no'' questions for all of you. Does your 
company collect and store health information from the end users of the 
prescriptions you provide? For example, information or records of a 
diabetic individual's blood sugar levels.

    Answer. The PBM is subject to the requirements of the Health 
Insurance Portability and Accountability Act (HIPAA) in its role as a 
HIPAA Business Associate to PBM clients, which are HIPAA Covered 
Entities. The collection, storage, and use of health information is 
essential for a variety of services provided to the PBM clients, by way 
of example, processing claims and appeals; providing services that 
support safety reviews, such as Drug Utilization Review; and member 
prescription adherence. For example, to help members manage insulin 
adherence, the PBM can assist members by monitoring blood sugar levels, 
as provided by the patient's physician, and then offer tailored support 
for improved care. For diabetes and other chronic conditions, we look 
for ways to engage with members and their health-care providers to 
achieve the best outcomes.

    Question. Does your company make any treatment, cost, or coverage 
decisions based on the health information you collect from an 
individual?

    Answer. Benefit design, including coverage decisions, are 
determined by the PBM client, whether that is an employer in the 
private market, a State, a union, or the Federal Government. As 
mentioned earlier, an individual's health information is necessary to 
pay claims and decide appeals. In addition, tracking patients' 
prescription adherence assists Express Scripts in developing tools to 
prevent or minimize non-adherence. In particular, clinical standards 
and models, in combination with personalized clinical services and 
interventions, are used to attempt to prevent or minimize non-
adherence. Information, such as geographic location/address, smoking 
status, drug cost, co-morbidities or potential clinical concerns, and 
other factors are gathered for the model to anticipate a patient's 
potential obstacles to prescription adherence and healthy outcomes. 
Using this data, a tailored approach is developed--through personal 
clinical services and outreach, for example, via providing 
consultations with licensed pharmacists--to reduce or prevent the 
likelihood of non-adherence and support outcomes.

    Question. Does your company share health information with third 
parties? And, if so, does your company profit from that sharing?

    Answer. In compliance with HIPAA requirements, health information 
is shared with HIPAA Business Associates consistent with the HIPAA 
``minimum necessary'' standard and pursuant to the provisions of a 
written Business Associate Agreement to allow these third parties to 
support and assist in providing PBM services. Additionally, the PBM 
shares health information with health care professionals, such as 
physicians and pharmacies, for purposes of supporting treatment 
provided by those professionals.

    The sharing of protected health information (PHI) with Business 
Associates does not provide the PBM with a source of revenue; Business 
Associates are vendors that are compensated for their services. Use 
disclosure of PHI is limited as agreed to in the Business Associate 
Agreement and governed by applicable HIPAA requirements.

    Question. Do you believe customers are fully aware of your 
information collection and sharing practices?

    Answer. We make individuals aware of their privacy rights via the 
HIPAA Notice of Privacy Practices, which is available, as required by 
HIPAA, on our website, where they can learn how to request an 
accounting of disclosures of their PHI other than for treatment, 
payment, or health-care operations.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
                             rebate demands
    Question. The use of rebates as a negotiating tool has led to 
problematic incentives in the prescription drug supply chain. For 
example, drug companies have argued that they increase list prices in 
response to demands from PBMs for high or increasing rebates.

    Does your company currently have, or has your company had since 
January 2013, any agreements with drug manufacturers that require 
equivalent rebates, even in the case of a drug for which the list price 
has been lowered?

    Answer. As noted during the hearing, manufacturers alone make and 
set prices for their products; rebates are retroactive discounts 
negotiated by PBMs with manufacturers to defray the price of drugs paid 
by health plans. The availability of any/several competitor brand drugs 
within a therapeutic class will affect the amount of discount 
obtainable--if any--by a PBM, among a host of other variables.

    Health plans and payers choose how to use rebate value. In Medicare 
Part D, for example, all of the rebate value is passed through to plan 
sponsors. In situations where a manufacturer lowers the list price of 
one of its products, maintaining the ``equivalent'' rebates for that 
drug results in an even lower negotiated price for plans and patients. 
Hence, a PBM negotiating ``equivalent'' rebates in the face of lower 
list prices actually helps drive a lower drug cost for payers.

    We welcome and encourage manufacturers to lower list prices 
independent of whatever discounts we negotiate with them.

    Question. Does your company currently have, or has your company had 
since January 2013, any agreements with drug manufacturers that require 
advance notice of changes in the list price of drugs, including 
reductions or increases in list price?

    Answer. Many sole-source, high-priced specialty drugs, such as 
those treating cancer, do not offer rebates and continue to rise in 
cost over time. For example:

    In 2017, non-rebated drugs treating depression, high-cholesterol, 
infertility, and other conditions all registered price increases of 
more than 15 percent.\2\
---------------------------------------------------------------------------
    \2\ Express Scripts, ``Let's Talk About Rebates,'' May 15, 2018, 
http://lab.express-scripts.com/lab/insights/industry-updates/lets-talk-
about-rebates.

    List prices for oral oncology medications, which are not rebated or 
discounted to any significant extent, doubled between 2011 and 2016, 
from $20 per unit to $40 per unit.\3\ Looking at the 39 oral oncology 
medications on the market in 2010, six experienced 100-200-percent 
inflation between 2010 and 2016; one was greater than 300 percent and 
another one was greater than 800 percent.\4\ Rebates are not available 
on these drugs, but the manufacturers continue to increase list prices. 
Under the recently proposed rebate rule, beneficiaries using non-
preferred and specialty drugs will see premiums increase, and will not 
see a reduction in cost at the pharmacy counter.\5\
---------------------------------------------------------------------------
    \3\ Express Scripts, ``The Cost of Hope: 5 Things to Know About the 
Cost of Cancer Drugs.'' May 30, 2017, http://lab.express-scripts.com/
lab/insights/industry-updates/the-cost-of-hope-5-things-to-know-about-
the-cost-of-cancer-drugs.
    \4\ http://lab.express-scripts.com/lab/insights/industry-updates/
sharing-smarter.
    \5\ http://lab.express-scripts.com/lab/insights/industry-updates/
sharing-smarter.

    In the end, we focus on the lowest net cost of a drug, not the 
rebate. Again, we welcome manufacturers lowering their list prices so 
---------------------------------------------------------------------------
that patients can have greater access to medications.

    Question. If the answer to either of the above is ``yes,'' please 
provide details regarding each of these requirements in each instance 
in which they were in place: the required rebate amount or percent; the 
amount of notice required for list price change notifications, 
specifically for increases and decreases; any penalties for 
noncompliance with rebate or notification requirements by the drug 
manufacturer.

    Answer. In situations where a manufacturer lowers the list price of 
one of its products, maintaining the ``equivalent'' rebates for that 
drug results in an even lower negotiated price for plans and patients. 
Hence, a PBM negotiating ``equivalent'' rebates in the face of lower 
list prices actually helps drive a lower drug cost for payers.
                            revenue sources
    Question. Please provide an annual breakdown of the following 
components of the revenue you received from drug manufacturers from 
January 1, 2013 through December 31, 2018: dollar amount and percent of 
revenue from rebates; dollar amount and percent of revenue from 
administrative fees; dollar amount and percent of revenue from 
distribution fees; dollar amount and percent of revenue from marketing 
fees; dollar amount and percent of revenue from clinical case 
management fees; all other sources of revenue from manufacturers not 
listed above.

    Answer. Revenues generated by Express Scripts segments can be 
classified as either tangible pharmacy revenues or other pharmacy 
service revenues. We earn tangible pharmacy revenues from the sale of 
prescription drugs by retail pharmacies in our retail pharmacy networks 
and from dispensing prescription drugs from our home delivery and 
specialty pharmacies. Other pharmacy service revenues include 
administrative fees associated with integrated medical benefit 
management solutions, the administration of retail pharmacy networks 
contracted by certain clients, informed decision counseling services 
and certain specialty pharmacy services.
                           part d negotiation
    Question. The PBM market has changed dramatically over the past 
several years. Many Part D health plans also operate as PBMs, including 
your companies. While Part D has done a great job offering Medicare 
beneficiaries drug coverage they did not have access to before, Part D 
has not been successful at keeping up with the growing cost of 
medicines. PBMs and Part D plans claim they bargain to get lower 
prices, but the HHS Inspector General found that almost 4 in 10 brand 
name drugs in Part D offered no rebate or discount to Part D plans.

    Why have Part D plans been ineffective at bringing down the cost of 
almost half of brand-name medicines?

    Answer. According to a study of drugs covered under Medicare Part D 
by the actuarial firm Milliman, 81 percent of all drugs in the 
program--including 64 percent of brand drugs analyzed--do not offer 
rebates.\6\ In most cases, the reason for this can be traced down to 
the absence of competitor or therapeutically equivalent (generic) drugs 
that PBMs can use as negotiating leverage with manufacturers. In other 
instances, Medicare regulations prevent use of step therapy or prior 
authorization for drugs that fall within the six protected classes, or 
are the only drug in a class. In such cases, mandatory coverage 
requirements remove any negotiating leverage PBMs could otherwise exert 
on the manufacturer.
---------------------------------------------------------------------------
    \6\ https://www.ahip.org/wp-content/uploads/2018/07/AHIP-Part-D-
Rebates-20180716.pdf.

    Many have discussed possible changes to the Medicare Part D benefit 
design to achieve lower patient out-of-pocket costs, and our company 
welcomes the opportunity to be a constructive partner in efforts to 
address these program shortcomings for Medicare Part D beneficiaries. 
The testimony provided in front of the Senate Finance Committee on 
April 9, 2019 included several policy options that inject greater 
competition into the prescription drug market and also give plans and 
PBMs further utilization management and negotiation tools to work with 
in Medicare.
                              pbm profits
    Question. At the hearing, witnesses spoke about the ways in which 
they seek to get the best price for patients. However, behind this is 
the reality that PBMs are driven by their bottom line.

    Researchers at Johns Hopkins University found that 72 percent of 
formularies in Part D charge lower cost-sharing for a brand name drug 
compared to the cheaper generic equivalent.\7\ This occurs because the 
more expensive brand name drugs are able to give bigger rebates, but we 
can never know for sure because rebate information is kept secret.
---------------------------------------------------------------------------
    \7\ https://jamanetwork.com/journals/jamainternalmedicine/article-
abstract/2728446.

    How can the public have confidence that they're getting the lowest 
price and not the price that gives you the biggest rebate to your 
---------------------------------------------------------------------------
business?

    Answer. Every formulary decision we make is based first and 
foremost on clinical guidance, not on cost. Our National Preferred 
Formulary (NPF) is developed by an independent Pharmacy and 
Therapeutics (P&T) Committee comprised of independent practicing 
physicians, other clinicians and academics representing multiple areas 
of clinical expertise. Their decisions are based solely on whether 
clinical evidence shows that a drug must be covered. Only after 
products are evaluated from a clinical perspective are net cost and 
other factors considered. Financial impact to Express Scripts is 
expressly excluded and prohibited from consideration in the formulary 
development process.

    Further, we note that plan sponsors are not obligated to adopt our 
NPF, but can accept, reject, or modify it as they deem fit or even 
create their own custom drug formulary. A formulary becomes part of a 
plan sponsor's benefit only after adoption by the client. Like 
formularies, copay tiers and other elements of benefit design are 
ultimately determined by our clients. Plan sponsors use PBMs to manage 
their drug benefits, however, because our services are effective and 
result in savings to their plans and ultimately, for patients. 
Competition among PBMs is fierce and clients--who are sophisticated and 
often advised by expert consultants--leverage that dynamic to secure 
the greatest savings from their bidders.
                       spread pricing in medicaid
    Question. A PBM practice that has come up quite a bit recently is 
the practice of spread pricing. Spread pricing occurs when PBMs charge 
health plans more for prescription drugs than they actually reimburse 
pharmacies, and then pocket the different as profit.

    Do you engage in spread pricing practices?

    Answer. Spread pricing is one option Express Scripts' clients--
including Medicaid Managed Care Organizations (MCOs) where authorized 
by a State--may elect in structuring their overall drug pricing 
arrangement. Certain clients opt to utilize spread pricing, while other 
clients opt to use pass-through arrangements. It is important to note 
that our clients (payers) always decide whether or not to use spread 
pricing.

    Spread pricing encourages active and aggressive rate negotiations 
by harnessing market forces to achieve the lowest drug prices through 
negotiation. Put more simply, spread pricing allows PBMs to offer 
client plan sponsors more favorable discounts and reduced 
administrative costs as compared to ``pass-through'' or ``cost-plus'' 
arrangements. Notably--and contrary to the views of many industry 
critics--spread pricing is favored by many clients because it 
represents the greatest alignment of interests between the PBM and 
client; specifically, that the PBM is compensated for driving the 
lowest net cost for the plan sponsor.

    Question. If yes, do you engage in such practices in Medicaid?

    Answer. Yes. Express Scripts has contracts with Medicaid managed 
care plans in which the client has chosen to utilize spread pricing.

    Question. List each State you operate in where you have a contract 
with a Medicaid managed care plan where you employ spread pricing.

    Answer. We have arrangements with clients who operate under rules 
established by State Medicaid agencies and we encourage the committee 
to work with States to understand and examine the specifics of 
contracts within their State.

    Question. List each Medicaid managed care plan you have contracts 
with where you employ spread pricing.

    Answer. We have arrangements with clients who operate under rules 
established by State Medicaid agencies and we encourage the committee 
to work with States to understand and examine the specifics of 
contracts within their State.

    Question. Describe whether and how you disclose the use of such 
practices to the plans.

    Answer. Our clients decide which pricing structure to select and 
are provided robust disclosures. Further, we give plans full audit 
rights to ensure we are performing according to the terms of our 
contracts with them.

    Question. Describe whether you disclose such practices directly to 
the State.

    Answer. Express Scripts does not contract directly with any State 
Medicaid agencies, but instead the Medicaid Managed Care Organization 
contracted with the State.

    Question. List any States where you have direct contracts with the 
State Medicaid agency as a PBM for fee-for-service individuals.

    Answer. Express Scripts does not contract directly with any State 
Medicaid agencies as a PBM.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
    Question. What is the total dollar amount that you obtain from 
pharmaceutical manufacturers in any form such as rebates, fees, etc.?

    Answer. Manufacturers ultimately decide whether to offer a rebate 
discount, and if so, what rebate to offer. When there are multiple 
therapies with similar clinical efficacy, Express Scripts is able to 
leverage competition to drive lower costs for its clients and 
customers. Conversely, rebates are not typically offered for drugs 
without market competition (i.e., sole-source brand drugs), drugs that 
have obtained ``orphan'' designation, or drugs administered by a 
physician. Rebates are typically only offered on brand drugs. The 
amount of rebate discounts varies significantly based on utilization 
and a plan's benefit design.

    Question. What is the total dollar amount that you remit to health 
plans?

    Answer. In 2018, Express Scripts saved its clients $45 billion. 
Because of our innovative solutions, our clients achieved the lowest 
drug trend in decades, just 0.4 percent across employer-sponsored 
plans. Despite rising list prices, the average 30-day prescription cost 
only $0.06 more than in the previous year. To Medicare, we delivered an 
unprecedented 0.3 percent decline in drug spending across the plans we 
serve.\8\
---------------------------------------------------------------------------
    \8\ https://my.express-scripts.com/rs/809-VGG-836/images/
Express%20Scripts%202018%20
Drug%20Trend%20Report.pdf.

    Express Scripts passes approximately 95 percent of rebates, 
discounts, and price reductions back to its core PBM commercial and 
health plan clients and their customers. Nearly half of Express 
Scripts' clients have opted for 100 percent pass-through of rebates. In 
Medicare Part D, 100 percent of the rebate value is passed through to 
---------------------------------------------------------------------------
plan sponsors.

    Question. Managed Care Organizations are on record as widely 
supportive of the potential of biosimilars. However, most MCOs have 
continued to support originator brand products and have not preferred 
and often excluded less expensive biosimilars. For example, most MCOs 
have kept Remicade (a treatment for rheumatoid arthritis and other 
diseases) as the preferred agent on their formularies, and in most 
cases to the exclusion of its biosimilar, Infliximab.

    Why do you tout support for biosimilars while, at the same time, 
inhibiting adoption of these less expensive products?

    Answer. We support the lowest net cost, clinically appropriate 
option for our clients and members. We fully support efforts to 
accelerate adoption of specialty generics and biosimilars. In certain 
situations, our formulary offerings may prefer branded products when 
doing so results in a lower net cost to our client plan sponsors.

    Question. HHS may broaden the scope of its proposed rule and 
eliminate rebates between Medicare Advantage plans and manufacturers 
for Part B drugs. Would this realign incentives to encourage preferred 
access for lower cost drugs, such as biosimilars?

    Answer. We believe that part of the cause for escalating drug costs 
in the Part B program today includes a lack of utilization management 
tools that exert downward pressure on net costs. There are clear 
opportunities to achieve savings in the Medicare Part B program, 
including introducing Part D utilization management tools into Part B 
and potentially shifting some Part B drugs to Part D. Because of the 
complexity involved with identifying the ``candidate'' drugs for moving 
into Part D, along with assessing the consequences and impacts of doing 
so for both programs, we strongly recommend CMS engage stakeholders as 
they develop their policy.

    Question. What changes can we recommend/make to help you prefer 
lower-cost drugs, such as biosimilars, without rebates?

    Answer. After clinical factors are evaluated, Express Scripts 
considers the lowest net cost drugs as part of developing formulary 
offerings for its clients, where competition exists. Lowest net cost 
can be achieved through lower list price, rebates, or both. We welcome 
manufacturers lowering their list prices so that patients can have 
greater access to medications. Solutions for driving lower drug 
spending and fostering the use of lower net cost treatments often 
include negotiating discounts or rebates.

    The role of rebates in prescription drug pricing has been 
mischaracterized. Rebates are not the cause of increasing drug prices. 
Rebates are discounts paid by drug manufacturers after a patient 
receives a manufacturer's drug. In the system today, rebates are used 
to reduce health care costs for consumers. The amount of discount/
rebate per drug attainable is affected by the relative bargaining power 
of the PBM negotiating to drive down costs for its plan sponsor 
clients.

    PBMs compete among themselves to obtain the greatest rebates/
discounts for health plan sponsors. The ability to help drive lower net 
drug costs for plan sponsors, in addition to the quantity and quality 
of other clinical and administrative services provided by the PBM, will 
determine its success in the marketplace. Today, employers and others 
use the value of discounts to help keep premiums affordable, lower out-
of-pocket costs, and offer workplace wellness programs, just to name a 
few ways they put discounts to work.

    Question. Why is there such a disparity in reimbursed pharmacy 
prices for specialty generic drugs in Part D (e.g., Imatinib)? Does 
ownership of specialty pharmacy influence your reimbursement decision?

    Answer. Our ownership of Accredo specialty pharmacy does not 
influence reimbursement decisions with respect to other pharmacies.

    Question. I'm concerned with the recent trend of PBM's allowing 
brand companies to ``pay for position'' on insurance formularies, which 
results in seniors losing access to lower-cost generics and 
biosimilars.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs?

    Answer. The process Express Scripts uses to develop formularies has 
been constructed to ensure that clinical considerations are paramount 
and fully taken into account before cost considerations. Formulary 
management is a highly effective strategy that pharmacy plan sponsors 
can implement to maintain a safe, affordable and meaningful benefit for 
patients. When a manufacturer launches a lower-cost authorized 
alternative to a branded medication currently on the market, Express 
Scripts will evaluate the product for placement on the National 
Preferred Flex Formulary. If clinically appropriate, the authorized 
alternative product will be added to the Flex formulary with preferred 
or possibly non-preferred status. The innovator brand-name product, and 
potentially other products in the therapy class, then will be excluded 
from coverage.

    In our experience to date, we have not seen manufacturers of 
authorized alternatives offer a rebate that would result in a net cost 
lower than that of the brand. Moreover, until recent changes to current 
biosimilar interchangeability guidance were released by the FDA, and 
pending further implementation of those policies, the ability of plan 
sponsors to make clinically appropriate therapeutic substitutions has 
been severely limited. We are hopeful as more biosimilars enter the 
U.S. market that, under these new guidelines, plans will be in a much 
better position to take full advantage of the potential these products 
can provide.
                  formulary placement/generic tiering
    Question. In 2011, 71 percent of generic drugs in Part D were on 
the lowest tier designed for generics; by 2019, that number decreased 
to only 14 percent of generics. According to an Avalere study, this 
practice cost seniors $22 billion in higher out-of-pocket costs since 
2015, costs that could have been avoided through the proper formulary 
placement of lower-cost generics. This practice, known as ``paying for 
position,'' allows brands to block uptake of lower-cost generics and 
biosimilars, thereby unnecessarily increasing out-of-pocket costs for 
seniors.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs? Do you ever consider portfolio or bundled rebates with brand 
manufacturers?

    When you place generics on your formularies, do you place that 
generic favorably to brand products--in other words, on generic-only 
tiers?

    When a generic becomes available, do you place it on your 
formularies immediately?

    Answer. Our formulary is a critical driver of both clinical 
efficacy and value. Formulary development involves guidance from three 
distinct committees: the Therapeutic Assessment Committee (``TAC''); 
the Pharmacy and Therapeutics Committee (``P&T''); and the Value 
Assessment Committee (``VAC''). Each is described briefly below:

        TAC is an internal clinical review body consisting of clinical 
pharmacists and physicians, who review specific medications following 
FDA approval using medical literature and published clinical trial 
data.

        P&T consists of a group of 15 independent physicians and one 
pharmacist from active community and academic practices representing a 
broad range of medical specialties.

        VAC, which consists of Express Scripts' employees from 
formulary management, product management, finance, human resources, and 
clinical account management, considers the value of drugs by evaluating 
the net cost, market share, and drug utilization trends of clinically 
similar medications.

    Our formulary development approach for all medications prioritizes 
clinical considerations first and foremost before evaluating net cost 
to clients. Financial impact to Express Scripts is expressly excluded 
and prohibited from consideration in the formulary development process. 
The financial impact to clients, however, is considered by the VAC, but 
only after all clinical considerations have been taken into account.

    When a manufacturer launches a lower-cost authorized alternative to 
a branded medication currently on the market, Express Scripts will 
evaluate the product for placement on the National Preferred Flex 
Formulary. If appropriate, the authorized alternative product will be 
added to the Flex formulary with preferred or possibly non-preferred 
status. The innovator brand-name product, and potentially other 
products in the therapy class, then will be excluded from coverage. In 
our experience to date, we have not seen manufacturers of authorized 
alternatives offer a rebate that would result in a net cost lower than 
that of the brand.
              direct and indirect remuneration (dir) fees
    Question. Many community-based cancer clinics have established 
medically integrated pharmacies so patients can access their oral 
chemotherapy prescriptions or other medications at the point-of- care. 
These practices are often assessed large DIR which are based on certain 
quality measures targeted toward primary care.

    Shouldn't pharmacies be evaluated on the type of drug dispensed and 
disease managed rather than a one-size fits all approach?

    Answer. CMS Star ratings were created with patient outcomes in 
mind. That is why Express Scripts chooses to leverage CMS quality 
standards to measure pharmacy performance. Express Scripts and our plan 
sponsors believe that pharmacies should be held to the same quality 
standards as our plan sponsors.

    We agree that DIR arrangements should include performance metrics 
over which pharmacies have meaningful control and an ability to 
influence. We also believe that they should appropriately take into 
account whether the pharmacy is a retail pharmacy, specialty pharmacy, 
or dispensing physician. Express Scripts DIR arrangements take these 
factors into account.

    Question. Does assessing large DIR fees on medically integrated 
pharmacies drive patients to PBM-owned specialty pharmacies?

    Answer. No.

    Question. According to CMS, from 2012 to 2017 PBMs imposed a 45,000 
percent increase in the amount of DIR fees pharmacies had to pay PBMs 
and PDPs under Part D, and revenues earned from these fees increased 
225 percent per year during this period.\9\ I thought PDPs and PBMs 
were supposed to pay pharmacies for dispensing drugs to patients. Why 
do pharmacies have to pay DIR fees to PBMs at all?
---------------------------------------------------------------------------
    \9\ CMS Proposed Rule: Modernizing Part D and Medicare Advantage to 
Lower Drug Prices and Reduce Out-of-Pocket Expenses, 83 Fed. Reg. 
62152, 62174 (November 30, 2018).

---------------------------------------------------------------------------
    Why are pharmacies forced to pay DIR and other fees to PBMs?

    Answer. Pharmacies are not forced to enter into DIR agreements with 
Express Scripts. DIR agreements are made between plan sponsors and 
pharmacies as a way to improve the cost and quality of a Medicare Part 
D plan. They are part of the contract that is mutually developed and 
agreed upon by the pharmacy and the Part D plan sponsor.

    As part of these arrangements, pharmacies become one of the plan's 
preferred pharmacies by agreeing to achieve certain performance 
metrics. These metrics for the pharmacies are typically aligned with 
the Star ratings metrics that CMS uses to judge the performance of Part 
D plans. Express Scripts has seen improvement in quality across all 
pharmacy types over time, particularly for Pharmacy Services 
Administrative Organizations (PSAOs) and independent pharmacies.

    Pharmacies are increasingly interested in participating in DIR 
arrangements as a way to become a preferred provider within a Part D 
plan's retail pharmacy network. Within these narrower pharmacy 
networks, patients have lower copays when filling prescriptions at 
their plan's preferred pharmacies, and those pharmacies benefit by 
gaining access to a larger percentage of the plan's beneficiaries.

    Ultimately, it is the decision of the pharmacy whether or not to 
enter into a DIR agreement.

    Question. According to CMS, PBMs justify DIR fees as adjustments to 
improve quality. CMS also found that PBMs and PDPs withhold 
substantially more in reductions in payments than as rewards paid to 
pharmacies.\10\ Aren't so-called ``quality adjustments'' that collect 
more for ``poor performance'' than they pay out for ``high 
performance'' just another way for PBMs to collect even more money from 
pharmacies?
---------------------------------------------------------------------------
    \10\ Id. at 62174.

    Why do PBMs collect more in quality payment adjustment than they 
---------------------------------------------------------------------------
pay pharmacies under Part D?

    Answer. If a pharmacy does not reach the performance metric to 
which it agreed to pursue and maintain--e.g., medication adherence 
rates for a specific disease category--then that pharmacy is assessed 
the DIR fee detailed in the contract between the plan and pharmacy. It 
is important to note that all DIR fees go to the Part D plan sponsor 
and not to the PBM--100 percent of pharmacy network DIR is passed to 
plan sponsors.

    In addition to a variable reimbursement based on quality outcomes, 
the Express Scripts performance network also includes bonus payments to 
top performers at the end of the year to further reward achievement of 
high quality outcomes.
                 delays and denials in cancer treatment
    Question. I have received stories of cancer patients facing delays 
or denials for their treatment due to PBM actions. Data shows that 
breast cancer patients who experienced a 3-month or more delay in 
treatment had a 12-percent lower 5-year survival rate compared with 
breast cancer patients with only a 0- to 3-month delay.

    What percent of patients experience a 14-day or longer delay in 
receiving an oral oncolytic prescribed by their oncologist?

    Answer. At ESI, we use pharmacists and board certified physicians 
for all of our reviews. We respectfully refer to our answer below with 
respect to the most common reasons for delays. We are committed to 
always providing our clients' patients access to clinically appropriate 
medications as quickly, affordably, and safely as possible.

    Question. What are the primary reasons patients experience delays 
or denials for their treatments?

    Answer. A client plan sponsor's formulary design and the 
utilization management tools--e.g., prior authorization or step 
therapy, etc.--determines how quickly a patient may access certain 
prescribed medications. Where there are multiple drugs--both branded or 
generic--within a therapeutic class that are similarly effective, 
certain of those drugs may be preferred for initial coverage over 
others. Formularies are designed based on evidence-based research and 
established clinical guidelines. Again, plan sponsors alone determine 
their formularies and which utilization management tools to employ as 
permitted under applicable law (i.e., Medicare, ERISA, etc.).

    Where a prescriber seeks an exception to the plan's preferred drug 
option, he/she has the right to appeal and request approval of the 
original prescription. For coverage appeals, prescribers are required 
to submit all relevant clinical information necessary for the plan to 
determine if the request is appropriate under the patient's 
circumstances. In these situations, providers act on behalf of patients 
when requesting approval of some covered services or medications from 
health plans before delivering a particular treatment.

    When clinical evidence appropriately provides that alternative 
medicines that are similarly effective and cost less have not been 
tried first, or additional patient clinical information must be 
provided to support their request for coverage, any delays that arise 
may be due to any number of factors. The vast majority of any delayed 
approvals for exception requests are due to prescribers not providing 
complete information at the time the request was submitted. Or the 
prescriber does not respond to plan follow-up requests for additional 
clinical information necessary to complete a review on their 
submissions.

    Cigna and Express Scripts have worked to simplify and improve the 
prior authorization request experience for prescribers, and have 
developed and made available to physicians an ``App'' tool that allows 
providers using it to submit electronic prior authorization requests 
directly from their smartphones at the moment the prescription is being 
ordered, along with possible alternatives that would not require such a 
request. Details on this product are discussed further in our response 
to questions addressing ``real-time benefit check tools.''

    Question. What percent of determinations to delay or deny treatment 
for cancer patients are made by an oncologist or healthcare 
professional with oncology training?

    Answer. We are committed to always providing our clients' patients 
access to clinically appropriate medications as quickly, affordably, 
and safely as possible.

    Question. Why is a PBM-owned specialty pharmacy better qualified to 
manage a cancer patient's adherence and side effects than a community 
cancer clinic with a medically integrated pharmacy?

    Answer. Specialty pharmacies are distinct from traditional 
pharmacies because they coordinate many aspects of patient care to more 
effectively manage treatment, side effects and interactions with other 
therapies. Medications dispensed by specialty pharmacies are often 
subject to strict dispensing rules under the FDA REMS program, and 
require special storage, handling and packaging prior to dispensing. 
These products are usually significantly more expensive than 
conventional medications and require additional controls to assure that 
patients take them appropriately.

    For these reasons, manufacturers of specialty medications 
frequently enter into limited distribution arrangements with those 
specialty pharmacies fully capable of addressing the unique needs of 
their products. This is not a function of whether a specialty pharmacy 
is owned by a PBM or not; not all specialty pharmacies (even large ones 
based on prescription volume) are owned by PBMs, and often have their 
own limited distribution arrangements with manufacturers as well. In 
fact we also contract with non-PBM owned specialty pharmacies provided 
they meet the same quality and safety accreditation standards followed 
by the industry.

    At Accredo, our in-house specialty pharmacy, we operate 15 
condition-specific Therapeutic Resource Centers (TRCs) that allow us to 
deliver a level of expertise and individualized care that is unmatched 
in the market. Our clinical model, developed around the TRCs, allows us 
to provide patients with the additional resources they need to manage 
their condition safely and effectively, including:

        Access to 500 specialty pharmacists on the phone and through 
video;

        550 field-based infusion nurses who meet patients face-to-
face--at home, work, or school--to administer specialty medications for 
some of the most complex disease states, such as pulmonary arterial 
hypertension and immune disorders;

        Nutrition counseling and social worker support;

        Therapy management programs to protect patient health and 
safety; and

        Complete coordination of care between the medical benefit, 
pharmacy benefit and physicians.

    This unique combination of clinical specialization and personalized 
engagement helps patients make decisions that improve adherence, 
optimize health outcomes, and reduce costs.

                                 ______
                                 
                Questions Submitted by Hon. Bill Cassidy
    Question. In calendar years 2015, 2016, and 2017, what percent of 
your revenue was from fees paid by plans, fees paid by manufacturers, 
other fees, pharmacy spread or rebates? Same question as to profits. Of 
all revenue generated from part D contracts, what percent did you 
retain?

    Answer. Per our annual 10-K filings with the SEC:

        In 2015, Express Scripts' net profit margin was 2.43 percent.

        In 2016, Express Scripts' net profit margin was 3.39 percent.

        In 2017, Express Scripts' net profit margin was 4.51 percent.

    Question. Should a patient ever pay more out of pocket for a 
medicine than what you pay the pharmacy for that medicine?

    Answer. Express Scripts employs a ``lesser of logic'' approach at 
the point of sale for patients at the retail pharmacy, and pharmacies 
in our networks are not permitted to charge a member more for their 
copay under their benefit than the pharmacy's cash price. Moreover, 
Express Scripts has never used ``gag clauses'' and enthusiastically 
supported legislation--passed in the previous Congress--that banned 
such practices.

    Question. PBM revenue from fees has risen, illustrated below. 
Further, PBM's retained revenue as a percent of net retail drug spend 
has consistently increased. What do you attribute this increase to?

[GRAPHIC] [TIFF OMITTED] T0919.007


    Answer. We would first note that this is an industry chart and not 
necessarily indicative of our specific business.

    We respectfully refer to our answer for the preceding question to 
note that while revenues may increase, Express Scripts' profit margin 
remained consistently around or below the 5-percent range.\11\ It is 
noteworthy that the Express Scripts 2017 margins are roughly a third 
less than that of the top Fortune 500 drug manufacturers, who averaged 
14.6-percent profit from revenues in that same year (2017).
---------------------------------------------------------------------------
    \11\ https://www.drugchannels.net/2018/06/profits-in-2018-fortune-
500.html.

    Following Cigna's combination with Express Scripts, the combined 
organization reported a GAAP margin of 3.61 percent for the first 
quarter of 2019. We again note the disparity with our counterparts 
among the top Fortune 500 drug manufacturers, who averaged 23.9 percent 
profit from revenues in 2018.\12\
---------------------------------------------------------------------------
    \12\ https://www.drugchannels.net/2019/06/profits-in-2019-fortune-
500.html.

    Question. How are bona fide service fees established? What was your 
---------------------------------------------------------------------------
revenue generated in part D by bona fide fees in 2015, 2016, and 2017?

    Answer. Express Scripts has served and continues to serve thousands 
of clients, which include Medicare Part D sponsors. Express Scripts' 
clients, including Medicare Part D sponsors, make benefit design 
decisions and individually negotiate contractual provisions such as 
service fees.

    Question. A Health Affairs article suggests plans may prefer paying 
PBMs using rebates instead of fees, as ``Using retained rebates to 
cover PBM costs in lieu of fees could artificially lower reported 
administrative costs and make it easier to meet government medical loss 
ratio (MLR) requirements.'' Is it true that paying the PBM a percent of 
rebates would keep that revenue from counting towards a plan's MLR?

    Answer. In the Medicare setting, we pass through 100 percent of the 
rebate value to our health plan clients.

    Question. Would you support an industry-wide standard set of 
performance metrics by which a PBM would set its pharmacy contracts, 
which would be tailored based on regional patient populations, to give 
certainty for local pharmacies?

    Answer. We welcome the opportunity to work with you on improving 
performance metrics standards. We encourage policies that use informed 
metrics that would improve quality of care for all patients.

    Question. Are there ever cases where a patient in your health plan 
or one of the health plans for whom you negotiate as a PBM pays more 
for a medicine than the plan spends on a net basis, when you reimburse 
the pharmacy for that same medicine? In those cases, what entity 
receives the benefit of the difference between the amount the patient 
pays and the net amount the plan pays?

    Answer. Yes, there are and in those cases where such differences 
occur, the contracting arrangements with the client will dictate how 
those amounts are allotted.

                                 ______
                                 
                Questions Submitted by Hon. Richard Burr
    Question. Pharmacy Benefit Managers (PBMs) offer a variety of 
contract designs to health insurance plans, allowing the insurer or 
client to choose the best structure for their customers. During the 
Finance Committee hearing on April 9, 2019, each witness stated that, 
in the contracts structured to allow for the pass-through of rebate 
dollars at the point of sale, PBMs do not keep any portion of the 
rebate. If the PBM does not keep a portion of the rebate, what type of 
revenue do PBMs receive from these contracts? What percent of your 
contracts are point of sale and what percent utilize a structure 
providing a percentage of the rebate back to the PBM?

    Answer. In a typical rebate pass-through arrangement with clients, 
we are paid an ``administrative fee'' (spelled out in our contract with 
the plan sponsor) for adjudicating a prescription drug claim in lieu of 
keeping any portion of any rebate dollars remitted to the plan; this is 
also known as a ``cost-plus'' arrangement. When selecting between 
``spread pricing'' and ``pass-through'' arrangements, clients negotiate 
for pricing terms that best suit their needs from a wide range of 
options. For more than 10 years, we have offered our clients an option 
to provide rebate value at the point-of-sale, and to date only a 
handful of clients have chosen to do so. Instead, most clients elect to 
use rebate value to offset premiums and offer a more robust benefit.

    In Medicare Part D, PBMs are required to pass through all rebates 
to the plan sponsor. Client contracts contain financial disclosures in 
which Express Scripts provides a detailed overview of its principal 
revenue sources, including arrangements with pharmaceutical 
manufacturers, wholesale distributors, and retail pharmacies. These 
disclosures explain that some of this revenue relates to utilization of 
prescription drugs by members of the clients receiving PBM services, 
and that Express Scripts may pass through certain manufacturer payments 
to its clients or may retain certain of those payments for itself, 
depending on the contract terms between Express Scripts and the client. 
Terms vary across clients and contracts. Express Scripts' contractual 
terms with its clients are confidential and based on those 
confidentiality obligations, Express Scripts cannot disclose the 
individual financial performance of any specific contract.

    Our clients, who are sophisticated entities and are often 
represented by benefit consultants and advisors, negotiate the overall 
arrangement they believe best suits their pharmacy benefit needs. Terms 
vary across clients and contracts, and some clients negotiate to 
receive a portion of rebates, as well as manufacturer administrative 
fees collected by Express Scripts. Nearly half of Express Scripts' 
clients have opted for 100-percent pass-through of rebates.

    Question. It is our understanding that contracts with 
pharmaceutical manufacturers may also take a variety of forms. In 
calendar years 2016, 2017 and 2018, what was the total dollar amount 
that you obtained from pharmaceutical manufacturers in any form such as 
rebates, fees, etc.? What is the total dollar amount that was passed on 
to health insurance plans with which you have an agreement or contract?

    Answer. In 2018, Express Scripts' clinical pharmacy benefit 
solutions returned $45 billion in savings to our clients,\13\ up from 
$32 billion in 2017.\14\ Because of our innovative solutions, our 
clients achieved the lowest drug trend in decades, just 0.4 percent 
across employer-sponsored plans. Despite rising list prices, the 
average 30-day prescription cost only $0.06 more. In Medicare, we 
delivered an unprecedented 0.3-percent decline in drug spending across 
the plans we serve.\15\
---------------------------------------------------------------------------
    \13\ https://my.express-scripts.com/rs/809-VGG-836/images/
Express%20Scripts%202018%20
Drug%20Trend%20Report.pdf.
    \14\ file:///C:/Users/p067734/Downloads/
Express%20Scripts%202017%20Drug%20Trend%20
Report.pdf.
    \15\ https://my.express-scripts.com/rs/809-VGG-836/images/
Express%20Scripts%202018%20
Drug%20Trend%20Report.pdf.

    Express Scripts passes approximately 95 percent of rebates, 
discounts, and price reductions back to its core PBM commercial and 
health plan clients and their customers. Nearly half of Express 
Scripts' clients have opted for 100 percent pass-through of rebates. In 
Medicare Part D, 100 percent of the rebate value is passed through 
---------------------------------------------------------------------------
within the program.

                                 ______
                                 
                Questions Submitted by Hon. Steve Daines
    Question. In Medicare Part D, beneficiaries' deductible and 
coinsurance payments are calculated based on the price negotiated 
between the PBM and the pharmacy.

    Does this take into account rebates and discounts the PBM 
negotiates separately with pharmaceutical manufacturers?

    If yes, what percentage of the time is this the case?

    Answer. In Medicare Part D, 100 percent of the rebate value is 
passed through within the program. All beneficiaries benefit from 
rebates in the form of lower premiums. Most drugs do not involve a 
rebate structure. According to a study of drugs covered under Medicare 
Part D by the actuarial firm Milliman, 81 percent of all drugs analyzed 
do not offer rebates and 64 percent of brand drugs analyzed do not 
offer rebates.\16\ In the case of payments made during the deductible 
phase of the benefit and when cost-sharing is percentage-based, rebates 
and discounts are not factored into beneficiaries' payments at the 
point of sale. However, as noted above, all beneficiaries in Medicare 
Part D see the value of rebates in the form of lower premiums. This is 
part of the reason that the Medicare Part D program remains popular 
among seniors, and why participation remains high.
---------------------------------------------------------------------------
    \16\ https://www.ahip.org/wp-content/uploads/2018/07/AHIP-Part-D-
Rebates-20180716.pdf.

    Question. In calendar years 2016, 2017, and 2018, what share of 
brand prescriptions covered by the Part D plans you contract with were 
filled in the deductible or required beneficiaries to pay coinsurance? 
What was the total amount beneficiaries spent out of pocket for those 
prescriptions? What would beneficiaries' total out-of-pocket spending 
have been under the same cost sharing structure if their payments were 
based on the net price to the Part D plan, inclusive of rebates and 
other price concessions, rather than the price negotiated between your 
---------------------------------------------------------------------------
PBM and the pharmacy?

    Answer. We do not maintain information in the form requested.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Should the CREATES Act become law, what commitment can 
your company making to covering generics as soon as they are approved 
and passing those savings on to patients?

    Answer. We strongly support the Creating and Restoring Access to 
Equivalent Samples (CREATES) Act, which aims to lower drug prices by 
ending restricted access to samples by manufacturers of brand-name 
drugs, and help to speed generics to market. According to the 
Congressional Budget Office, its passage would save $3.9 billion over 
10 years. Express Scripts is committed to leveraging competition to 
drive lower drug costs, which is why we support the CREATES Act and 
other legislative changes that would speed the entry of generic drugs 
into the market. Express Scripts has long been committed to encouraging 
generic drug use--including biosimilars where available--as appropriate 
to preserve patient access to needed medications in the most cost-
effective manner without sacrificing safety or efficacy.

    Question. What are your concerns with point-of-sale rebates and 
what alternatives do you propose to such rebates to improve consumer 
savings at the pharmacy counter?

    Answer. When selecting between spread pricing and pass-through 
arrangements, clients negotiate for pricing terms that best suit their 
needs from a wide range of options. For more than 10 years, we have 
offered our clients an option to provide rebate value at the point of 
sale, and to date only a handful of clients have chosen to do so. 
Instead, most clients elect to use rebate value to offset premiums and 
offer a more robust benefit.

    Question. What are the specific steps your company is taking to 
move PCSK9 inhibitors off the specialty tier in Medicare Part D and to 
fixed copay tiers given that prices went down by 60 percent and are no 
longer above the specialty tier threshold?

    Answer. Express Scripts focuses on the lowest net cost drugs on 
formulary. Plan sponsors always determine their formulary benefit 
design including their drug coverage tiers, and always retain the 
option to make changes accordingly subject to Medicare rules.

    Question. Why haven't your plans moved it already, given that CMS 
allows plans to make positive mid-year formulary changes that improve 
patient access and affordability?

    Answer. Again, we make changes to drug placement on formulary tiers 
at the direction of our client plan sponsors. Further, we advise 
clients to prefer lowest net cost drugs within their formularies.

                                 ______
                                 
             Questions Submitted by Hon. Benjamin L. Cardin
              drug rebate rule and higher part d premiums
    Question. In January, the Department of Health and Human Services 
released a proposal to reform prescription drug rebates paid by 
pharmaceutical manufacturers to pharmacy benefit managers under 
Medicare Part D. The OIG proposal attempts to ban most rebates by 
eliminating their regulatory protections and creating two new safe 
harbor provisions: one to expressly protect discounts applied directly 
at the point of sale (POS) for consumers, and another to protect 
certain service fees that manufacturers pay to PBMs for services 
furnished to health plans. The only service fees that would be 
permissible under the proposal are those that are fixed, and not based 
on a percentage of sales and not based on volume or the value of other 
business generated between the parties. The proposed rule was designed 
to address the Department's concerns with the current rebate system, 
which HHS believes rewards high list prices, discourages the use of 
generics and biosimilars, and does not reflect patient out-of-pocket 
costs. For consumers, this proposal may result in lower costs at the 
pharmacy counter, but Part D premiums may increase as a result.

    Could you explain which Part D beneficiaries could see savings on 
their drug costs at the pharmacy counter and which Part D beneficiaries 
could not see lower drug costs?

    Answer. According to a study of drugs covered under Medicare Part D 
by the actuarial firm Milliman, 81 percent of all drugs analyzed do not 
offer rebates and 64 percent of brand drugs analyzed do not offer 
rebates.\17\ However, the CMS Office of the Actuary's analysis of the 
proposed rule shows that all beneficiaries would be harmed by the rule 
in the form of higher Part D premiums. Under the recently proposed 
rebate rule, many beneficiaries using generic, non-preferred, and 
specialty drugs will see premiums increase, and not a reduction in 
costs at the pharmacy counter.
---------------------------------------------------------------------------
    \17\ https://www.ahip.org/wp-content/uploads/2018/07/AHIP-Part-D-
Rebates-20180716.pdf.
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    perverse incentive to place more expensive drugs on formularies
    Question. In a Senate Finance Committee hearing had a few weeks 
ago, many pharmaceutical companies argued that the current rebate 
structure incentivizes high list prices. These companies argue that the 
higher the list price of the drug, the greater the rebates, and 
therefore, the more profit the PBM earns. While contracts between PBMs, 
Part D Plans, and pharmaceutical companies require PBMs to pass through 
100 percent of the negotiated rebate back to insurance plans, I worry 
that this structure could incentivize PBMs to favor a more expensive 
drug on the formulary because they could get a higher rebate.

    Is there an incentive for a PBM to place a higher cost drug on the 
Part D formulary because the PBM receives a larger rebate for that more 
expensive drug? Why or why not?

    Answer. No. Financial impact to Express Scripts is expressly 
excluded and prohibited from consideration in the formulary development 
process. Our formulary development approach for all medications 
prioritizes clinical considerations first and foremost before 
evaluating net cost to clients. The financial impact to clients, 
however, is considered, but only after all clinical considerations have 
been taken into account.

    Question. Another complaint that I have heard from physician groups 
is that many formularies do not cover newer drugs that they consider to 
be necessary for hard-to-treat diseases, even if the drugs are very 
well-studied.

    With technology changing so rapidly, how do your companies ensure 
that you keep up with the medical and surgical experts and new 
research, so that your authorization decisions are in line with the 
most recent medical innovations and physician standards?

    Answer. Express Scripts develops formularies through a four-step 
process involving the work of distinct committees: the Therapeutic 
Assessment Committee, National Pharmacy and Therapeutics Committee, 
Value Assessment Committee, and an annual formulary review by the 
National Pharmacy and Therapeutics Committee.

    The Therapeutic Assessment Committee (TAC) is an internal clinical 
review body, consisting of clinical pharmacists and physicians who are 
employed by Express Scripts. From a formulary development perspective, 
the committee is tasked to review specific medications following 
approval by the Food and Drug Administration (FDA). Before discussing a 
new drug at TAC, Express Scripts' clinical team conducts a search of 
the medical literature, evaluates published data from clinical trials, 
and develops comprehensive drug evaluation summary documents. The drug 
evaluation documents include, at a minimum: a summary of the 
pharmacology, safety, efficacy, dosage, mode of administration, and the 
relative place in therapy of the medication under review compared to 
other pharmacologic alternatives. Following a review of the drug 
evaluation summary document, TAC ultimately provides a formulary 
placement recommendation that is shared with the Express Scripts' 
National Pharmacy and Therapeutics (P&T) Committee. TAC formulary 
recommendations are merely a suggestion and cannot be formally 
implemented without the approval of the P&T Committee.

    Express Scripts' P&T Committee is a group of independent, actively 
practicing physicians and pharmacists who are not employed by Express 
Scripts. The P&T Committee is tasked to review medications from a 
purely clinical perspective. The committee does not have access to, nor 
does it consider, any information regarding Express Scripts' rebates/
negotiated discounts, or the net cost of the drug after application of 
all discounts. The committee does not use price, in any way, to make 
formulary placement decisions.

    The P&T Committee can establish one of the following three 
formulary placement designations: include, exclude, or optional from a 
formulary. Drugs with a designation of include are recommended for 
placement on all formularies. Drugs may be given an include designation 
for one or more of the following clinical reasons: unique indication 
for use addressing a clinically significant unmet treatment need; 
efficacy superior to that of existing therapy alternatives; a safety 
profile superior to that of existing therapy alternatives; a unique 
place in therapy; and/or drugs which treat medical conditions that 
necessitate individualized therapy and for which there are multiple 
treatment options. Drugs with an exclude designation are not 
recommended for formulary inclusion. Drugs may be given an exclude 
designation for one or more of the following clinical reasons: efficacy 
inferior to that of existing therapy alternatives; a safety profile 
inferior to that of existing therapy alternatives; and/or insufficient 
data to evaluate the drug. Medications recalled from the market for 
safety reasons take an automatic exclude status, and are formally 
reviewed at the next P&T Committee meeting. Drugs may also be 
designated as optional on a formulary. Drugs may be given an optional 
designation based on the conclusion that they are clinically similar to 
other currently available drug alternatives.

    Optional medications are forwarded to the Value Assessment 
Committee (VAC) for further analysis, which considers the value of 
drugs by evaluating the net cost, market share, and drug utilization 
trends of clinically similar medications. VAC consists of Express 
Scripts employees from various areas. No member of VAC can serve in any 
capacity on TAC (and vice-versa). VAC reviews drugs designated as 
optional by the P&T Committee, and develops a formulary placement 
recommendation.

    Finally, on an annual basis, the National P&T Committee will review 
the final formulary recommendations, by drug class, for the upcoming 
plan year. The committee utilizes this opportunity to ensure adherence 
to previously established formulary placement recommendations, and to 
recommend any additional changes to ensure that the formulary is 
clinically appropriate. The committee also ensures that all Express 
Scripts national formularies cover a broad distribution of therapeutic 
classes and categories, and that the formularies neither discourage 
enrollment by any group of enrollees nor discriminate against certain 
patient populations.

    Question. I have heard from independent pharmacies in Maryland that 
have struggled with pharmacy benefit managers and direct and indirect 
remuneration (DIR) fees. According to independent pharmacies, there are 
times when DIR fees are based on performance, and these fees range from 
$2-$7 for certain types of maintenance prescriptions and are often 
collected retroactively--weeks or even months after a prescription was 
filled. A PBM can take money back from the pharmacy when the pharmacies 
haven not met a PBM's performance standard. In these instances, the PBM 
claws back money and creates a situation where the pharmacy does not 
receive adequate reimbursement to cover its costs. As a result, DIR 
fees can be a significant financial loss to pharmacies and an 
additional cost burden to patients.

    Could you explain what performance measures are considered when 
determining a DIR fee?

    Answer. The metrics for the pharmacies are aligned with the Star 
ratings metrics that CMS uses to judge the performance of Part D plans. 
The metrics are part of the contract that is mutually developed and 
agreed upon by the pharmacy and the Part D plan sponsor.

    Examples of performance metrics include: generic dispensing rate, 
patient adherence rate, prescription refill rate, counselling services, 
medication therapy management, dispensing volume, and opioid dispensing 
oversight.

    Question. How is that performance measure communicated to the 
pharmacy?

    Answer. Our performance networks use the EQUIPP portal, an industry 
standard for quality data, which provides insightful information on 
performance and potential opportunities for patient intervention.

    Pharmacies and plan sponsors can log in to the quality reporting 
tool EQUIPP, managed by our reporting partner Pharmacy Quality 
Solutions (PQS), to have visibility into the pharmacy performance and 
ranking of the key metrics.

    Question. How much does your company receive in DIR fees?

    Answer. Pharmacy network DIR fees go to the Part D plan sponsor and 
not to the PBM--100 percent of DIR is passed to plan sponsors, who 
typically use these fees to help reduce premiums.

    If a contracted pharmacy's performance does not meet a mutually 
agreed-upon quality metric--as defined in their contract, entered into 
voluntarily with us--Express Scripts does not claw back monies already 
disbursed to the pharmacy. Again, pharmacies who meet or exceed their 
performance metric scores receive bonus payments as a reward for 
providing high-quality care to patients.

    Question. How much does your company receive in performance-related 
DIR fees?

    Answer. DIR fees go to the Part D plan sponsor and not to the PBM--
100 percent of DIR is passed to plan sponsors, who typically use these 
fees to reduce premiums.

    If a contracted pharmacy's performance does not meet up to a 
mutually agreed-upon quality metric--as defined in their contract, 
entered into voluntarily with us--Express Scripts does not claw back 
monies already disbursed to the pharmacy. Again, pharmacies who meet or 
exceed their performance metric scores receive bonus payments as a 
reward for providing high quality care to patients

    Question. Are those fees passed on to the consumer? If so, how?

    Answer. Medicare Part D beneficiaries benefit from DIR arrangements 
as these fees not only spur pharmacies to provide them with the 
highest-quality care and services, but they also lower plan costs in a 
number of ways. For example, these collected fees are typically used to 
keep premiums low--and across all plans, well below CBO projections 
with little increases year-over-year, despite an environment seeing 
ever-escalating drug prices. Among other metrics, rewarding pharmacies 
that maintain high medication adherence rates reduces the likelihood of 
medical interventions and saves the costs of providing such care for 
both plans and beneficiaries.
                             drug shortages
    Question. Currently there are over 270 drugs in shortage. Drug 
shortages happen for many reasons such as manufacturing and quality 
problems, natural disasters, and inventory practices of wholesalers and 
pharmacies. Drug shortages cause harm to providers, hospitals, and most 
importantly patients. Pharmacists and providers must spend significant 
amounts of time on researching alternative drug treatments for the 
patient, which may not always be the most optimal therapies.

    As a pharmacy benefit manager, you have contractual agreements with 
pharmaceutical companies in order to place their drugs on a plan's 
formulary. While I understand that drug shortages happening in both the 
inpatient and outpatient settings, there may be a role PBMs can play in 
protecting patients.

    For the prescription drugs you negotiate to cover on a plan 
formulary, could you use your negotiating power to ensure a drug is 
available to a patient? Why or why not?

    Answer. We do not manufacture, set the price of, or control the 
supply of a drug. Our contracts assume products will be available for 
patients, as it is in our collective interest to have adequate supply 
and competition to lower costs and improve quality. Further, there is 
rarely a single, predictable reason behind a drug shortage. In many 
cases, shortages are the result of disruptions in manufacturing 
processes, FDA orders to halt productions, etc., matters for which we 
have no control over--even via contract negotiation.

    Question. What do you do to ensure that patients have the drugs 
they need?

    Answer. Preventing drug shortages and ensuring adequate supply of 
necessary pharmaceutical products is critical to patient health. The 
majority of drug shortages occur in the hospital setting. We have 
predictive models that help to show us which drugs might be in short 
supply and make adjustments as we are able. In the United States, the 
biggest problems with drug shortages occur when there is a single 
source manufacturer. Decreasing the amount of time in which generics 
get to market can also play a key part in solving this problem.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
    Question. During the hearing, each of you expressed support for 
biosimilars and most of you indicated you try and take advantage of 
available biosimilars to help lower costs. When I asked each of you to 
identify solutions to help ensure a robust biosimilar marketplace here 
in the U.S., most of you mentioned things Congress or the 
administration could do to help ensure uptake of biosimilars--from 
lowering the exclusivity period for biologics to finalizing guidance on 
interchange ability at the FDA. However, none of you offered any 
solutions or ideas for what your company could do to help ensure timely 
uptake of biosimilars, a robust U.S. biosimilars market, and a 
resulting cost savings to patients to taxpayers.

    Most of the biosimilars currently approved and on the market in the 
U.S. are reimbursed through the medical benefit. What are the 
similarities and differences in how rebates are passed onto patients 
and providers in the medical benefit versus pharmacy benefit. In your 
answer, please describe these similarities and differences across each 
of your books of business (i.e., commercial, Medicare, Medicaid).

    Answer. We believe that part of the cause for escalating drug costs 
in the Part B program today includes a lack of utilization management 
tools that exert downward pressure on net costs. There are clear 
opportunities to achieve savings in the Medicare Part B program, 
including introducing Part D utilization management tools into Part B 
and potentially shifting some Part B drugs to Part D. Because of the 
complexity involved with identifying the ``candidate'' drugs for moving 
into Part D, along with assessing the consequences and impacts of doing 
so for both programs, we strongly recommend CMS engage stakeholders as 
they develop their policy.

    In addition, for our commercial business, we have fully insured 
arrangements, in which rebates are generally used to lower premiums, 
and self-funded arrangements, in which our clients have a choice on how 
rebate dollars are used, including to lower administrative costs or 
reduce employee contributions. Most self-funded clients elect lower 
administrative costs rather than 100 percent pass-through of rebate 
dollars due to lower prevalence, fewer rebate dollars, and the 
additional complexity of medical claims. Drug rebates in the medical 
benefit are typically available only for high-cost specialty drugs. 
Rebates do not impact provider reimbursement as it is based on a 
percentage of Average Sales Price (ASP). Finally, point-of-sale 
capability is not generally an option for drugs covered in the medical 
benefit given the differences in processing compared to drugs covered 
under a retail pharmacy benefit.

    Question. Do any of your plans require the use of a higher list 
price, branded product over the use of a therapeutically equivalent 
lower list price generic or biosimilar product? Why? If a plan 
restricts the use of a biosimilar or generic product in lieu of an 
innovator or brand name product, do patients pay more out-of-pocket 
than they would if the biosimilar was preferred?

    Answer. As we have noted in other responses to similar questions, 
our plan clients alone decide what their formulary benefit design will 
be for the plan(s). Accordingly, we do not require our client plan 
sponsors use higher net cost branded products over lower net cost 
drugs, regardless of whether they are on-brand, generic or biosimilar. 
While we advise clients to prefer lowest net cost drugs within their 
formularies, such decisions are ultimately theirs.

    Question. Recognizing most biosimilars are paid for via medical 
benefit, please explain whether you use step-therapy to restrict access 
to biosimilars for your patients in any medical benefit you manage 
across each of your books of business (i.e., commercial, Medicare, 
Medicaid). What role do rebates playing in your consideration for 
patient access to biosimilars in each of these instances?

    Answer. Rebate size is not considered by our P&T Committee when 
determining tiering/formulary placement for any drug, whether on-brand 
or biosimilar. We always advise clients to pursue lowest net cost for 
preferred drug placements in their formularies.

    Question. How can and will your company help ensure a robust 
biosimilars market here in the U.S.?

    Answer. With an expected cost of 15 percent to 40 percent less than 
originator products, biosimilars create a significant savings 
opportunity across the U.S. health care system. Cigna and Express 
Scripts are fully supportive of a robust biosimilars market in the 
United States, and believes important first steps toward ensuring such 
a market include ending so-called ``pay-for-delay'' arrangements, which 
delay the availability of lower-cost generics and biosimilars. We would 
also encourage the FDA to finalize guidance on biosimilar naming 
standards, improve the efficiency of the biosimilar product development 
and approval process, and develop effective communications tools to 
educate providers and patients about the safety and efficacy of 
biosimilars.

    Question. I have heard concerns that ``rebate walls'' are 
responsible for keeping new biosimilars off of formularies, where a 
manufacturer offers conditional rebates on a bundle of their products 
in order to incentive PBMs to exclude a new biosimilar competitor from 
their formularies. Have you ever decided to place a drug on a preferred 
tier because of the rebates you receive for other drugs from that 
manufacturer? If you do not do this, do you support this practice being 
carried out by your competitors?

    Answer. We negotiate for lowest net cost. Our formulary development 
approach for all medications prioritizes clinical considerations first 
and foremost before evaluating net cost to clients. Financial impact to 
Express Scripts is expressly excluded and prohibited from consideration 
in the formulary development process. The financial impact to clients, 
however, is considered only after all clinical considerations have been 
taken into account.

    Question. What more can and will you do to counteract efforts to 
rebate-block or bundle rebates to block biosimilar formulary placement? 
Will you commit to taking these actions as more biosimilars become 
available in Part D?

    Answer. We advise clients to prefer lowest net cost drugs within 
their formularies.
                            rebates vs. fees
    Question. During the hearing, Senator Cassidy asked each of you 
about the trend in PBM contracting where a larger share of your 
reimbursement and payment is a result of ``fees'' which you are able to 
pocket, as opposed to ``rebates'' which must be passed back to the 
plan/consumer.

    Please define the word ``rebate.'' As part of your definition, 
please clarify whether or not you consider administrative fees, 
inflation payments, product discounts, prospective rebates, care 
management fees, procurement fees or any other type of fee or payment 
that isn't a retrospective rebate to be a rebate.

    Answer. At a most basic level, a rebate is simply a retrospective 
discount. For over 30 years, Express Scripts has been singularly 
focused on helping employers, health plans, labor unions, and public 
programs like Medicare expand access to needed medications without 
overwhelming payer budgets. In 2018, we helped save employers more than 
$45 billion on their prescription drug costs.\18\ Also, we held 
prescription drug cost increases for our clients to just 1.5 percent, 
the lowest growth rate since we started measuring the trend in the 
early 1990s.
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    \18\ https://my.express-scripts.com/rs/809-VGG-836/images/
Express%20Scripts%202018%20
Drug%20Trend%20Report.pdf.

    Express Scripts returns on average 95 percent \19\ of rebates we 
negotiate with drug manufacturers directly to our clients. Our clients, 
100 percent of the time, decide how rebates will be returned to them. 
In turn, clients determine how they will use rebates to lower patient 
premiums, cost-sharing, and/or deductibles.
---------------------------------------------------------------------------
    \19\ http://lab.express-scripts.com/lab/insights/drug-options/2019-
national-preferred-formulary-better-access-better-value.

    Ninety-six to 98 percent of our clients are projected to stick with 
Express Scripts through 2020 because they know the value we bring by 
not only driving down costs, but also through improving care and 
creating better outcomes. Better value includes working with our 
clients to achieve a 90 percent generic-fill rate--and generics are 
---------------------------------------------------------------------------
generally not rebated.

    Notwithstanding the mistaken blame on rebates as the source of drug 
price increases, we note many non-rebated drugs continue to see double-
digit increases. In 2017, non-rebated drugs treating infertility, 
depression, high cholesterol, and transplants all registered price 
increases above 15 percent.

    Question. Please provide, across your books of business (i.e., 
commercial, Medicare, Medicaid), a list of each of the different types 
of rebates, charges, and/or fees that you incorporate into your 
contracts.

    Answer. Our clients--who are sophisticated entities and are often 
represented by benefit consultants and advisors--determine the overall 
pricing arrangement they believe best suits their pharmacy benefit 
management needs. Terms vary across clients and contracts. Express 
Scripts' contractual terms with its clients are confidential.

    Question. Rebates, by definition, must be passed along to the 
employer, health plan, or consumer. Please provide, across your books 
of business (i.e., commercial, Medicare, Medicaid), details on which of 
the rebates/fees detailed in my prior question are passed along to the 
consumer and/or plan and which are kept by the PBM.

    Answer. Express Scripts passes approximately 95 percent of rebates, 
discounts, and price reductions back to its core PBM commercial and 
health plan clients and their customers. Nearly half of Express 
Scripts' clients have opted for 100 percent pass-through of rebates. In 
Medicare Part D, 100 percent of the rebate value is passed through 
within the program to plan sponsors. As noted before, employers and 
other plan sponsors that work with Cigna and Express Scripts choose how 
any rebates are used. Some use them to lower premiums and cost sharing, 
others choose to expand access, fund wellness programs, or provide 
discounts to consumers at the point of sale. These decisions are and 
should be governed by the particular circumstances of the employer, 
health plan, and patients.
                             fiduciary duty
    Question. Each of you has argued that you are the one entity in the 
drug supply chain that exists to help lower the cost of prescription 
drugs. You claim that your value comes in saving taxpayers, plans, and 
consumers' money.

    Would you be willing to accept a fiduciary standard in your 
contracts? In other words, do you believe you have a fiduciary duty to 
the plan or employer you contract with--to act in their best interest 
and not your own? If not, why not?

    Answer. Fiduciary status for PBMs is not appropriate because the 
services that PBMs provide are not fiduciary in nature. While PBMs 
provide claims processing and perform other administrative tasks for 
plans, they do not make decisions regarding benefit design or exercise 
any discretionary authority over the plan or plan assets.
                           paying pharmacists
    Question. Following a series of reports in The Columbus Dispatch, 
Ohio has taken a number of actions over the past year to crack down on 
several PBM practices. Efforts to date have included investigations, 
lawsuits, and policy changes to address the egregious use of spread-
pricing, alleged breaches of contract, accusations of anti-competitive 
behavior, a misuse of taxpayer dollars, and a general lack of 
transparency.

    PBMs are responsible for creating pharmacy networks, setting the 
price patients and health plans pay for prescription drugs, 
adjudicating claims, and reimbursing pharmacies for dispensed drugs. In 
addition, nearly all PBMs own proprietary pharmacies that directly 
compete with the PBM-created retail network. Do you design plans that 
incentivize or require patients to use a pharmacy owned by your 
affiliate over a competing retail pharmacy. If yes, do you believe this 
represents a conflict of interest? If yes, how do you ensure there is 
no resulting anticompetitive misuse of pharmacy and patient data?

    Answer. Unlike some PBM competitors in the industry, our company 
does not own or operate a retail pharmacy chain. While we do own and 
operate both mail-order and specialty pharmacies, we do not exclude 
from our network of pharmacies competitors both large and small, 
provided they meet the same industry standard accreditation and safety 
standards we follow ourselves. We also reiterate that client plan 
sponsors will determine whether any particular pharmacies are preferred 
or not.

    In the case of specialty pharmacies, however, we note they are 
distinct from traditional retail pharmacies because they coordinate 
many aspects of patient care to more effectively manage treatment, side 
effects, and interactions with other therapies the patient may be 
receiving. Medications dispensed by specialty pharmacies are often 
subject to strict dispensing rules under the FDA REMS program, and 
require special storage, handling, and packaging prior to dispensing. 
These products are usually significantly more expensive than 
conventional medications and require additional controls to assure that 
patients take them appropriately.

    For these reasons, manufacturers of specialty medications 
frequently enter into limited distribution arrangements with specialty 
pharmacies fully capable of addressing the unique needs accompanying 
use of their products. This is not a function of whether a specialty 
pharmacy is owned by a PBM or not; not all specialty pharmacies (even 
large ones) are owned by PBMs. Again, we also contract with non-PBM 
owned specialty pharmacies provided they meet the same quality and 
safety accreditation standards followed by the industry.

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. Can you answer the following questions to help us 
understand the pharmacy benefit manager business model and how you make 
formulary decisions?

    What percent of rebates are passed to the consumer under Medicare 
Part D?

    Answer. In Medicare Part D, 100 percent of the rebate value is 
passed through within the program to Part D plan sponsors. All 
beneficiaries benefit from rebates in the form of lower premiums.

    Question. What percent of rebates are passed to the consumer in the 
private insurance market?

    Answer. Express Scripts passes approximately 95 percent of rebates, 
discounts, and price reductions back to its core PBM commercial and 
health plan clients and their customers. Employers and other plan 
sponsors that work with Cigna and Express Scripts choose how rebates 
are used. Some use them to lower premiums and cost sharing, others 
choose to expand access, fund wellness programs, or provide discounts 
to consumers at the point of sale.

    Question. Do you have any comments on how health plans should use 
their share of the rebates to lower drug prices for patients with high 
deductibles?

    Answer. Employers and other plan sponsors that work with Cigna and 
Express Scripts choose how rebates are used. Some use them to lower 
premiums and cost sharing, others choose to expand access, fund 
wellness programs, or provide discounts to consumers at the point of 
sale. These decisions are and should be governed by the particular 
circumstances of the employer, health plan, and patients.

    Question. What is the process of deciding on which tier a generic 
will be placed in your formularies?

    Answer. Our formulary development approach for all medications 
prioritizes clinical considerations first and foremost before 
evaluating net cost to clients. Financial impact to Express Scripts is 
expressly excluded and prohibited from consideration in the formulary 
development process. The financial impact to clients, however, is 
considered after all clinical considerations have been taken into 
account. Further, our clients determine, ultimately, the placement of 
any drug on their formularies as it is our purpose to manage the 
pharmacy benefit design they select.

    Question. Are generics always tiered as preferred (versus branded 
drugs)?

    Answer. Our National Preferred Formulary (NPF) is developed by an 
independent Pharmacy and Therapeutics (P&T) Committee comprised of 
independent practicing physicians, other clinicians and academics 
representing multiple areas of clinical expertise. Their decisions are 
based solely on whether clinical evidence shows that a drug must be 
covered. Only after products are evaluated from a clinical perspective 
are net cost and other factors considered. Again our focus is on the 
lowest net cost for drugs so we can reduce costs for our clients.

    Further, we note that plan sponsors are not obligated to adopt our 
NPF, but can accept, reject, or modify it as they deem fit or even 
create their own custom drug formulary. A formulary becomes part of a 
plan sponsor's benefit only after adoption by the client. Like 
formularies, copay tiers and other elements of benefit design are 
ultimately determined by our clients.

    Question. How quickly are generics placed on formularies once FDA 
clears them?

    Answer. Where a brand drug already has multiple manufacturers of 
generic equivalents, no special arrangements need to be made because 
this occurs frequently for ``mature'' drugs and the makers of these 
generic products can and do change. With regard to a newly approved, 
authorized generic, we will add it to our formulary at the direction of 
our clients.

    Question. Given the struggles we hear about patients accessing 
insulin, what measures are you taking to ensure that diabetes products 
and different types of insulin are placed on a preferred tier when 
establishing a formulary?

    Answer. Earlier this year, we were able to launch a new Patient 
Assurance Program, which will bring additional affordability and 
predictability to customers who rely on insulin to manage their 
diabetes. Furthering Cigna and Express Scripts' respective historical 
efforts in diabetes disease management, the Patient Assurance Program 
establishes a lower, fixed out-of-pocket cost for covered insulins, 
ensuring customers will pay no more than $25 out of pocket when filling 
a 30-day insulin prescription at a retail pharmacy or through home 
delivery. This is an early example of the accelerated change and 
innovation our new company is positioned to drive in the financing and 
delivery of care.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
    Question. During the hearing, I asked an initial question on spread 
pricing and wanted to follow up here. According to the Centers for 
Medicare and Medicaid Services (CMS), total gross spending in 2017 on 
prescription drugs was $154.9 billion in Medicare Part D, $30.4 billion 
in Part B, and $67.6 billion in Medicaid.

    One of the main challenges in lowering the price of prescription 
drugs is that there is a disturbing lack of transparency all along the 
supply chain, from research and development to what the patient is 
expected to pay at the counter. Further, the out-of- pocket costs for 
drugs varies greatly and unpredictably from patient to patient. That is 
why Senate Special Committee on Aging Chairwoman Collins and I 
introduced legislation that would codify the Drug Spending Dashboards 
at the CMS. The dashboards provide cost and spending information for 
drugs in the Medicaid, Medicare Part B, and Medicare Part D 
programs.\20\ With regards to transparency in the prescription drug 
supply chain, please provide answers to the following questions.
---------------------------------------------------------------------------
    \20\ S. 709, 116th Congress, Prescription Drug Pricing Dashboard 
Act, online at: https://www.
congress.gov/bill/116th-congress/senate-bill/
709?q=%7B%22search%22%3A%22drug+dashboard
%22%7D&s=1&r=1. Accessed April 23, 2019.

    Is it the policy and practice of your company to negotiate with 
drug manufacturers in good faith and obtain the best and lowest prices 
---------------------------------------------------------------------------
possible for patients and American taxpayers?

    Answer. We negotiate with manufacturers to achieve the lowest net 
cost of prescription drugs for our customers, regardless of whether 
they are employers in the commercial market or health plan sponsors 
offering Medicare Advantage or Medicaid coverage.

    Question. Is it the policy and practice of your company that 
patients, providers, researchers, policymakers, and the American people 
in general, know how taxpayer dollars are being spent in the Medicare 
and Medicaid programs?

    Answer. We strongly support the concept of providing information 
about the price of drugs, therapies, and the cost of care to 
beneficiaries and their providers as a means of improving price 
transparency, educating consumers, and incentivizing the efficient use 
of care throughout the health care system. We support efforts by CMS to 
move toward a system in which Part D enrollees and their providers have 
access to real-time benefit check and electronic prior authorization 
tools, while ensuring appropriate standardization and timeframes for 
implementation. We also support efforts to ensure the Medicare Payment 
Advisory Commission (MedPAC) and the Medicaid and CHIP Payment and 
Access Commission (MACPAC) have access to de-identified information 
currently submitted by PBMs, Part D sponsors, and Medicare Advantage 
plans to CMS. Legislation to address this issue was recently introduced 
by Senators Cortez Masto, Cornyn, Carper, and Cassidy.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by manufacturer list price; rebate 
paid by the manufacturer to you (the PBM); the amount reimbursed to 
pharmacies by the PBM; and the amount insured and uninsured patients 
pay out of pocket, before coupons, discounts, and other forms of 
patient assistance offered at the point of sale?

    If so, please provide useful and easily accessible links to where 
policymakers and the public can find such information. If not, please 
disclose how much each drug you work with clients to provide costs, 
broken down by manufacturer list price; rebate paid by the manufacturer 
to you (the PBM); the amount reimbursed to pharmacies by the PBM; and 
the amount insured and uninsured patients pay out of pocket, before 
coupons, discounts, and other forms of patient assistance offered at 
the point of sale.

    Answer. We are committed to providing transparency and audit rights 
to our clients. However, making this information available to the 
public involves releasing both proprietary and trade secret 
information, the disclosure of which would require us to breach 
contracts and harm our ability to negotiate discounts and lower prices 
for our clients--and ultimately reduce competition in the marketplace.

    Question. Please provide a list of actions your company has taken 
to ensure that pharmacists are enabled and allowed to communicate to 
patients how they can pay the lowest out-of-pocket cost possible for 
their prescription drugs.

    Answer. Last Congress, Express Scripts endorsed bipartisan Senate 
legislation aimed at stopping so-called PBM ``gag clauses'' that 
prohibit a pharmacy from informing a patient that the retail cash price 
may be lower than his or her copayment. Express Scripts does not engage 
in this anti-consumer practice. We believe our members should be 
informed about any out-of-pocket costs in advance. We provide members 
real-time pricing information, customized to their individual plans, 
via our website and mobile app. Pharmacies participating in our retail 
networks are not permitted to charge a member more for their copay 
under their benefit than the pharmacy's cash price.

    Additionally, our Real Time Prescription Benefit tool, launched 
last November, helps to simplify the patient's experience with their 
prescriber and improve the price transparency. Real-time clinical 
alerts that reach physicians through electronic prescribing systems can 
turn data into actionable patient intelligence, helping people stay on 
their therapy and avoid dangerous drug-drug interactions. We provide 
patient-specific information and pricing information directly into the 
physician's electronic health record within seconds. By providing drug 
cost information and reconciling coverage issues at the point of 
prescribing, we are eliminating confusion and pain points for patients 
at the pharmacy counter.

    These systems are delivering measurable savings to patients at the 
pharmacy counter, while ensuring providers and patients are 
communicating to make better-informed medication choices. Electronic 
prior authorization capabilities are improving as well, eliminating 
hours of potential wait time for prescribers and patients.

                                 ______
                                 
                 Questions Submitted by Hon. John Thune
                        real-time benefit check
    Question. You've all shared your ability to leverage technology 
such as real-time benefit tools to help patients and providers 
understand drug costs at the point of prescribing, as well as how 
technology can be used to help identify opportunities to provide 
enhanced support and medication management for enrollees. What policies 
can we consider to incentivize greater uptake of these tools?

    Answer. Thank you for this question and for your continued 
willingness to work toward policies that will harness technology to 
improve health outcomes and control costs. We would welcome the 
opportunity to work with you and your staff on additional policies, but 
wanted to highlight the following proposals.

    We strongly support the concept of providing information about the 
price of drugs, therapies, and the cost of care to beneficiaries and 
their providers as a means of improving price transparency, educating 
consumers, and incentivizing the efficient use of care throughout the 
health-care system. We support efforts by CMS to move toward a system 
in which Part D enrollees and their providers have access to real-time 
benefit check and electronic prior authorization tools, while ensuring 
appropriate standardization and time frames for implementation.

    Greater uptake of these tools in public programs, through policies 
promulgated by CMS, will lead to greater uptake in commercial markets, 
so that all patients and prescribers have the information needed to 
improve affordability and predictability.

    Question. You referenced legislation in your testimony that I've 
worked on with Senator Carper to apply value-based insurance design to 
high-deductible health plans for chronic disease management. If 
enacted, how do you expect plans to utilize this tool and what will be 
the impact on drug prices and health-care spending more broadly?

    Answer. This legislation addresses a key affordability issue for 
consumers, and for the health-care system, as prevention is a critical 
tool to managing future health-care costs. As plan sponsors turn to 
CDHPs as a way manage costs and encourage patients to take a more 
active role in their health care purchasing decisions, we welcome more 
flexibility through health savings accounts (HSAs) to help patients 
manage the growth in spending generally, but on chronic conditions in 
particular. The ability to cover care related to chronic disease 
management prior to a beneficiary reaching their plan deductible 
through an HSA could mitigate the financial deterrent posed by 
expensive prescriptions and services. If enacted, this legislation 
would enable increased patient engagement to improve health outcomes 
and potentially reduce costs.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. One challenge that I see, when considering the medical 
treatment marketplace, is that we have a new wave of life-saving 
treatments--of incredible cures we could never have dreamed of, even 10 
or 15 years ago--for which cost, by necessity, is going to be a major 
issue. You look, for instance, at a condition like sickle cell disease. 
For the average SCD patient who reaches age 45, lifetime treatment 
costs are at roughly $1 million--and there are complications that can 
make that figure even higher. Now that we see therapies coming down the 
pipeline that could erase those long-term costs and drastically improve 
the quality of life for sickle cell patients, the question becomes, how 
can our current payment systems adapt to--and absorb--the high costs 
necessary to bring treatments like these to market and to ensure that 
we continue to see innovations like these ones moving forward?

    Answer. The current health-care system is built to address chronic 
illnesses treated over time, and not built for one-time potentially 
curative therapies. We are focused on building a future ecosystem that 
helps ensure payers and patients get the most value from new 
breakthrough gene and cell therapies. We are focused on providing 
appropriate clinical and financial management for gene therapies and 
other curative and transformative therapies coming to market. Our 
company is working with drug makers, policymakers, patient groups and 
payers on innovative approaches to make gene therapies accessible for 
patients. Innovative contracting can ensure that payers and patients 
are not on the hook when a treatment isn't effective, and discussions 
with policymakers can help set an appropriate regulatory framework.

    Ultimately, we believe gene therapies will require payment and 
patient care systems which are as novel as the medications themselves. 
Ideas on the table include paying for a treatment over time, 
establishing insurer risk pools and financing one-time payments. A 
successful model must address patients who change insurers or 
employers, and tracking their health outcomes over time to ensure 
treatments are effective.

    Question. And along the same lines, beyond creating some much-
needed clarity around value-based arrangements--which I've been working 
with Senators Cassidy and Warner to accomplish legislatively--are there 
steps that Congress could take to facilitate these innovative payment 
models?

    Answer. We urge Congress to take steps establishing additional 
flexibility under the Anti-Kickback Statute (AKS) to support value-
based contracts and other innovative programs in public programs.
               six protected classes proposal and access
    Question. This past November, the Centers for Medicare and Medicaid 
Services released a proposed rule for 2020 to help tackle drug pricing. 
Among the proposed changes is one, which would alter the current rules, 
governing the ``six protected classes.'' The concept of the protected 
classes has been around since the launch of the Medicare Part D 
program, and it was instituted to ensure that some of our most 
vulnerable patients would have access to their needed drugs by 
requiring formularies to cover nearly all protected drugs. These 
classes are anticonvulsants, antidepressants, antipsychotics, 
immunosuppressants, antiretrovirals, and antineoplastics.

    Some people have argued that these protected classes have led to 
higher drug prices because formularies are required to include this 
prescription coverage, and there are limited tools left to help lower 
prices. In an effort to increase competition, this proposed new rule 
would do a couple of different things. The first aspect of the 
administration's proposal would allow Part D sponsors to implement 
broader use of prior authorization and step therapy for protected class 
drugs, including to determine use for protected class indications. Any 
time there is a mention of plans using prior authorization or step 
therapy there is an immediate concern of restricting patient access to 
needed drugs or medical services.

    Could you explain why your company would favor such utilization 
management tools like step therapy or prior authorization?

    Answer. We offer an option for plans not implementing exclusions to 
utilize step therapies requiring the trial of a clinically appropriate 
preferred product before the patient can try a non-preferred drug. Like 
formularies, step therapies and other elements of benefit design are 
ultimately determined by our clients. Prior authorization is designed 
to help prevent individuals from being prescribed medications that are 
either clinically inappropriate or that lack evidence demonstrating 
that they are safe and effective for a specific condition. It is also a 
highly effective tool for health insurance companies to manage costs 
for otherwise expensive medications without sacrificing access to 
clinically appropriate, lower-net cost, but similarly effective options 
for patients.

    Question. Do you believe there is a danger that using step therapy 
or prior authorization could possibly restrict patients from having 
access to medication that has been successful for them? Why or why not?

    Answer. Properly managed, they should not. A medical exception 
process is always available for the prescribing physician to pursue if 
a patient's unique health situation requires a non-preferred product to 
be the only option.

    Question. If you were to use step therapy or prior authorization 
for drugs in the six protected classes, how would you ensure patients 
would continue to have access to their needed medications in one of the 
six protected classes?

    Answer. Cigna supports changes to the six protected classes, in 
part because the Part D program includes strong patient protections 
that enable beneficiaries to gain access to any drugs subject to 
utilization management (UM), when clinically appropriate. Existing 
coverage review processes--both standard and expedited--have proven 
workable, and plans have demonstrated the use of UM tools can provide 
safe access to the most appropriate medications while reducing member 
and plan costs. This additional opportunity for interaction and 
education with patients and prescribers, and the assessment of the 
appropriateness of a prescribed therapy based on either cost or 
clinical efficacy, may avoid unnecessary or inappropriate utilization 
and should not come at the expense of access.

    Question. The second aspect of the administration proposed change 
to the six protected classes is the proposal to allow drug coverage 
formularies to exclude a protected class drug from a Part D formulary 
if the drug represents a new formulation of a single-sourced drug, 
regardless of whether the older formulation remains on the market. My 
understanding is that this administration is trying to target 
pharmaceutical companies who participate in the anticompetitive 
practice of ``ever-greening.'' This is a practice where pharmaceutical 
companies make slight alterations to a drug's packaging, color, and 
formulation without an added or new benefit. However, we also 
understand that seemingly small changes to a drug can still make a big 
difference to patient well-being. We have heard from Maryland 
physicians that the creation of combination antiretroviral pills was a 
huge step forward in the fight against HIV. Even though these 
combination pills or extended release versions didn't have a new 
chemical formula, they made a world of difference to the HIV patients 
taking over a dozen pills a day. These vulnerable patients are 
obviously very concerned that they could lose coverage for new and 
better drugs, especially when their old drugs may no longer be 
available. HIV treatments have come a long way in the last few decades, 
and proper antiretroviral treatment is vital to ensuring an end to the 
HIV epidemic.

    Do you think the proposed rule anticipates a situation where a 
pharmaceutical company stops producing an older version of a drug when 
a new formulation is available, but the newer formulation is not 
covered by a Part D plan? Why or Why not?

    Answer. Provided that existing formulations of drugs set for 
``ever-greening'' by a manufacturer are off-patent, generic 
manufacturers should be able to offer alternatives to the ``new'' 
formulation. It is common practice for manufacturers of the ``brand'' 
drug to begin offering a new formulation for an existing product near 
the end of its patent protection cycle, precisely because it will 
likely be facing generic competition. That said, no current statutes 
prevent a manufacturer from halting production of an older formulation 
in favor of a new, ever-greened version of the same drug.

    Question. What would your company do to ensure that patients 
continue to have access to their medication in this situation?

    Answer. To the extent possible, we will work to provide our 
clients' patients with all available supply of such products, and if 
necessary, help them find therapeutically similar alternative therapies 
that can best approach the clinical efficacy of the discontinued drug.
                       appeals process in general
    Question. Prior authorization and step therapy are some of the most 
commonly mentioned concerns from patient groups coming to talk to my 
office, second only patients' concerns about out-of-pocket costs. What 
has become especially striking in the past few weeks is the number of 
physicians explaining how they feel stymied by prior authorization 
restrictions by insurance plans. We have heard from one surgeon who 
argued for weeks with the insurer to appeal a decision that had been 
made to deny a newer type of less-invasive surgery. Someone who was not 
a surgical expert made the denial. Eventually, his patient made the 
decision to stop waiting and opted for a far more invasive and 
dangerous procedure because it was covered by insurance. Other doctors 
talk about the hours they spend on the phone waiting to appeal a 
decision, only to be told they need to write an extensive report 
justifying their medical decision. While the physicians are waiting for 
a response, quite often there are patients suffering without their 
proper medications, without certain tests, or not getting the surgery 
that the expert recommends.

    What is your organization doing to improve the appeals process for 
patients and physicians, in order to ensure timely medical care and 
access to their prescription drugs?

    Answer. We work collaboratively with physician partners to identify 
where they see opportunities for improvement and we are always looking 
to balance timely access with patient safety and effective utilization. 
Moreover, we have worked to simplify and improve the prior 
authorization request experience for prescribers, and have developed 
and made available to physicians an ``App'' tool that allows providers 
using it to submit electronic prior authorization requests directly 
from their smartphones at the moment the prescription is being ordered, 
along with identifying possible alternatives that would not require 
such a request. Details on this product are discussed further in our 
response to questions addressing ``real-time benefit check tools.''

    Question. What do you think is an appropriate wait limit for 
emergency medical appeals, and how do you make sure you meet it?

    Answer. One way to improve the appeals process and reduce wait 
times is increased use of electronic prior authorizations. Currently, 
60 percent of our prior authorizations are done electronically and we 
aim for that to be even higher. It's faster for the patient and it's 
more convenient for the prescriber. Electronic prior authorization 
capabilities are improving as well, eliminating over 158,000 hours of 
potential wait time in December 2018. As noted in our response above, 
we have worked to simplify and improve the prior authorization request 
experience for prescribers, and have developed and made available to 
physicians an ``App'' tool that allows providers using it to submit 
electronic prior authorization requests directly from their smartphones 
at the moment the prescription is being ordered, along with possible 
alternatives that would not require such a request. Details on this 
product are discussed further in our response to questions addressing 
``real-time benefit check tools.''

                                 ______
                                 
                 Prepared Statement of John M. Prince, 
                    Chief Executive Officer, OptumRx
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, I am honored to be here today on behalf of OptumRx. Our 
company has 28,000 dedicated employees--including 5,000 pharmacists and 
pharmacy technicians--working every day to deliver value to society, 
improve the quality of pharmacy care services, simplify the health-care 
experience, and ensure that the individuals we are privileged to serve 
have affordable access to the drugs they need.

    We reduce the costs of prescription drugs. We negotiate substantial 
discounts from drug manufacturers on behalf of our customers. And we 
are leading the way to ensure that those discounts directly benefit 
consumers. We recently announced that soon all of our new employer-
sponsored drug plans must provide point-of-sale drug discounts to their 
employees at the pharmacy counter. This builds on a similar initiative 
we launched at scale last year for millions of members in fully insured 
employer plans.

    Manufacturers are increasing drug prices for one simple reason: a 
lack of meaningful competition allows them to. In the absence of 
competition, manufacturers often set exceptionally high prices. There 
is a vital role for Congress and the administration to play in 
addressing this important issue.

    I look forward to discussing this issue with the committee. I will 
focus on the following points:

        1.  OptumRx's pharmacy care services business is achieving 
        better health outcomes for patients, lowering costs for the 
        system, and improving the health-care experience for consumers.

        2.  OptumRx negotiates better prices with drug manufacturers 
        for our customers and for consumers.

        3.  Drug manufacturers are solely responsible for the high cost 
        of prescription drugs.

        4.  Drug manufacturers are not helping solve the problem by 
        blaming others in the supply chain and offering so-called 
        ``authorized generics'' that often result in net prices higher 
        than the brand drugs they replace.

        5.  Sensible policy reforms that promote competition and value-
        based payment models will help make drugs more affordable.

    Let me address these points in order.
1. optumrx's pharmacy care services business is achieving better health 
outcomes for patients, lowering costs for the system, and improving the 
                  health-care experience for consumers

    Our team delivers pharmacy care services to 250,000 patients each 
day. These services improve health outcomes for patients and reduce 
costs in the system. Here are some examples:

          We communicate with patients (and their physicians) about 
        how to take their medications, avoid harmful drug interactions, 
        and access convenient home-
        delivery services.

          We provide drug infusion services directly in patients' 
        homes, so they do not need to visit a hospital to obtain the 
        same, high-quality care, which improves medication adherence 
        and reduces costs.

          We have more than 450 pharmacies embedded in community 
        mental health centers to serve the behavioral health medication 
        needs of patients receiving care there. Our ability to deploy 
        those on-site services has improved medication adherence, 
        reduced emergency room visits and hospitalizations, and reduced 
        overall costs by $700 per patient.

          We provide special assistance for patients who need help 
        managing their chronic conditions, including real-time video 
        consultations with pharmacists.

          We are helping to address the opioid crisis by developing 
        evidence-based programs that help prevent overprescribing by 
        physicians and detect suspected opioid misuse, as well as 
        offering medication-assisted treatment to patients with opioid 
        use disorder. Our customers who have adopted our opioid 
        management program have achieved a 96 percent adherence rate by 
        prescribers with the Centers for Disease Control and 
        Prevention's prescribing guidelines.

    Our pharmacy care services business is doing important work to 
improve health outcomes and lower costs. We are not stopping with those 
efforts. We are also developing consumer-friendly tools to make the 
health care experience more satisfying and effective for patients. For 
example, one of these tools, PreCheck MyScript, is a digital platform 
that simplifies the drug prescribing experience by showing the 
prescribing physician what the patient's true out-of-pocket cost would 
be while the patient is still in the physician's office. PreCheck 
MyScript has helped lower consumer out-of-pocket costs by an average 
of $135 per prescription filled. This is just one of the ways we are 
working to simplify the system.
      2. optumrx negotiates better prices with drug manufacturers 
                    for our customers and consumers
    OptumRx manages pharmacy benefits on behalf of our customers, 
including self-insured employer groups, fully insured health plans, 
union funds, Medicare, Medicaid, and Federal and State government 
employee plans. In that role, we promote use of clinically effective, 
lowest net-cost prescription drugs for consumers when medications are 
needed.

    This work starts with an independent, clinically based formulary 
design process. OptumRx's Pharmacy and Therapeutics (P&T) Committee is 
comprised of independent physicians and pharmacists who evaluate 
existing and emerging drugs based on scientific evidence, and review 
and appraise those drugs in an unbiased and evidence-based way. The P&T 
Committee meets regularly, and its deliberations are open and 
transparent to OptumRx's customers and prospective customers.

    A drug's cost plays no role in the P&T Committee's clinical review. 
Cost only becomes relevant after the P&T Committee has identified drugs 
in a particular therapeutic class that are clinically effective and 
should be covered. If there is more than one drug in a particular 
class, OptumRx gives preferable placement on its formulary to the 
lowest-net-cost drug. For about 90 percent of prescriptions processed, 
OptumRx can identify a generic drug in a particular therapeutic class, 
and give that drug preferred placement on its formulary over the more 
expensive branded (or ``on-patent'') drug. If there is no generic 
product available, there may still be other therapeutically equivalent 
branded alternatives. If so, OptumRx negotiates with those competing 
brand manufacturers to obtain discounts, and places the drug with the 
lowest overall net cost in a preferred position on the formulary.

    OptumRx has been effective in driving utilization of clinically 
effective low-cost medications. OptumRx's negotiated network discounts 
and clinical tools are reducing annual drug costs, on average, by 
$1,600 per person for our customers. Even greater savings are achieved 
by customers who implement evidence-based utilization management and 
other OptumRx clinical programs.

    OptumRx also ensures that these cost-savings go to our customers 
and consumers. Our customers receive approximately 98 percent of the 
value of the discounts we negotiate from drug manufacturers. The 
application of discounts is subject to audit and verification by an 
independent third-party on behalf of any of our customers. In those 
limited instances in which we retain some of the discount, it is 
because our customers have chosen to pay us that way.

    We have heeded the call for change by taking direct action to 
ensure that the discounts we obtain directly lower consumers' out-of-
pocket costs at the pharmacy counter. Last year, we implemented a 
point-of-sale discount solution at scale for fully insured group 
customers so that consumers receive the benefit of discounts at the 
pharmacy counter. This action has already made nearly six million 
consumers eligible for point-of-sale discounts. Eligible consumers 
filling prescriptions on discounted brand drugs are seeing average 
savings of $130 per eligible prescription. We believe it will also 
improve prescription drug adherence by as much as 16 percent. By the 
end of 2019 we expect more than nine million consumers will be eligible 
for these point-of-sale discounts. Last month, we announced a decision 
to expand this point-of-sale discount solution to all new employer-
sponsored plans beginning in January 2020.

    It is important to recognize that pharmacy benefit managers are the 
only stakeholders in the prescription drug supply chain working to 
reduce costs for their customers and the only ones able to effectively 
negotiate with drug companies. In fact, studies have shown that 
pharmacy benefit managers will save the Medicare Part D program over 
$900 billion in the next 10 years.\1\ If States fully utilized those 
same tools and capabilities, Medicaid could save more than $100 billion 
over the next 10 years.\2\
---------------------------------------------------------------------------
    \1\ Oliver Wyman, Savings Generated by Pharmacy Benefit Managers in 
the Part D Program, June 2017. Available at: http://
www.affordableprescriptiondrugs.org/app/uploads/2018/05/
resources_medicarepartd_report.pdf.
    \2\ UnitedHealth Group, Pharmacy Benefit Management Can Save 
Medicaid Drug Programs Over $100 Billion, March 2018. Available at: 
https://www.unitedhealthgroup.com/content/dam/UHG/PDF/2018/PBM-
Medicaid-Savings-Study040418.pdf.
---------------------------------------------------------------------------
               3. drug manufacturers are responsible for 
                  the high cost of prescription drugs
    Drug manufacturers have continued to increase the prices of their 
branded drugs. List prices have increased on the twenty most-prescribed 
brand drugs for seniors by an average of 12 percent for each of the 
past 5 years.\3\ And from 2017 to 2018, drug manufacturers raised the 
list prices on twenty drugs by more than 200 percent.\4\ In January 
2019, manufacturers increased prices yet again on 15 of the top 20 most 
utilized brand drugs. There appears to be no end in sight. The Centers 
for Medicare and Medicaid Services (CMS) estimates a faster rate of 
growth in prescription drugs than all other health care 
expenditures.\5\
---------------------------------------------------------------------------
    \3\ U.S. Committee on Homeland Security and Governmental Affairs, 
``Manufactured Crisis: How Devastating Drug Price Increases Are Harming 
America's Seniors,'' March 2018.
    \4\ Pharmacy Benefit Consultants Analysis, AWP Price Increases (12-
2016 to 12-2017), January 2017-March 2018.
    \5\ American Academy of Actuaries, March 2018.

    Drug manufacturers alone decide what list price to set for their 
branded products. If market conditions permit OptumRx to negotiate 
better prices for a particular branded product, then we do so. As a 
matter of economics, where there is no competition over a branded drug, 
or where a drug's ``exclusivity period'' is extended by anti-
competitive tactics, it is difficult to control price-gouging by 
---------------------------------------------------------------------------
manufacturers.

    There is no better example of the economic calculus driving 
manufacturers' drug-pricing decisions than ``specialty'' drugs. These 
drugs treat complex conditions like cancer, HIV, rheumatoid arthritis, 
immune disorders, and multiple sclerosis, and they often lack 
therapeutic equivalents. If a manufacturer sets a very high price for a 
specialty drug, it is very difficult to negotiate a better price, since 
that drug has no competing therapeutic equivalent.

    As a result, the prices of specialty drugs are spiraling out of 
control. At least 26 non-discounted specialty drugs cost in excess of 
$200,000 per year.\6\ These include Elaprase at $985,000 per year, 
Myalept at $889,000 per year, and Cinryze at $626,000 per year.\7\ 
Today, less than 2 percent of the population takes specialty drugs, yet 
those drugs will account for approximately 50 percent of total drug 
spending by 2022.\8\
---------------------------------------------------------------------------
    \6\ OptumRx Book of Business, January-March 2019.
    \7\ Ibid.
    \8\ IQVIA, Medicine Use and Spending in the U.S., April 2018. 
Available at: https://www.iqvia.com/institute/reports/medicine-use-and-
spending-in-the-us-review-of-2017-outlook-to-2022.

    Drug manufacturers not only set high prices for branded drugs; they 
regularly extend the lives of those patented products by using 
aggressive, anti-competitive tactics to delay the entry of cheaper 
generic alternatives into the marketplace. One such tactic involves 
obtaining new patents for products that are not actually new drugs. A 
recent academic paper found that ``78 percent of the drugs associated 
with new patents were not new drugs, but existing ones, and extending 
protection is particularly pronounced among blockbuster drugs.'' \9\ 
The study further found that ``Adding new patents and exclusivities to 
extend the protection cliff is particularly pronounced among 
blockbuster drugs. Of the roughly 100 best-selling drugs, more than 70 
percent had their protection extended at least once, with almost 50 
percent having the protection cliff extended more than once.'' \10\
---------------------------------------------------------------------------
    \9\ Professor Robin Feldman, ``May Your Drug Price Be Evergreen.'' 
Journal of Law and the Biosciences, December 2018. Available at: 
https://academic.oup.com/jlb/advance-article/doi/10.1093/jlb/lsy022/
5232981.
    \10\ Ibid.

    Drug manufacturers have also engaged in ``pay-for-delay'' tactics 
to avoid competition. For example, in November 2018, AbbVie entered 
into an agreement with Pfizer to keep Pfizer from marketing a generic 
version of AbbVie's top-selling Humira in the U.S. until 2023.\11\ This 
agreement represented AbbVie's seventh pay-for-delay deal with a would-
be competitor.\12\ This means that patients in the U.S. will continue 
to pay much higher prices for an additional 6 years after Humira's 
patent expires before a lower-priced, therapeutically equivalent drug 
is available. AbbVie has also secured more than 100 patents on this one 
drug.\13\ As a result of these tactics, the list price of Humira--a 
drug that was introduced in 2003--has increased by 78 percent over the 
last 4 years alone.\14\ Humira is now projected to generate annual 
revenues of nearly $20 billion--16 years after its launch.\15\
---------------------------------------------------------------------------
    \11\ Eric Sagonowsky, ``AbbVie inks Humira patent deal No. 7, 
delaying Pfizer's U.S. biosim launch until late 2023.'' Fierce Pharma, 
November 30, 2018. Available at: https://www.fiercepharma.com/pharma/
abbvie-inks-humira-patent-deal-no-7-delaying-pfizer-s-u-s-bio
sim-launch-until-late-2023.
    \12\ Ibid.
    \13\ Cynthia Koons, ``This Shield of Patents Protects the World's 
Best-Selling Drug.'' Bloomberg, September 7, 2017. Available at: 
https://www.bloomberg.com/news/articles/2017-09-07/this-shield-of-
patents-protects-the-world-s-best-selling-drug.
    \14\ OptumRx Book of Business, 2015-2019.
    \15\ Bob Herman, ``Humira sales approach $20 billion.'' Axios, 
January 25, 2019. Available at: https://www.axios.com/abbvie-humira-
2018-sales-20-billion-e4039176-baeb-44ff-b4fe-1b6300528
3b9.html.

  4. drug manufacturers are not helping solve the problem by blaming 
    others in the supply chain and offering so-called ``authorized 
generics'' that often result in net prices higher than the brand drugs 
                              they replace
    Manufacturers have blamed pharmacy benefit managers, health plans, 
and hospitals for high drug costs. They contend that the discounts or 
rebates we negotiate with them are the root cause of the problem. That 
is simply untrue.

    We have a proven track record of reducing net costs to our 
customers. We negotiate a discount when there are two or more competing 
brand drugs in the same therapeutic class. In those circumstances, we 
take advantage of the competitive market. We negotiate better prices 
with manufacturers, give preferred formulary status to the drug that 
offers the best price, and then we provide those savings to our 
customers and consumers. That is a formula for reducing costs, not 
increasing them.

    The data simply does not support the manufacturers' contrary 
assertion. If they were right, drug prices would be rising more steeply 
for the drugs on which we negotiate discounts. But the opposite is 
true. In fact, drug prices are rising the fastest in the area of 
specialty drugs, where due to the importance of the drugs and the lack 
of clinical alternatives, manufacturers are unwilling to negotiate a 
discount. It is no surprise, then, that CMS recently reported that in 
2016 and 2017 drug manufacturers raised prices the most on those drugs 
that have no discounts.\16\ The related assertion by brand 
manufacturers that discounts force them to increase list prices is 
simply an attempt to avoid accountability. If market conditions permit 
it, OptumRx harnesses the purchasing power of its customers to 
negotiate discounts.
---------------------------------------------------------------------------
    \16\ Sarah Karlin-Smith, Sarah Owermohle, and Janie Boschma, 
``Drugs with a single manufacturer drive Medicare, Medicaid spending 
increases, CMS says.'' Politico, March 14, 2019.

    Drug manufacturers have also responded to criticisms of the high 
prices they set for their products by introducing so-called 
``authorized generic'' versions of their higher-priced brand products. 
To be clear, these are not generic drugs. Their marketing and 
production is exclusively controlled and directed by the brand drug 
manufacturers. They do nothing to promote competition. Rather, in our 
experience, these so-called ``generics'' often result in higher overall 
---------------------------------------------------------------------------
cost when compared to the discounted price of the original brand drug.

    As an example, consider a hypothetical brand manufacturer that has 
set the list price for its brand drug at $100. OptumRx has successfully 
negotiated a $70 discount off that list price, resulting in a net 
overall cost of $30 for the brand drug. If the brand manufacturer 
announces a so-called ``authorized generic'' at a list price of $50, 
the list price may be lower, but the overall net price of the 
``generic'' is $20 higher than the brand drug. This may result in a 
lower cost-sharing obligation for some plan members in the short-term, 
but in the long-term it will be more expensive for plans and lead to 
higher overall drug costs for everyone, benefiting no one other than 
the manufacturers.
  5. sensible policy reforms that promote competition and value-based 
          payment models will help make drugs more affordable
    An effective intellectual property environment plays an 
indispensable role in both promoting drug discovery and ensuring 
innovations are affordable and sustainable. Today's intellectual 
property system does not work as intended. The most important step 
Congress can take to address the high cost of prescription drugs is to 
modernize the intellectual property system for the 21st century and 
eliminate drug manufacturers' ability to manipulate the patent and 
regulatory system and thereby prevent lower-cost generics and 
biosimilars from reaching consumers more quickly. Specifically, 
Congress should:

          Pass the bipartisan CREATES Act to end the manipulation by 
        drug manufacturers of the Risk Evaluation and Management 
        Strategies (REMS) program to block timely entry of generic 
        competition.

          Prohibit ``pay-for-delay'' settlements between manufacturers 
        that delay the market entry of lower-cost alternatives.

          Restrict ``ever-greening'' of patents in which drug 
        manufacturers make minor changes to their product, or to the 
        delivery technology for their product, to extend the patent 
        exclusivity period.

          Reduce the exclusivity period for brand and specialty drugs.

          Increase patent transparency for biologics (which are 
        essentially generic equivalents for expensive specialty drugs), 
        promote biosimilar competition, and bring needed biosimilar 
        treatments to market faster and at lower cost.

    Beyond patent law reform, there are also other policy solutions 
that will help lower the net price of drugs, eliminate market barriers, 
increase transparency, and promote true competition. In particular, the 
Federal Government should:

          Continue to support Food and Drug Administration (FDA) 
        reforms around biosimilars. Specifically, the FDA should adopt 
        reforms to release these products to the market more quickly 
        and should finalize guidance to promote substitution of these 
        products over expensive branded specialty products. As other 
        countries have shown, these two measures have been proven to 
        increase competition and lower drug prices.

          Finalize Proposed Rules that would modernize the Medicare 
        Part B and Part D programs by implementing utilization 
        management tools in Medicare Part B and enabling negotiation in 
        the six protected classes in Medicare Part D.

          Finalize a Proposed Rule that would enable Medicare and 
        Medicaid to use real-time benefits tools at the point of 
        prescribing to allow beneficiaries to have meaningful and 
        actionable information about out-of-pocket drug costs.

          Evaluate the entire prescription drug regulatory structure 
        to identify opportunities to advance value-based payments and 
        promote comparative effectiveness.

    The administration's proposed Safe Harbor Rule does not address the 
root cause of rising drug prices. In fact, according to actuaries at 
CMS, the Proposed Rule would increase premiums up to 25 percent for 
seniors and create a $40 billion windfall for drug manufacturers.

    If the administration intends to finalize the Proposed Rule, it 
should prevent the disruption of the existing and proven supply chain, 
and ensure that pharmacy benefit managers are explicitly authorized to 
facilitate discounts at the point of sale for seniors. Today, pharmacy 
benefit managers administer point-of-sale discounts, including for 
Medicare Part D, through proven, stable, secure, and highly efficient 
systems that have evolved through three decades of investment, 
innovation, and partnership with key stakeholders. Unless pharmacy 
benefit managers facilitate point-of-sale discounts, existing, 
negotiated drug discounts will be jeopardized, net prices will 
increase, and consumers will experience disruption.

    The Proposed Rule potentially would allow these discounts to be 
administered by wholesalers. A new, unregulated, and unproven system of 
wholesaler-based discounts and service fees to local pharmacies would 
be unworkable because:

          Wholesalers get paid more if drug prices are high.

          It would create a standing conflict of interest for 
        wholesalers whose subsidiaries help drug manufacturers 
        undermine formularies.

          There is no current Federal structure to regulate 
        wholesalers' administration of discounts, nor will CMS have 
        visibility to these discounts and service fees as it currently 
        does.

          Wholesalers lack the underlying claims data to facilitate 
        these transactions.

          Unlike Part D plans and pharmacy benefit managers, 
        wholesalers and drug manufacturers are not subject to prompt 
        pay laws.

    It is critically important to understand that drug manufacturers 
pay wholesalers based on list prices and are not subject to the U.S. 
Department of Health and Human Services' proposed Safe Harbor reforms. 
Because they are paid based on list prices, allowing wholesalers to 
begin administering point-of-sale discounts will recreate the very 
concern that Congress and the administration are attempting to address.

    We appreciate the opportunity to address the committee today, and 
share with you the meaningful solutions we are advancing to deliver 
value for consumers and bring down prescription drug costs. We are 
committed to doing our part to make prescription drugs more affordable 
for people and sustainable for the country. I would be pleased to 
answer any questions you have.

                                 ______
                                 
          Questions Submitted for the Record to John M. Prince
               Questions Submitted by Hon. Chuck Grassley
      collection, use, and sharing of personal health information
    Question. Consumers are becoming more and more concerned about the 
data collection and sharing practices of companies. While these issues 
have been most prevalent in the social media and tech industry, 
companies in the pharmaceutical supply chain also have access to 
tremendous amounts of sensitive, personal health information of the 
individuals they serve. For example, the company Livongo partners with 
CVS Caremark to provide low-cost or no-cost blood sugar meters to 
diabetic patients. The meters are always ``connected'' to Livongo's 
``Diabetes Response Specialists.'' As the company's website states, 
``When readings are out of range, our Diabetes Response Specialists 
call or text [the individual] within minutes.'' While these innovations 
may be highly beneficial for individuals in managing their health, it's 
also important for this committee to fully understand what types of 
information is collected, how or why it's stored or shared, and for 
what purposes PBMs themselves and other affiliated drug supply chain 
participants (such as insurers) use the information.

    Health information is extremely sensitive. It's the most personal 
of all the information we share. So I want to know more about each of 
your companies' data collection, sharing, and protection practices.

    Does your company collect and store health information from the 
end-users of the prescriptions you provide? For example, information or 
records of a diabetic individual's blood sugar levels.

    Answer. Yes, OptumRx collects and stores health information, 
consistent with applicable privacy laws, related to an individual's 
prescriptions when a pharmacy submits a claim for processing to our PBM 
or a member or provider submits a prior authorization for a 
prescription. Additionally, as part of certain clinical programs 
offered to customers by the PBM, and with the member's consent, OptumRx 
may also access information from an individual, such as a diabetic 
individual's glucose testing results.

    Question. Does your company make any treatment, cost, or coverage 
decisions based on the health information you collect from an 
individual?

    Answer. OptumRx does not make treatment decisions. Coverage 
decisions are made, on behalf of OptumRx's customers, based on the 
adjudication of the health information submitted by a pharmacy and also 
may be made based on health information submitted by an individual or 
their provider when a prior authorization is required by a health plan 
for a particular prescription.

    Answer. Does your company share health information with third 
parties? And, if so, does your company profit from that sharing?

    Answer. OptumRx, as a business associate to its customers, uses and 
shares data only as authorized by applicable law and its customer 
contracts. In addition to sharing data with and on behalf of its 
customers, OptumRx shares claims-related health information with 
providers about their patients as part of clinical programs. Health 
information may be shared with third party vendors of OptumRx in 
support of our PBM services pursuant to business associate agreements. 
OptumRx does not profit from the sharing of information with its 
vendors. OptumRx does have some arrangements to license de-identified 
data. Additionally, our pharmacies have service agreements with drug 
manufacturers that may involve the sharing of certain data in 
accordance with applicable law.

    Question. Do you believe customers are fully aware of your 
information collection and sharing practices?

    Answer. Yes.
  impact of vertical integration between pbms and insurance companies
    Question. The PBM industry has experienced significant 
consolidation within the past 10 years, which has contributed to 
concerns about the potential abuse of market power, barriers to market 
entry, and exclusionary practices. In 2012, for example, Express 
Scripts acquired Medco Health Solutions--a nearly $30 billion 
transaction that merged two of the country's three largest PBMs. More 
recently, PBMs are also vertically integrating with insurers/payers, 
reflected by the 2018 acquisitions of Express Scripts Holding Co. (a 
PBM) by Cigna Corp. (a payer) and of Aetna Inc. (a payer) by CVS Health 
Corp. As a result, the three largest PBMs are all vertically integrated 
with insurance companies. According to a report from the Kaiser Family 
Foundation, the two combined entities, along with UnitedHealth and 
Humana, will cover 71 percent of all Medicare Part D enrollees and 86 
percent of stand-alone drug plan enrollees. Vertical integration can 
result in increased efficiencies and consumer benefits. I can also, 
however, lead to higher barriers to entry for competition, leading to 
further consolidation. FDA Commissioner Scott Gottlieb recently warned 
that ``consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious. And the very 
complexity and opacity of these schemes help to conceal their corrosion 
on our system--and their impact on patients.''

    I'd like to talk about consolidation, including the recent 
integration of PBMs with insurance companies. Last year, I wrote to the 
Justice Department on this issue. It's reported that the three largest 
PBMs--who are before us today--now cover 71 percent of Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees.4 Such 
market power has raised concerns. FDA Commissioner Scott Gottlieb said, 
``the consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious.''

    I want to hear briefly from each of you on whether the PBM industry 
is competitive. For example, are there high barriers to entry for new 
competitors?

    Answer. The PBM industry is and will remain highly competitive. 
There are currently more than 60 PBMs actively competing for business 
from governments, Medicare Part D beneficiaries, unions, health plans, 
and large and small employers, and more players are entering the market 
on a regular basis.\1\ For example, Anthem started IngenioRx on March 
2, 2019, to replace its contract with Express Scripts.\2\ In April 
2018, Diplomat Pharmacy launched CastiaRx, a PBM with specialty 
pharmacy experience to manage pharmacy and medical benefit plans for 
small and midsize payers.\3\ New ventures such as WithMe Health, 
Amazon, and Haven have entered or are planning to enter the health 
benefits industry with disruptive business models.\4\ Not only can 
customers choose from numerous external PBM options, but some 
government payers and health plans also can (and do) perform their own 
PBM services internally.\5\
---------------------------------------------------------------------------
    \1\ ``Drug Pricing in America: A Prescription for Change, Part 
III,'' hearing before the Senate Committee on Finance, 116th Congress, 
video at 57:22-27, 57:48-54 (April 9, 2019) (live testimony of Steve 
Miller, M.D., executive vice president and chief clinical officer, 
Cigna Corporation; live testimony of Derica Rice, executive vice 
president, CVS Health and president, CVS Caremark), video available at 
https://www.finance.senate.gov/hearings/drug-pricing-in-america-a-
prescription-for-change-part-iii.
    \2\ Anthem, Inc., ``Anthem Reports Fourth Quarter and Full Year 
2018 Results Reflecting Strong Core Performance'' (January 3, 2019), 
available at https://ir.antheminc.com/news-releases/news-release-
details/anthem-reports-fourth-quarter-and-full-year-2018-
results?field_nir_
news_date_value[min]=2019; Anthem, Inc., ``Anthem Launches IngenioRx, 
New Pharmacy Benefits Manager'' (October 18, 2017), available at 
https://ir.antheminc.com/news-releases/news-release-details/anthem-
launches-ingeniorx-new-pharmacy-benefits-manager?field_nir_news_date_
value[min]=2019.
    \3\ Diplomat Pharmacy, Inc., ``Diplomat Launches CastiaRx, 
Industry-Leading Specialty Benefit Manager,'' PR Newswire (April 30, 
2018), https://www.prnewswire.com/news-releases/diplomat-launches-
castiarx-industry-leading-specialty-benefit-manager-300638735.html.
    \4\ Withme.health; Kevin Truong, ``Why a VC Frustrated by the PBM 
Industry Decided to Start an Alternative,'' MedCityNews.com (January 6, 
2019), https://medcitynews.com/2019/01/why-a-vc-frustrated-by-the-pbm-
industry-decided-to-start-an-alternative/?rf=1.
    \5\ Id. at 107 (``The various functions of pharmacy benefit 
management can be performed by different entities within the drug 
channel system: an employer, a health plan, the government, and an 
independent PBM company.''); id. at 115 (``Humana Pharmacy Solutions is 
the internal PBM of health insurer Humana. It manages traditional 
prescription drug coverage for Humana's individual and employer 
groups.'').

    At least eight PBMs serve major health plans and large employers, 
while others serve regional and smaller customers.\6\ It is OptumRx's 
experience when competing for business there are regularly at least 3-5 
competitors bidding for the same business.
---------------------------------------------------------------------------
    \6\ Adam J. Fein, ``The 2018 Economic Report on U.S. Pharmacies and 
Pharmacy Benefit Managers'' (February 2018) at p. 112 Ex. 75.

    Question. I'm also interested in what effect the most recent 
consolidations of PBMs and insurers has had on the bottom line for the 
---------------------------------------------------------------------------
government and consumer.

    Do these arrangements result in a lower cost to the government--as 
a payer--and the consumer? Please explain.

    Answer. OptumRx operates in a competitive industry where we must 
continually innovate, reduce the total cost of care, and improve 
outcomes to win new business and retain existing customers. Our 
synchronization of disparate, uncoordinated areas in health care allows 
us to focus on these goals. This results in lower costs to government 
and consumer payers, on average saving $1,600 per person annually.

    Over the next decade, PBMs project that they will save the Medicare 
Part D program over $900 billion.\7\ If States fully utilized those 
same tools and capabilities, over the same period, Medicaid could save 
more than $100 billion.\8\ This adds up to $1 trillion in savings for 
Federal and State governments and taxpayers as a direct result of PBMs.
---------------------------------------------------------------------------
    \7\ ``Drug Pricing in America: A Prescription for Change, Part 
III,'' hearing before the Senate Committee on Finance, 116th Congress 
(April 9, 2019) (prepared testimony of John M Prince, CEO, OptumRx) 
(citing Oliver Wyman, ``Savings Generated by Pharmacy Benefit Managers 
in the Medicare Part D Program'' (June 26, 2017), available at http://
www.
affordableprescriptiondrugs.org/app/uploads/2018/05/
resources_medicarepartd_report.pdf.
    \8\ Id.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
                           manufacturer money
    Question. What is the total dollar amount that you obtain from 
pharmaceutical manufacturers in any form such as rebates, fees, etc.?

    What is the total dollar amount that you remit to health plans?

    Answer. OptumRx does not collect an administrative fee from 
manufacturers for Medicare or Medicaid plans, or for drugs for which 
manufacturers provide no discount. The drugs in this latter category--
the majority of which are generics--constitute approximately 90 percent 
of all prescriptions processed by OptumRx. OptumRx's PBM business does 
not receive distribution, marketing or clinical case management fees.

    OptumRx makes pricing and rebate information available to 
customers, and reimbursement and out-of-pocket information available to 
pharmacies, subject to appropriate confidentiality provisions. The 
information is subject to independent audit by our customers. At the 
consumer level, OptumRx provides solutions to help consumers make 
better decisions, including our MyScript Finder solution, which 
provides members with easy to understand price and benefit 
transparency. OptumRx shares with its customers approximately 98 
percent of the discounts it obtains from manufacturers. We pass through 
an even greater percentage of the discounts we negotiate with 
manufacturers to our Medicare Part D and Medicaid plan customers. 
Discounts collected on behalf of Medicare Part D customers are reported 
to CMS, and discounts collected on behalf of Medicaid customers are 
disclosed to those customers for their reporting purposes.
                              biosimilars
    Question. Managed Care Organizations are on record as widely 
supportive of the potential of biosimilars. However, most MCOs have 
continued to support originator brand products and have not preferred 
and often excluded less expensive biosimilars. For example, most MCOs 
have kept Remicade (a treatment for Rheumatoid Arthritis and other 
diseases) as the preferred agent on their formularies, and in most 
cases to the exclusion of its biosimilar, Infliximab.

    Why do you tout support for biosimilars while, at the same time, 
inhibiting adoption of these less expensive products?

    Answer. OptumRx urges action to increase the availability and 
adoption of biosimilars and promote true competition. Specifically, 
Congress should modernize the intellectual property system for the 21st 
century and eliminate drug manufacturers' ability to manipulate the 
patent and regulatory system to prevent lower-cost generics and 
biosimilars from reaching consumers more quickly. We applaud the FDA's 
recent release of interchangeability guidance to promote substitution 
of these products over expensive branded specialty products. The FDA 
should continue to adopt reforms to release biosimilars to the market 
more quickly and promote adoption with prescribers and patients. As 
other countries' experiences have shown, these two measures have proven 
to increase competition and lower drug prices. There are 51 approved 
biosimilars in Europe. To date, however, in the U.S. the FDA has only 
approved 19 biosimilars, and of those only seven have launched to 
market.

    Not all biosimilars are less expensive products, but OptumRx 
promotes the inclusion of those biosimilars that are less expensive and 
that drive lower net costs on its standard formularies. On our Premium 
formulary effective July 1, 2019, for example, we prefer the Infliximab 
biosimilars Renflexis and Inflectra, and exclude Remicade; we also 
prefer the biosimilar Zarzio, a biosimilar that treats blood disorders, 
and exclude Amgen's biologic Neupogen.

    Question. HHS may broaden the scope of its proposed rule and 
eliminate rebates between Medicare Advantage plans and manufacturers 
for Part B drugs.

    Would this realign incentives to encourage preferred access for 
lower-cost drugs, such as biosimilars?

    What changes can we recommend/make to help you prefer lower-cost 
drugs, such as biosimilars, without rebates?

    Answer. We have heard the bipartisan call for reform and have taken 
strong action to reduce drug prices for millions of consumers. Last 
year, our company led the way in voluntarily making negotiated 
prescription drug discounts available at the point of sale for 
UnitedHealthcare's fully insured customers.

    Earlier this year, we took action to ensure the prescription drug 
discounts we negotiate with drug manufacturers will be passed directly 
to consumers at the point of sale for all new employer customers 
starting in 2020. Eligible consumers filling prescriptions on 
discounted brand drugs are seeing average savings of $130 per eligible 
prescription and increased drug adherence by as much as 16 percent. 
This action means real out-of-pocket savings for consumers who take 
brand drugs with discounts.

    These actions underscore that only PBMs have the capability to both 
negotiate meaningful discounts from drug manufacturers and ensure those 
savings flow directly to consumers at the pharmacy counter.

    Our action to provide point-of-sale discounts to employer-sponsored 
health plans demonstrates that the private sector is responsive and is 
taking a leadership role with its customers to reform the market. 
Legislation to eliminate rebates is unnecessary and could put at risk 
the ability to negotiate significant discounts from drug manufacturers. 
In fact, according to actuaries at CMS, even without broadening its 
scope, the CMS' Proposed Rebates Rule would increase premiums up to 25 
percent for seniors and create a $40 billion windfall for drug 
manufacturers. Broadening it to Medicare Advantage plans would likely 
exacerbate this problem.

    Congress should take action in ways that promote real competition 
to drive down the list prices of prescription drugs. The most important 
step Congress can take to address the high cost of prescription drugs 
is to modernize the intellectual property system for the 21st century 
and eliminate drug manufacturers' ability to manipulate the patent and 
regulatory system and prevent lower-cost generics and biosimilars from 
reaching consumers more quickly. Specifically, Congress should:

        Pass the bipartisan CREATES Act to end the manipulation by 
drug manufacturers of the Risk Evaluation and Management Strategies 
(REMS) program to block timely entry of generic competition.

        Prohibit ``pay-for-delay'' settlements between drug 
manufacturers that delay the market entry of lower-cost alternatives.

        Restrict ``ever-greening'' of patents in which drug 
manufacturers make minor changes to their product, or to the delivery 
technology for their product, to extend the patent exclusivity period.

        Reduce the exclusivity period for brand and specialty drugs.

        Increase patent transparency for biologics.

        Continue additional FDA reforms, such as the recently issued 
interchangeability guidance, to promote biosimilar competition to bring 
needed lower cost biosimilar treatments to market faster and promote 
broader adoption with prescribers and patients.

    Question. Why is there such a disparity in reimbursed pharmacy 
prices for specialty generic drugs in Part D (e.g., Imatinib)? Does 
ownership of specialty pharmacy influence your reimbursement decision?

    Answer. Preferred network pharmacy options deliver greater drug 
cost savings and value to customers and their members through our 
pharmacy care services model that is integrated with pharmacies that we 
operate. OptumRx is transparent to customers by disclosing our 
ownership of pharmacies, and customers ultimately choose the pharmacy 
network plan design that best meet their needs.

    We offer reasonable terms and conditions for participation in the 
various networks we offer on behalf of our Part D customers. While 
pricing may differ across networks, we seek to pay all of our Part D 
providers market competitive rates. All of our Part D plan customers 
have chosen pass-through pricing arrangements. We are not aware of any 
reimbursement anomalies related to Imatinib.

    Question. I'm concerned with the recent trend of PBM's allowing 
brand companies to ``pay for position'' on insurance formularies, which 
results in seniors losing access to lower-cost generics and 
biosimilars.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs?

    Answer. OptumRx manages pharmacy benefits on behalf of our 
customers, including self-insured employer groups, fully insured health 
plans, union funds, Medicare, Medicaid, and Federal and State 
government employee plans. In that role, we promote the use of 
clinically effective, low net-cost prescription drugs for consumers 
when medications are needed.

    This work starts with an independent, clinically based formulary 
design process. OptumRx's Pharmacy and Therapeutics (P&T) committee is 
comprised of independent physicians and pharmacists who evaluate 
existing and emerging drugs based on scientific evidence and review and 
appraise those drugs in an unbiased and evidence-based way. The P&T 
committee meets regularly, and its deliberations are open and 
transparent to OptumRx's customers and prospective customers.

    A drug's cost plays no role in the P&T committee's clinical review. 
Cost only becomes relevant after the P&T committee has identified drugs 
in a particular therapeutic class that are clinically effective and 
should be covered. If the P&T committee determines that more than one 
drug in a particular class is clinically effective, OptumRx will 
consider net cost--among other factors such as improving adherence, 
product availability, market share, potential disruption to patients, 
and negotiated price protection guarantees--when negotiating formulary 
placement for that therapeutic category.

    For about 90 percent of prescriptions processed, OptumRx can 
identify a generic drug in a particular therapeutic class, and give 
that drug preferred placement on its formulary over the more expensive 
branded (or ``on-patent'') drug. If there is no generic product 
available, there may still be other therapeutically equivalent branded 
alternatives. If so, OptumRx negotiates with those competing brand 
manufacturers to obtain discounts, and generally places the drugs that 
drive the lowest overall net cost for the therapeutic category in a 
preferred position on the formulary.

    OptumRx has been effective in driving utilization of clinically 
effective low-cost medications. OptumRx's negotiated network discounts 
and clinical tools are reducing annual drug costs, on average, by 
$1,600 per person for our customers. Even greater savings can be 
achieved by customers who implement evidence-based utilization 
management and other OptumRx clinical programs.

    OptumRx also ensures that these cost-savings go to our customers. 
Our customers receive approximately 98 percent of the value of the 
discounts we negotiate from drug manufacturers. The application of 
discounts is subject to audit and verification by an independent third-
party on behalf of any of our customers. In those limited instances 
where we retain some of the discount, it is because our customers have 
chosen to pay us that way. Additionally, as noted above, we have led 
the industry in promoting point-of-sale discounts for consumers.
                 delays and denials in cancer treatment
    Question. I have received stories of cancer patients facing delays 
or denials for their treatment due to PBM actions. Data shows that 
breast cancer patients who experienced a 3-month or more delay in 
treatment had a 12-percent lower 5-year survival rate compared with 
breast cancer patients with only a 0- to 3-month delay.

    What percent of patients experience a 14-day or longer delay in 
receiving an oral oncolytic prescribed by their oncologist?

    Answer. All of our prior authorization and step therapy criteria 
are evidence-based and approved by our or the applicable customer's 
independent P&T committee process. Step therapies are used to aid in 
affordability by encouraging patients to choose clinically appropriate 
lower net cost alternative therapies when such therapies exist. Prior 
authorizations help ensure treatment is clinically appropriate and 
aligned with FDA labeling, and assist in minimizing potential safety 
concerns. Time limits for completing the prior authorization process 
vary depending upon regulatory and contractual provisions and line of 
business. Once the member has initiated the prior authorization 
process, OptumRx renders and communicates its decision to the 
prescribing physician, utilizing criteria approved by OptumRx's or our 
customer's independent P&T committee, within 12 hours, on average. 
Delays in actually receiving the prescriptions may be caused by a 
number of factors outside of OptumRx's control.

    Question. What are the primary reasons patients experience delays 
or denials for their treatments?

    Answer. OptumRx strives to avoid all unnecessary delays, and 
maintains a streamlined process for seeking and obtaining necessary 
approvals for a course of treatment. When there are delays in this 
process, we have found the primary factor to be that the patient's 
physician fails to provide the necessary clinical information in a 
timely manner during a prior authorization review. The primary reason 
OptumRx, as the plan's administrator, would not approve coverage for a 
treatment is that the requested drug is deemed not clinically 
appropriate for treatment based on clinical criteria reviewed and 
approved by the independent physicians and pharmacists of OptumRx or 
the customer's independent P&T committee.

    Question. What percent of determinations to delay or deny treatment 
for cancer patients are made by an oncologist or health-care 
professional with oncology training?

    Answer. All criteria used to determine coverage of oncology 
therapies are reviewed and approved by the OptumRx independent P&T 
committee inclusive of practicing oncologists considered experts in the 
field or the customer's P&T committee.

    Question. Why is a PBM-owned specialty pharmacy better qualified to 
manage a cancer patient's adherence and side effects than a community 
cancer clinic with a medically integrated pharmacy?

    Answer. OptumRx has 67,000 pharmacies in our networks, including 
24,000 independent pharmacies. Our network pharmacies play a valuable 
role in providing convenient network access to our customers and their 
members. A customer may select a preferred network to help drive 
greater drug cost savings and improved outcomes. Our specialty 
pharmacies use a multi-faceted approach to clinical management which we 
have seen drive higher medication adherence rates and lower medical 
costs. OptumRx discloses its ownership of pharmacies, and customers 
ultimately choose the pharmacy network plan design that best meets 
their needs. In addition, a pharmacy that is connected and integrated 
with access to a more complete range of PBM data related to a patient's 
therapeutic regimen is able to identify additional opportunities to 
improve outcomes and lower health care costs.
              direct and indirect remuneration (dir) fees
    Question. Many community-based cancer clinics have established 
medically integrated pharmacies so patients can access their oral 
chemotherapy prescriptions or other medications at the point of care. 
These practices are often assessed large DIR which are based on certain 
quality measures targeted toward primary care.

    Shouldn't pharmacies be evaluated on the type of drug dispensed and 
disease managed rather than a one-size-fits-all approach?

    Answer. OptumRx operates a performance-based pharmacy network for 
Medicare Part D that rewards pharmacies with contingent compensation 
based on performance across quality metrics designed to improve 
outcomes in disease States including diabetes, hypertension and 
cholesterol. These metrics align with measures used by CMS to evaluate 
Part D plan performance under the CMS STAR ratings program.

    Question. Does assessing large DIR fees on medically integrated 
pharmacies drive patients to PBM-owned specialty pharmacies?

    Answer. Performance-based compensation structures for network 
pharmacies do not incentivize the patient to select any particular 
pharmacy.

    Question. According to CMS, from 2012 to 2017 PBMs imposed a 45,000 
percent increase in the amount of DIR fees pharmacies had to pay PBMs 
and PDPs under Part D, and revenues earned from these fees increased 
225 percent per year during this period. I thought PDPs and PBMs were 
supposed to pay pharmacies for dispensing drugs to patients. Why do 
pharmacies have to pay DIR fees to PBMs at all?

    Why are pharmacies forced to pay DIR and other fees to PBMs?

    Answer. Pharmacies are able to agree or decline to participate in 
performance-based pharmacy networks.

    Question. According to CMS, PBMs justify DIR fees as adjustments to 
improve quality. CMS also found that PBMs and PDPs withhold 
substantially more in reductions in payments than as rewards paid to 
pharmacies. Aren't so-called ``quality adjustments'' that collect more 
for ``poor performance'' than they pay out for ``high performance'' 
just another way for PBMs to collect even more money from pharmacies?

    Why do PBMs collect more in quality payment adjustment than they 
pay pharmacies under Part D?

    Answer. OptumRx does not retain the contingent performance amounts 
withheld from payments to pharmacies as part of its performance-based 
pharmacy network. Instead, all contingent performance amounts are 
either paid to the high performing pharmacies or are used by the Part D 
client to reduce the drug cost for pharmacies that do not meet the 
specified quality metrics.
                  formulary placement/generic tiering
    Question. In 2011, 71 percent of generic drugs in Part D were on 
the lowest tier designed for generics; by 2019, that number decreased 
to only 14 percent of generics. According to an Avalere study, this 
practice cost seniors $22 billion in higher out-of-pocket costs since 
2015, costs that could have been avoided through the proper formulary 
placement of lower-cost generics. This practice, known as ``paying for 
position,'' allows brands to block uptake of lower-cost generics and 
biosimilars, thereby unnecessarily increasing out-of-pocket costs for 
seniors.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs? Do you ever consider portfolio or bundled rebates with brand 
manufacturers?

    When you place generics on your formularies, do you place that 
generic favorably to brand products--in other words, on generic-only 
tiers?

    When a generic becomes available, do you place it on your 
formularies immediately?

    Answer. OptumRx manages pharmacy benefits on behalf of our 
customers, including self-insured employer groups, fully insured health 
plans, union funds, Medicare, Medicaid, and Federal and State 
government employee plans. In that role, we promote use of clinically 
effective, low net-cost prescription drugs for consumers when 
medications are needed.

    This work starts with an independent, clinically based formulary 
design process. Our customers may adopt OptumRx's standard formulary or 
choose instead to utilize their own custom formularies. OptumRx's 
Pharmacy and Therapeutics (P&T) committee is comprised of independent 
physicians and pharmacists who evaluate existing and emerging drugs 
based on scientific evidence, and review and appraise those drugs in an 
unbiased and evidence-based way. The P&T committee meets regularly, and 
its deliberations are open and transparent to OptumRx's customers and 
prospective customers. Part D customers may designate OptumRx's P&T 
committee or leverage their own committees for such purposes.

    A drug's cost plays no role in the P&T committee's clinical review. 
Cost only becomes relevant after the P&T committee has identified drugs 
in a particular therapeutic class that are clinically effective and 
should be covered. If the P&T committee determines that more than one 
drug in a particular class is clinically effective, OptumRx will 
consider net cost--among other factors such as improving adherence, 
product availability, market share, potential disruption to patients, 
and negotiated price protection guarantees--when negotiating formulary 
placement for that therapeutic category.

    For approximately 90 percent of prescriptions processed, OptumRx 
can identify a generic drug in a particular therapeutic class, and give 
that drug preferred placement on its formulary over the more expensive 
branded (or ``on-patent'') drug. If there is no generic product 
available, there may still be other therapeutically equivalent branded 
alternatives. If so, OptumRx negotiates with those competing brand 
manufacturers to obtain discounts, and generally places the drugs that 
drive the lowest overall net cost for the therapeutic category in a 
preferred position on the formulary.

    OptumRx has been effective in driving utilization of clinically 
effective low-cost medications. OptumRx's negotiated network discounts 
and clinical tools are reducing annual drug costs, on average, by 
$1,600 per person for our customers. Even greater savings can be 
achieved by customers who implement evidence-based utilization 
management and other OptumRx clinical programs.
                            optumrx specific
    Question. Attached is a new contract for 2020 that OptumRx sent to 
a community oncology practice in my State. It States that if CMS 
requires ``100 percent of pharmacy price concessions to be reported at 
the point of sale'' then OptumRx will reimburse pharmacy providers 10 
percent less for the drugs they dispense.

    Please tell me how and why OptumRx justifies reducing reimbursement 
on critical cancer drugs if CMS takes away your rebates?

    Answer. There is no relationship between drug manufacturer rebates 
and what OptumRx pays a participating network pharmacy for dispensing a 
particular drug.

    Question. What's the valid connection between rebates, which have 
been linked to fueling higher drug prices, and reimbursement to 
pharmacy providers of cancer medicines?

    Answer. There is no relationship between drug manufacturer rebates 
and what OptumRx pays a participating network pharmacy for dispensing a 
particular drug.

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                                 ______
                                 
                 Question Submitted by Hon. John Thune
    Question. You've shared your ability to leverage technology such as 
real-time benefit tools to help patients and providers understand drug 
costs at the point of prescribing, as well as how technology can be 
used to help identify opportunities to provide enhanced support and 
medication management for enrollees. What policies can we consider to 
incentivize greater uptake of these tools?

    Answer. We have a long history of developing consumer-friendly 
tools to lower out-of-pocket costs and make the health-care experience 
more satisfying and effective for patients. For example, one of these 
tools, PreCheck MyScript, is a digital platform that simplifies the 
drug prescribing experience by showing the prescribing physician what 
the patient's true out-of-pocket cost would be while the patient is 
still in the physician's office. PreCheck MyScript has helped lower 
consumer out-of-pocket costs by an average of $135 per prescription 
filled. This is just one of the ways we are working to simplify the 
system.

    OptumRx recently introduced another transparency tool for use by 
consumers directly. MyScriptFinder provides drug pricing, coverage, and 
therapeutic alternatives information for consumers to discuss with 
their physician through a mobile application or the Internet. The 
information includes point-of-sale drug pricing information for 
consumers filling prescriptions at an OptumRx network pharmacy.

    We recommend the committee advance solutions that provide 
meaningful transparency to consumers, providers, and customers while 
preserving the role of health plans and PBMs to reduce overall net 
costs by harnessing the competitive marketplace, including:

        Drive interoperability and end information blocking to enable 
seamless integration of data into the clinical workflow;

        Advance technology solutions for consumers and providers that 
promote visibility to the lowest price for any given medication; and

        Support business practices that ensure consumers pay low, 
transparent out-of-pocket costs at the pharmacy counter.

                                 ______
                                 
                Questions Submitted by Hon. Richard Burr
    Question. Pharmacy benefit managers (PBMs) offer a variety of 
contract designs to health insurance plans, allowing the insurer or 
client to choose the best structure for their customers. During the 
Finance Committee hearing on April 9, 2019 each witness stated that, in 
the contracts structured to allow for the passthrough of rebate dollars 
at the point of sale, PBMs do not keep any portion of the rebate. If 
the PBM does not keep a portion of the rebate, what type of revenue do 
PBMs receive from these contracts? What percent of your contracts are 
point of sale and what percent utilize a structure providing a 
percentage of the rebate back to the PBM?

    Answer. To meet varying customer needs, we offer flexibility in how 
we are compensated for our services. For example, customers can choose 
to compensate us through per-member per-month fees, administrative 
fees, or they may require us to retain a certain percentage of 
discounts we negotiate with drug manufacturers. If a customer allows us 
to retain a certain percentage of rebates, the specific amount we 
retain will be governed by the terms set forth in our customer 
agreement. Already today, approximately 98 percent of discounts we 
collect from drug manufacturers are passed on to our customers. 
Additionally, for years we have offered the capability to enable point-
of-sale discount solutions and in 2018 we were the first PBM to launch 
the solution at scale to ensure that consumers also directly benefit 
from our negotiations with drug manufacturers. By the end of 2019 we 
expect more than 9 million consumers will be eligible for these point-
of-sale discounts, and beginning January 1, 2020, we will expand this 
point-of-sale discount solution to all new employer-sponsored plans.

    Question. It is our understanding that contracts with 
pharmaceutical manufacturers may also take a variety of forms. In 
calendar years 2016, 2017 and 2018, what was the total dollar amount 
that you obtained from pharmaceutical manufacturers in any form such as 
rebates, fees, etc.? What is the total dollar amount that was passed on 
to health insurance plans with which you have an agreement or contract?

    Answer. OptumRx does not collect an administrative fee from 
manufacturers for Medicare or Medicaid plans, or for drugs for which 
manufacturers provide no discount. The drugs in this latter category--
the majority of which are generics--constitute approximately 90 percent 
of all prescriptions processed by OptumRx. OptumRx's PBM business does 
not receive distribution, marketing or clinical case management fees.

    OptumRx makes pricing and rebate information available to 
customers, and reimbursement and out-of-pocket information available to 
pharmacies, subject to appropriate confidentiality provisions. The 
information is subject to independent audit by our customers. At the 
consumer level, OptumRx provides solutions to help consumers make 
better decisions, including our MyScript Finder solution, which 
provides members with easy to understand price and benefit 
transparency. OptumRx shares with its clients approximately 98 percent 
of the discounts it obtains from manufacturers. We pass through an even 
greater percentage of the discounts we negotiate with manufacturers to 
our Medicare Part D and Medicaid plan customers. Discounts collected on 
behalf of Medicare Part D customers are reported to CMS, and discounts 
collected on behalf of Medicaid customers are disclosed to those 
customers for their reporting purposes.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. One challenge that I see, when considering the medical 
treatment marketplace, is that we have a new wave of life-saving 
treatments--of incredible cures we could never have dreamed of, even 10 
or 15 years ago--for which cost, by necessity, is going to be a major 
issue. You look, for instance, at a condition like sickle cell disease. 
For the average SCD patient who reaches age 45, lifetime treatment 
costs are at roughly $1 million--and there are complications that can 
make that figure even higher. Now that we see therapies coming down the 
pipeline that could erase those long-term costs and drastically improve 
the quality of life for sickle cell patients, the question becomes, how 
can our current payment systems adapt to--and absorb--the high costs 
necessary to bring treatments like these to market and to ensure that 
we continue to see innovations like these ones moving forward?

    And along the same lines, beyond creating some much-needed clarity 
around value-based arrangements--which I've been working with Senators 
Cassidy and Warner to accomplish legislatively--are there steps that 
Congress could take to facilitate these innovative payment models?

    Answer. We understand how important these treatments are for 
patients facing life-threatening illness. The availability of high cost 
gene therapies and cures are increasing, with list prices averaging 
$850,000 for such therapies. To date, five gene therapies have been 
approved by the Food and Drug Administration, and 20-45 additional gene 
therapies will be launched in the U.S. over the next 5 years. Thirty 
million Americans have some form of rare disease. If just five percent 
are treated at an average list price of $850,000, this would equal 
$1.275 trillion--four times the $330 billion the U.S. spends on all 
prescription drugs today.

    We recommend the committee advance the following policies to stem 
this approaching crisis:

        Require the Centers for Medicare and Medicaid Services to 
issue a National Coverage Determination on each high-cost therapy or 
cure.

        Use registries to assess the long-term health outcomes of each 
high-cost therapy or cure.

        Introduce a drug price inflation penalty tied to the Consumer 
Price Index, medical cost, or the Medicare growth rate in the 
catastrophic phase for all brand, biosimilar, and generic drug covered 
in Medicare Part B and Part D.

        Study risk mitigation options, such as stop loss programs, for 
extremely high-cost products.

        Modify Medicaid Best Price, Anti-Kickback Statute, and Stark 
requirements that currently impede the full use of value-based 
contracting for all drugs and devices.

    Question. I'm also interested in the role that technology can play 
in helping to drive down drug costs--as well as to increase medication 
adherence. Some estimates suggest that between 50 and 75 percent of 
patients don't take their medications as prescribed, and that one in 
five new prescriptions go unfilled. And study after study shows that 
cost is a key factor here. As a consequence, we see roughly 125,000 
deaths from non-adherence every year, along with more than $100 billion 
in excess costs to the health-care system.

    To what extent can technology help providers and patients to make 
more informed and cost-effective choices about prescriptions--and to 
then adhere to these prescriptions?

    Answer. New and emerging technology tools, such as real-time 
benefit check (OptumRx's version is known as PreCheck MyScript), are 
now delivering the most accurate cost information at one of the most 
critical stages of the prescription process--the provider's issuance of 
the prescription. These tools enable patients to have a much better 
understanding of the costs they will be facing when they go to get 
their medication at the pharmacy counter. More importantly, these tools 
can drive a critical conversation between patients and their provider 
about the cost of medication and the treatment options (e.g., switch to 
generics or therapeutic equivalent brands) that will best position the 
patient for long-term adherence and optimal condition treatment.

    Question. And maybe more to the point, to the extent that these 
technological tools are out there, what steps are you and your clients 
taking to encourage physicians and patients to use them?

    Answer. OptumRx is actively working with prescribers and other 
relevant stakeholders across the health-care system to promote adoption 
of these new tools. We are also working directly with providers to: (1) 
educate on the objectives of these tools; (2) understand how to best 
integrate these tools into prescriber's existing work flows; and (3) 
assess what further enhancements are needed to ensure maximum clarity 
and value for the provider/patient experience. Lastly, OptumRx is 
making similar tools available to patients. These patient-facing tools 
focus on price comparisons and the different options available for 
obtaining medications when patients directly inquire about medication 
costs. Information about medication choice is available to patients who 
contact OptumRx by phone, web, or mobile applications. We work to 
measure and manage adoption of these tools to ensure they are 
generating value and lowering cost.

                                 ______
                                 
                Questions Submitted by Hon. Bill Cassidy
    Question. Are there ever cases where a patient in your health plan 
or one of the health plans for whom you negotiate as a PBM pays more 
for a medicine than the plan spends on a net basis, when you reimburse 
the pharmacy for that same medicine? In those cases, what entity 
receives the benefit of the difference between the amount the patient 
pays and the net amount the plan pays?

    Answer. OptumRx does not believe this is currently taking place. 
OptumRx encourages its customers to give their members the benefit of 
its contracted network reimbursement rates if they are lower than the 
members' copayment amounts. However, if there are cases where the 
member copayment exceeds the contracted reimbursement rate, the 
pharmacy, not OptumRx as the PBM, generally retains the excess.

    Question. In calendar years 2015, 2016, and 2017, what percent of 
your revenue was from fees paid by plans, fees paid by manufacturers, 
other fees, pharmacy spread, or rebates? Same question as to profits. 
Of all revenue generated from part D contracts, what percent did you 
retain?

    Answer. OptumRx does not collect an administrative fee from 
manufacturers for Medicare or Medicaid plans, or for drugs for which 
manufacturers provide no discount. The drugs in this latter category--
the majority of which are generics--constitute approximately 90 percent 
of all prescriptions processed by OptumRx. OptumRx's PBM business does 
not receive distribution, marketing or clinical case management fees.

    OptumRx makes pricing and rebate information available to 
customers, and reimbursement and out-of-pocket information available to 
pharmacies, subject to appropriate confidentiality provisions. The 
information is subject to independent audit by our customers. At the 
consumer level, OptumRx provides solutions to help consumers make 
better decisions, including our MyScript Finder solution, which 
provides members with easy to understand price and benefit 
transparency. OptumRx shares with its clients approximately 98 percent 
of the discounts it obtains from manufacturers. We pass through an even 
greater percentage of the discounts we negotiate with manufacturers to 
our Medicare Part D and Medicaid plan customers. Discounts collected on 
behalf of Medicare Part D customers are reported to CMS, and discounts 
collected on behalf of Medicaid customers are disclosed to those 
customers for their reporting purposes.

    Part D revenue and retention information is reported to CMS. 
OptumRx does not generate any revenue in Part D via service fees.

    Question. Should a patient ever pay more out of pocket for a 
medicine than what you pay the pharmacy for that medicine?

    Answer. OptumRx encourages its customers to give their members the 
benefit of its contracted network reimbursement rates if they are lower 
than the members' copayment amounts. However, if there are cases where 
the member copayment exceeds the contracted reimbursement rate, the 
pharmacy, not OptumRx as the PBM, generally retains the excess.

    Question. A recent study shows that PBM revenue from fees has 
risen. Further, PBM's retained revenue as a percent of net retail drug 
spend has consistently increased. What do you attribute this increase 
to?

    Answer. OptumRx did not prepare or participate in the study 
referenced, nor can it comment on the data sources that formed the 
basis for the study. However, the increase in fee revenue may be 
attributable to customers increasingly choosing to keep all or a 
greater percentage of discounts, or deciding to move to a pass-through 
network arrangement and paying PBMs through administrative fees.

    Question. How are bona fide service fees established? What was your 
revenue generated in part D by bona fide fees in 2015, 2016, and 2017?

    Answer. OptumRx does not generate any revenue in Part D via service 
fees.

    Question. A Health Affairs article suggests plans may prefer paying 
PBMs using rebates instead of fees, as ``Using retained rebates to 
cover PBM costs in lieu of fees could artificially lower reported 
administrative costs and make it easier to meet government medical loss 
ratio (MLR) requirements.'' Is it true that paying the PBM a percent of 
rebates would keep that revenue from counting towards a plan's MLR?

    Answer. OptumRx reports 100 percent of rebates received on behalf 
of Part D plans so that Part D plans can accurately complete DIR 
reports filed with CMS. In the limited instances that a Part D plan 
allows OptumRx to retain a portion of rebates as compensation for 
services, the Part D plan must still report 100 percent of the rebates 
received on its DIR reports. While we do not have visibility to our 
Part D plan customers' MLR filings, we are not aware of any situations 
where a Part D plan has reported a PBM's retained rebates as 
administrative costs.

    Question. Would you support an industry-wide standard set of 
performance metrics by which a PBM would set its pharmacy contracts, 
which would be tailored based on regional patient populations, to give 
certainty for local pharmacies?

    Answer. OptumRx is open to evaluating proposals, with a focus on 
approaches that reduce health care costs, incentivize improved health 
outcomes and improve quality.

                                 ______
                                 
                Questions Submitted by Hon. Steve Daines
    Question. In Medicare Part D, beneficiaries' deductible and 
coinsurance payments are calculated based on the price negotiated 
between the PBM and the pharmacy.

    Does this take into account rebates and discounts the PBM 
negotiates separately with pharmaceutical manufacturers?

    If yes, what percentage of the time is this the case?

    In calendar years 2016, 2017, and 2018, what share of brand 
prescriptions covered by the Part D plans you contract with were filled 
in the deductible or required beneficiaries to pay coinsurance? What 
was the total amount beneficiaries spent out of pocket for those 
prescriptions? What would beneficiaries' total out-of-pocket spending 
have been under the same cost sharing structure if their payments were 
based on the net price to the Part D plan, inclusive of rebates and 
other price concessions, rather than the price negotiated between your 
PBM and the pharmacy?

    Answer. Virtually all brand prescriptions include a member cost 
share. CMS has specific requirements and processes to obtain 
appropriate data on beneficiary cost sharing. Plan sponsors, working 
with their PBM, submit the required data and information to CMS 
annually and as requested. We are not able to determine the amount of 
member cost share under hypothetical scenarios retroactively.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
                       spread pricing in medicaid
    Question. A PBM practice that has come up quite a bit recently is 
the practice of spread pricing. Spread pricing occurs when PBMs charge 
health plans more for prescription drugs than they actually reimburse 
pharmacies, and then pocket the different as profit.

    Do you engage in spread pricing practices?

    Answer. Clients choose how they want to pay OptumRx for its 
services. Some choose a pass-through model in which the client pays us 
an administrative fee for managing prescription claims. If our 
customers choose a traditional model, OptumRx bears the risk. Our 
clients pay us based on agreed-upon negotiated market rates, which may 
or may not be the same as the prices we have negotiated with our 
network pharmacies. Some customers prefer the certainty and stability 
that a traditional (or spread) model offers.

    Question. If yes, do you engage in such practices in Medicaid?

    Answer. Yes, when allowed by State law and if the customer chooses 
it.

    Question. If so, please list each State you operate in where you 
have a contract with a Medicaid managed care plan where you employ 
spread pricing.

    Answer. Arizona, California, Florida, Hawaii, Maryland, 
Massachusetts, Nebraska, New Mexico, New York, New Jersey, Oregon, 
Pennsylvania, Utah, Virginia, and Washington. State Medicaid plans are 
increasingly choosing to move to pass-through pricing arrangements.

    Question. List each Medicaid managed care plan you have contracts 
with where you employ spread pricing.

    Answer. See above.

    Question. Describe whether and how you disclose the use of such 
practices to the plans.

    Answer. OptumRx's contracts with customers describe the financial 
model the customer has chosen, whether traditional (spread) or pass-
through.

    Question. Describe whether you disclose such practices directly to 
the State.

    Answer. Except when contracting to provide services to a State's 
Medicaid Fee-for-Service program (as noted in the next response), 
OptumRx contracts with the various States' Medicaid Managed Care 
Organizations, rather than with State Medicaid departments directly. 
However, State Medicaid programs have access to those contracts.

    Question. List any States where you have direct contracts with the 
State Medicaid agency as a PBM for fee-for-service individuals.

    Answer. Arizona, Georgia, Indiana, Nevada, South Dakota, and 
Washington.
                             rebate demands
    Question. The use of rebates as a negotiating tool has led to 
problematic incentives in the prescription drug supply chain. For 
example, drug companies have argued that they increase list prices in 
response to demands from PBMs for high or increasing rebates.

    Does your company currently have, or has your company had since 
January 2013, any agreements with drug manufacturers that:

    Require equivalent rebates, even in the case of a drug for which 
the list price has been lowered?

    Answer. See explanation below.

    Question. Require advance notice of changes in the list price of 
drugs, including reductions or increases in list price?

    Answer. See explanation below.

    Question. If the answer to either of the above is yes, please 
provide details regarding each of these requirements in each instance 
in which they were in place: the required rebate amount or percent; the 
amount of notice required for list price change notifications, 
specifically for increases and decreases; and any penalties for 
noncompliance with rebate or notification requirements by the drug 
manufacturer.

    Answer. Our customers that are Part D plan sponsors consider 
contracted-for discounts when setting their premiums. Those premiums 
must be submitted with their bids to CMS seven months before each plan 
year starts. CMS holds plan sponsors to those premiums for the duration 
of their contracts. We believe it is important for plans to be able to 
calculate premiums with confidence. For this reason, OptumRx proposed a 
Part D contract amendment requesting either advance notice from a drug 
manufacturer of list price decreases in the middle of a plan year or, 
in the absence of advance notice, a commitment by the manufacturer to 
honor its contracted-for discounts for the entire plan year.

    If a manufacturer agreed to the terms of the proposed amendment, 
and then failed to provide the requested notice, it would be expected 
to maintain its contracted-for discounts for the duration of the plan 
year for which the discounts were negotiated to provide premium 
continuity and stability in the Part D market.
                            revenue sources
    Question. Please provide an annual breakdown of the following 
components of the revenue you received from drug manufacturers from 
January 1, 2013 through December 31, 2018: dollar amount and percent of 
revenue from rebates; dollar amount and percent of revenue from 
administrative fees; dollar amount and percent of revenue from 
distribution fees; dollar amount and percent of revenue from marketing 
fees; dollar amount and percent of revenue from clinical case 
management fees; and all other sources of revenue from manufacturers 
not listed above.

    Answer. OptumRx does not collect an administrative fee from 
manufacturers for Medicare or Medicaid plans, or for drugs for which 
manufacturers provide no discount. The drugs in this latter category--
the majority of which are generics--constitute approximately 90 percent 
of all prescriptions processed by OptumRx. OptumRx's PBM business does 
not receive distribution, marketing or clinical case management fees.

    OptumRx makes pricing and rebate information available to 
customers, and reimbursement and out-of-pocket information available to 
pharmacies, subject to appropriate confidentiality provisions. The 
information is subject to independent audit by our customers. At the 
consumer level, OptumRx provides solutions to help consumers make 
better decisions, including our MyScript Finder solution, which 
provides members with easy to understand price and benefit 
transparency. OptumRx shares with its customers approximately 98 
percent of the discounts it obtains from manufacturers. We pass through 
an even greater percentage of the discounts we negotiate with 
manufacturers to our Medicare Part D and Medicaid plan customers. 
Discounts collected on behalf of Medicare Part D customers are reported 
to CMS, and discounts collected on behalf of Medicaid customers are 
disclosed to those customers for their reporting purposes.

                           part d negotiation
    Question. The PBM market has changed dramatically over the past 
several years. Many Part D health plans also operate as PBMs, including 
your companies. While Part D has done a great job offering Medicare 
beneficiaries drug coverage they did not have access to before, Part D 
has not been successful at keeping up with the growing cost of 
medicines. PBMs and Part D plans claim they bargain to get lower 
prices, but the HHS Inspector General found that almost 4 in 10 brand 
name drugs in Part D offered no rebate or discount to Part D plans.

    Why have Part D plans been ineffective at bringing down the cost of 
almost half of brand-name medicines?

    Answer. Drug manufacturers alone set the price of prescription 
drugs. A 2018 research study from Visante found that for drugs that 
have no or decreasing rebates, prescription drug prices, set by drug 
manufacturers, continue to skyrocket. In Medicare Part D, prescription 
drugs with no rebates (roughly 40 percent of those prescribed) saw 
significant price hikes between 2012 and 2017. In Medicare Part B, 
where there are no PBM-negotiated rebates, drug manufacturers increased 
the prices of the 10 most-used drugs by a range of 16 to 74 percent.

    This research comes on the heels of a study by the Department of 
Health and Human Services (HHS) Office of the Inspector General, which 
similarly found that even after accounting for rebates, the prices of 
prescription drugs increased by 62 percent--a dramatic increase from 
2011 to 2015.

    CBO continues to conclude that the government would not be able to 
lower drug prices more effectively than the private sector. Drug 
manufacturers are increasing drug prices for one simple reason: a lack 
of meaningful competition allows them to do so. In the absence of 
competition, drug manufacturers often set exceptionally high prices. 
There is a vital role for Congress and the administration to play in 
addressing this important issue.

    OptumRx supports providing Part D plans with greater flexibility to 
negotiate discounts for drugs in the protected classes. Currently, Part 
D plans must cover substantially all drugs in six protected classes, 
including all drugs to treat cancer, depression, and HIV, many of which 
are costly specialty medicines. The current protected class policy 
limits the private sector's ability to negotiate meaningful savings on 
protected class brand drugs. Today in the commercial market, discounts 
for the same protected class drugs can have a negotiated discount of up 
to 30 percent compared to an average of a six percent discount on 
protected class drugs in Part D. Without sacrificing the availability 
of appropriate clinical alternatives, increased flexibility will better 
position Part D plans to derive cost savings for the Medicare program 
and for beneficiaries, not only through discounts, but also through the 
use of biosimilars and generic alternatives. We estimate these 
flexibilities specific to protected class drugs could drive savings of 
up to 50 percent.\9\
---------------------------------------------------------------------------
    \9\ UnitedHealth Group, Comment Letter on Contract Year (CY) 2020 
Medicare Advantage and Part D Drug Pricing Proposed Rule (CMS-4180-P) 
(January 25, 2019).

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Should the CREATES Act become law, what commitment can 
your company making to covering generics as soon as they are approved 
and passing those savings on to patients?

    Answer. OptumRx urges action to increase the availability of 
generics and promote true competition. The most important step Congress 
can take to address the high cost of prescription drugs is to modernize 
the intellectual property system for the 21st century and eliminate 
drug manufacturers' ability to manipulate the patent and regulatory 
system and thereby prevent lower-cost generics and biosimilars from 
reaching consumers more quickly. We support the CREATES Act becoming 
law to end the manipulation by drug manufacturers of the Risk 
Evaluation and Management Strategies (REMS) program to block timely 
entry of generic competition.

    Question. What are your concerns with point-of-sale rebates and 
what alternatives do you propose to such rebates to improve consumer 
savings at the pharmacy counter?

    Answer. We have heeded the call for change by taking direct action 
to ensure that the discounts we obtain directly lower consumers' out-
of-pocket costs at the pharmacy counter. Last year, we implemented a 
point-of-sale discount solution at scale for fully insured group 
customers so that consumers receive the benefit of discounts at the 
pharmacy counter. This action has already made nearly 6 million 
consumers eligible for point-of-sale discounts. Eligible consumers 
filling prescriptions on discounted brand drugs are seeing average 
savings of $130 per eligible prescription. We believe it can also 
improve prescription drug adherence by as much as 16 percent. By the 
end of 2019 we expect more than nine million consumers will be eligible 
for these point-of-sale discounts. In March of this year, we announced 
a decision to expand this point-of-sale discount solution to all new 
employer-sponsored plans beginning in January 2020. This action means 
real out-of-pocket savings for consumers at the pharmacy counter who 
take brand drugs with discounts.

    Question. What are the specific steps your company is taking to 
move PCSK9 inhibitors off the specialty tier in Medicare Part D and to 
fixed copay tiers given that prices went down by 60 percent and are no 
longer above the specialty tier threshold?

    Why haven't your plans moved it already, given that CMS allows 
plans to make positive mid-year formulary changes that improve patient 
access and affordability?

    Answer. After the independent P&T Committee assessment, OptumRx 
seeks to prefer the drugs that drive to the lowest net cost for the 
therapeutic category on its standard formularies. In addition to net 
cost, OptumRx considers other factors such as improving adherence, 
product availability, market share, potential disruption to patients, 
and negotiated price protection guarantees.

    Tiering of PCSK9 inhibitors is complicated by the fact that newer 
and older formulations may share unique coding attributes required by 
CMS that make differentiation in claims adjudication systems difficult. 
OptumRx expects that, given ongoing market price changes in the PCSK9 
category, tiering of PCSK9 inhibitors will change in the future.

                                 ______
                                 
             Questions Submitted by Hon. Benjamin L. Cardin
              drug rebate rule and higher part d premiums
    Question. In January, the Department of Health and Human Services 
released a proposal to reform prescription drug rebates paid by 
pharmaceutical manufacturers to pharmacy benefit managers under 
Medicare Part D. The OIG proposal attempts to ban most rebates by 
eliminating their regulatory protections and creating two new safe 
harbor provisions: one to expressly protect discounts applied directly 
at the point-of-sale (POS) for consumers, and another to protect 
certain service fees that manufacturers pay to PBMs for services 
furnished to health plans. The only service fees that would be 
permissible under the proposal are those that are fixed, and not based 
on a percentage of sales and not based on volume or the value of other 
business generated between the parties. The proposed rule was designed 
to address the Department's concerns with the current rebate system, 
which HHS believes rewards high list prices, discourages the use of 
generics and biosimilars, and does not reflect patient out-of-pocket 
costs. For consumers, this proposal may result in lower costs at the 
pharmacy counter, but Part D premiums may increase as a result.

    Could you explain which Part D beneficiaries could see savings on 
their drug costs at the pharmacy counter and which Part D beneficiaries 
could not see lower drug costs?

    Answer. Part D beneficiaries who are not currently taking 
medications, who take generic drugs, or who take non-rebated brand 
drugs would not be expected to benefit from the shift to point-of-sale 
discounts, although premiums would increase for all seniors in Medicare 
Part D. Further, CBO and OACT estimate that net prices in Part D for 
rebated products would increase.\10\
---------------------------------------------------------------------------
    \10\ Congressional Budget Office, ``Incorporating the Effects of 
the Proposed Rule on Safe Harbors for Pharmaceutical Rebates in CBO's 
Budget Projections--Supplemental Material for Updated Budget 
Projections: 2019 to 2029'' (May 2019), available at https://
www.cbo.gov/system/files/2019-05/55151-SupplementalMaterial.pdf; 
Centers for Medicare and Medicaid Services, Office of the Actuary 
Analysis on Proposed Safe Harbor Regulation (August 30, 2018), 
available at https://www.cms.gov/Research-Statistics-Data-and-Systems/
Research/ActuarialStudies/Downloads/
ProposedSafeHarborRegulationImpact.pdf.
---------------------------------------------------------------------------
    perverse incentive to place more expensive drugs on formularies
    Question. In a Senate Finance Committee hearing had a few weeks 
ago, many pharmaceutical companies argued that the current rebate 
structure incentivizes high list prices. These companies argue that the 
higher the list price of the drug, the greater the rebates, and 
therefore, the more profit the PBM earns. While contracts between PBMs, 
Part D Plans, and pharmaceutical companies require PBMs to pass through 
100 percent of the negotiated rebate back to insurance plans, I worry 
that this structure could incentivize PBMs to favor a more expensive 
drug on the formulary because they could get a higher rebate.

    Is there an incentive for a PBM to place a higher cost drug on the 
Part D formulary because the PBM receives a larger rebate for that more 
expensive drug? Why or why not?

    Answer. OptumRx promotes the use of clinically effective, low net-
cost prescription drugs. For Part D consumers electing an OptumRx 
standard formulary, this work starts with an independent, clinically 
based formulary design process. OptumRx's P&T committee is comprised of 
independent physicians and pharmacists who evaluate existing and 
emerging drugs based on scientific evidence, and review and appraise 
those drugs in an evidence-based way. A drug's cost plays no role in 
the P&T committee's clinical review. Cost only becomes relevant after 
the P&T committee has identified drugs in a particular therapeutic 
class that are clinically effective and should be covered.

    If the P&T committee determines that more than one drug in a 
particular class is clinically effective, OptumRx will consider net 
cost--among other factors such as improving adherence, product 
availability, market share, potential disruption to patients, and 
negotiated price protection guarantees--when negotiating formulary 
placement for that therapeutic category.

    For about 90 percent of prescriptions processed, OptumRx can 
identify a generic drug in a particular therapeutic class and give that 
drug preferred placement on its formulary over the more expensive 
branded (or ``on-patent'') drug. If there is no generic product 
available, there may still be other therapeutically equivalent branded 
alternatives. If so, OptumRx negotiates with those competing brand 
manufacturers to obtain discounts, and generally places the drugs that 
drive the lowest overall net cost for the therapeutic category in a 
preferred position on the formulary.

    OptumRx has been effective in driving utilization of clinically 
effective low-cost medications. OptumRx's negotiated network discounts 
and clinical tools are reducing annual drug costs, on average, by 
$1,600 per person for our customers. Even greater savings can be 
achieved by customers who implement evidence-based utilization 
management and other OptumRx clinical programs.
               six protected classes proposal and access
    Question. This past November, the Centers for Medicare and Medicaid 
Services released a proposed rule for 2020 to help tackle drug pricing. 
Among the proposed changes is one, which would alter the current rules, 
governing the ``six protected classes.'' The concept of the protected 
classes has been around since the launch of the Medicare Part D 
Program, and it was instituted to ensure that some of our most 
vulnerable patients would have access to their needed drugs by 
requiring formularies to cover nearly all protected drugs. These 
classes are anticonvulsants, antidepressants, antipsychotics, 
immunosuppressants, antiretrovirals, and antineoplastics.

    Some people have argued that these protected classes have led to 
higher drug prices because formularies are required to include this 
prescription coverage, and there are limited tools left to help lower 
prices. In an effort to increase competition, this proposed new rule 
would do a couple of different things. The first aspect of the 
administration's proposal would allow Part D sponsors to implement 
broader use of prior authorization and step therapy for protected class 
drugs, including to determine use for protected class indications. Any 
time there is a mention of plans using prior authorization or step 
therapy, there is an immediate concern of restricting patient access to 
needed drugs or medical services.

    Could you explain why your company would favor such utilization 
management tools like step therapy or prior authorization?

    Answer. All of our prior authorization and step therapy criteria 
are evidence-based and approved by our or the applicable customer's 
independent P&T committee process. Step therapies are used to aid in 
affordability by encouraging patients to choose clinically appropriate 
lower net cost alternative therapies when such therapies exist. Prior 
authorizations help ensure treatment is clinically appropriate and 
aligned with FDA labeling, and assist in minimizing potential safety 
concerns.

    Question. Do you believe there is a danger that using step therapy 
or prior authorization could possibly restrict patients from having 
access to medication that has been successful for them? Why or why not?

    Answer. All of our prior authorization and step therapy criteria 
are evidence-based and approved by our or the applicable customer's 
independent P&T committee process. The committee's assessment takes 
into account the risks associated with abrupt changes or switching of 
medications. Our formulary management program includes a formulary 
exception process and prior authorization process that allows a 
prescriber to request an alternate, appropriate medication when the 
medication identified as first line on the formulary is not appropriate 
for an individual patient. This process allows for a case-by-case 
review for individual patients.

    Question. If you were to use step therapy or prior authorization 
for drugs in the six protected classes, how would you ensure patients 
would continue to have access to their needed medications in one of the 
six protected classes?

    Answer. We would utilize our independent P&T committee to evaluate 
step therapy or prior authorization protocols in the six protected 
classes.

    Question. The second aspect of the administration proposed change 
to the six protected classes is the proposal to allow drug coverage 
formularies to exclude a protected class drug from a Part D formulary 
if the drug represents a new formulation of a single-sourced drug, 
regardless of whether the older formulation remains on the market. My 
understanding is that this administration is trying to target 
pharmaceutical companies who participate in the anticompetitive 
practice of ``evergreening.'' This is a practice where pharmaceutical 
companies make slight alterations to a drug's packaging, color, and 
formulation without an added or new benefit. However, we also 
understand that seemingly small changes to a drug can still make a big 
difference to patient well-being. We have heard from Maryland 
physicians that the creation of combination antiretroviral pills was a 
huge step forward in the fight against HIV. Even though these 
combination pills or extended release versions didn't have a new 
chemical formula, they made a world of difference to the HIV patients 
taking over a dozen pills a day. These vulnerable patients are 
obviously very concerned that they could lose coverage for new and 
better drugs, especially when their old drugs may no longer be 
available. HIV treatments have come a long way in the last few decades, 
and proper antiretroviral treatment is vital to ensuring an end to the 
HIV epidemic.

    Do you think the proposed rule anticipates a situation where a 
pharmaceutical company stops producing an older version of a drug when 
a new formulation is available, but the newer formulation is not 
covered by a Part D plan? Why or why not?

    Answer. In situations where no therapeutically equivalent 
alternatives were available, the new formulation would likely be put on 
formulary through the OptumRx P&T process, which would require 
formulary options for treatment of a condition. As such, the proposed 
rule should not lead to a situation where patients did not have access 
to a unique treatment option on formulary.

    Question. What would your company do to ensure that patients 
continue to have access to their medication in this situation?

    Answer. OptumRx would recommend a formulary that met CMS 
requirements and provided for good and appropriate treatment of a 
condition as validated by OptumRx's independent P&T committee. In a 
situation where an older formulation was no longer available and no 
therapeutic alternatives exist, the new formulation will be placed on 
formulary.
                       appeals process in general
    Question. Prior authorization and step therapy are some of the most 
commonly mentioned concerns from patient groups coming to talk to my 
office, second only patients' concerns about out-of-pocket costs. What 
has become especially striking in the past few weeks is the number of 
physicians explaining how they feel stymied by prior authorization 
restrictions by insurance plans. We have heard from one surgeon who 
argued for weeks with the insure to appeal a decision that had been 
made to deny a newer type of less-invasive surgery. Someone who was not 
a surgical expert made the denial. Eventually, his patient made the 
decision to stop waiting and opted for a far more invasive and 
dangerous procedure because it was covered by insurance. Other doctors 
talk about the hours they spend on the phone waiting to appeal a 
decision, only to be told they need to write an extensive report 
justifying their medical decision. While the physicians are waiting for 
a response, quite often there are patients suffering without their 
proper medications, without certain tests, or not getting the surgery 
that the expert recommends.

    With technology changing so rapidly, how do your companies ensure 
that you keep up with the medical and surgical experts and new 
research, so that your authorization decisions are in line with the 
most recent medical innovations and physician standards?

    Answer. All criteria used to make therapy authorization decisions 
are reviewed by the independent physicians and pharmacists who comprise 
OptumRx's or the applicable customer's independent P&T committee. These 
professionals evaluate existing and emerging drugs based on scientific 
evidence, and review and appraise those drugs in an unbiased and 
evidence-based way. The P&T committee conducts an annual review to 
ensure that its evaluation criteria are in line with the most recent 
medical innovations and clinical standards. The annual review process 
also engages additional independent external physician specialists to 
provide additional clinical insights and recommendations for the P&T 
committee to consider when making clinical determinations.
                 direct and indirect remuneration fees
    Question. I have heard from independent pharmacies in Maryland that 
have struggled with Pharmacy Benefit Managers and direct and indirect 
remuneration (DIR) fees. According to independent pharmacies, there are 
times when DIR fees are based on performance, and these fees range from 
$2-$7 for certain types of maintenance prescriptions and are often 
collected retroactively--weeks or even months after a prescription was 
filled. A PBM can take money back from the pharmacy when the pharmacies 
haven not met a PBM's performance standard. In these instances, the PBM 
claws back money and creates a situation where the pharmacy does not 
receive adequate reimbursement to cover its costs. As a result, DIR 
fees can be a significant financial loss to pharmacies and an 
additional cost burden to patients.

    Could you explain what performance measures are considered when 
determining a DIR fee?

    Answer. Our Medicare Part D health plan customers identify DIR 
strategies to improve clinical outcomes and affordability. We have the 
administrative flexibility to implement the strategies our customers 
identify. Performance measures generally include quality metrics 
designed to improve outcomes in disease States, including diabetes, 
hypertension, and cholesterol, which align with measures used by CMS to 
evaluate Part D plan performance under the CMS STAR ratings program.

    Question. How is that performance measure communicated to the 
pharmacy?

    Answer. Performance measures are communicated in writing as part of 
the Pharmacy Network Agreement between OptumRx and participating 
pharmacies, either directly or through their contracting entity such as 
a Pharmacy Services Administrative Organization (PSAO). In addition, 
OptumRx provides quarterly and year-end reporting about performance to 
improve quality to participating pharmacies.

    Question. How much does your company receive in DIR fees?

    Answer. With respect to OptumRx's performance-based pharmacy 
network, OptumRx does not retain any of the contingent performance 
amounts withheld from payments to pharmacies. All such contingent 
performance amounts are either paid to the high performing pharmacies, 
or are used by the Part D customers to reduce the drug cost for 
pharmacies that do not meet the specified quality metrics.

    Question. How much does your company receive in performance-related 
DIR fees?

    Answer. See response above.

    Question. Are those fees passed on to the consumer? If so, how?

    Answer. OptumRx's performance networks focus on activities that 
benefit consumers (such as increased adherence) and the health system 
as a whole by improving health outcomes and lowering health-care costs. 
Our Part D plan customers determine how to best use DIR amounts to 
lower overall costs and improve health outcomes.
                             drug shortages
    Question. Currently there are over 270 drugs in shortage. Drug 
shortages happen for many reasons such as manufacturing and quality 
problems, natural disasters, and inventory practices of wholesalers and 
pharmacies. Drug shortages cause harm to providers, hospitals, and most 
importantly patients. Pharmacists and providers must spend significant 
amounts of time on researching alternative drug treatments for the 
patient, which may not always be the most optimal therapies.

    As a pharmacy benefit manager, you have contractual agreements with 
pharmaceutical companies in order to place their drugs on a plan's 
formulary. While I understand that drug shortages happening in both the 
inpatient and outpatient settings, there may be a role PBMs can play in 
protecting patients.

    For the prescription drugs you negotiate to cover on a plan 
formulary, could you use your negotiating power to ensure a drug is 
available to a patient? Why or Why not?

    Answer. Drug shortages are often related to manufacturing and 
quality problems, natural disasters, and inventory practices of 
wholesalers and pharmacies. In these situations, drug availability is 
outside of OptumRx's control.

    Question. What do you do to ensure that patients have the drugs 
they need?

    Answer. OptumRx works closely with various suppliers to ensure that 
they have the supply needed to meet patient demand for prescriptions 
dispensed by affiliated pharmacies. Additionally, when drug shortages 
take place, OptumRx evaluates the medications and, if necessary, 
identifies clinically appropriate alternatives and communicates with 
consumers about the availability of those alternatives. This may take 
the form of suppressing utilization management criteria, such as step 
therapy or prior authorization, and/or moving alternative drugs to a 
more favorable tier until the shortage is resolved.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
                              biosimilars
    Question. During the hearing, each of you expressed support for 
biosimilars and most of you indicated you try and take advantage of 
available biosimilars to help lower costs. When I asked each of you to 
identify solutions to help ensure a robust biosimilar marketplace here 
in the U.S., most of you mentioned things Congress or the 
administration could do to help ensure uptake of biosimilars--from 
lowering the exclusivity period for biologics to finalizing guidance on 
interchangability at the FDA. However, none of you offered any 
solutions or ideas for what your company could do to help ensure timely 
uptake of biosimilars, a robust U.S. biosimilars market, and a 
resulting cost savings to patients to taxpayers.

    Most of the biosimilars currently approved and on the market in the 
U.S. are reimbursed through the medical benefit. What are the 
similarities and differences in how rebates are passed onto patients 
and providers in the medical benefit versus pharmacy benefit. In your 
answer, please describe these similarities and differences across each 
of your books of business (i.e., commercial, Medicare, Medicaid).

    Do any of your plans require the use of a higher list price, 
branded product over the use of a therapeutically equivalent lower list 
price generic or biosimilar product? Why? If a plan restricts the use 
of a biosimilar or generic product in lieu of an innovator or brand 
name product, do patients pay more out-of- pocket than they would if 
the biosimilar was preferred?

    Recognizing most biosimilars are paid for via medical benefit, 
please explain whether you use step-therapy to restrict access to 
biosimilars for your patients in any medical benefit you manage across 
each of your books of business (i.e., commercial, Medicare, Medicaid). 
What role do rebates playing in your consideration for patient access 
to biosimilars in each of these instances?

    How can and will your company help ensure a robust biosimilars 
market here in the U.S.?

    I have heard concerns that ``rebate walls'' are responsible for 
keeping new biosimilars off of formularies, where a manufacturer offers 
conditional rebates on a bundle of their products in order to incentive 
PBMs to exclude a new biosimilar competitor from their formularies. 
Have you ever decided to place a drug on a preferred tier because of 
the rebates you receive for other drugs from that manufacturer? If you 
do not do this, do you support this practice being carried out by your 
competitors?

    What more can and will you do to counteract efforts to rebate-block 
or bundle rebates to block biosimilar formulary placement? Will you 
commit to taking these actions as more biosimilars become available in 
Part D?

    Answer. OptumRx promotes the use of clinically effective, low net-
cost prescription drugs for consumers when medications are needed. This 
work starts with an independent, clinically based formulary design 
process. OptumRx's customers may adopt OptumRx's standard formulary or 
choose instead to utilize their own custom formularies.

    OptumRx's P&T committee is comprised of independent physicians and 
pharmacists who evaluate existing and emerging drugs based on 
scientific evidence, and review and appraise those drugs in an 
evidence-based way. A drug's cost plays no role in the P&T committee's 
clinical review. Cost only becomes relevant after the P&T committee has 
identified drugs in a particular therapeutic class that are clinically 
equivalent and should be covered.

    If the P&T committee determines that more than one drug in a 
particular class is clinically effective, OptumRx will consider net 
cost--among other factors such as improving adherence, product 
availability, market share, potential disruption to patients, and 
negotiated price protection guarantees--when negotiating formulary 
placement for that therapeutic category.

    For about 90 percent of prescriptions processed, OptumRx can 
identify a generic drug in a particular therapeutic class, and give 
that drug preferred placement on its formulary over the more expensive 
branded (or ``on-patent'') drug.

    OptumRx has been effective in driving utilization of clinically 
effective low-cost medications. OptumRx's negotiated network discounts 
and clinical tools are reducing annual drug costs, on average, by 
$1,600 per person for our customers. Even greater savings can be 
achieved by customers who implement evidence-based utilization 
management and other OptumRx clinical programs.

    Increasing the number of generic and biosimilars alternatives to 
branded drugs is key to increasing competition and lowering drug 
prices. OptumRx urges action to increase the availability of 
biosimilars and promote true competition. Specifically, Congress should 
modernize the intellectual property system for the 21st century and 
eliminate drug manufacturers' ability to manipulate the patent and 
regulatory system and thereby prevent lower-cost generics and 
biosimilars from reaching consumers more quickly. OptumRx applauds the 
FDA's recent release of interchangeability guidance to promote 
substitution of these products over expensive branded specialty 
products. The FDA should adopt reforms to release biosimilars to the 
market more quickly and to promote adoption by prescribers and 
consumers. As has been successfully done in many therapeutic categories 
outside of the U.S., these two measures have been proven to increase 
competition in the market and lead to lower drug prices provided that 
biosimilars are available and priced competitively, similar to generic 
drugs. There are 51 approved biosimilars in Europe. To date, however, 
in the U.S. the FDA has only approved 19 biosimilars, and of those only 
seven have launched to market.

    Not all biosimilars are less expensive products, but OptumRx 
promotes the inclusion of those biosimilars that are less expensive and 
drive lower net costs on its standard formularies, which can be adopted 
by our customers. On our Premium formulary effective July 1, 2019, for 
example, we prefer the Infliximab biosimilars Renflexis and Inflectra, 
and exclude Remicade; we also prefer the biosimilar Zarzio, a 
biosimilar that treats blood disorders, and exclude Amgen's biologic 
Neupogen.
                            rebates vs. fees
    Question. During the hearing, Senator Cassidy asked each of you 
about the trend in PBM contracting where a larger share of your 
reimbursement and payment is a result of ``fees'' which you are able to 
pocket, as opposed to ``rebates'' which must be passed back to the 
plan/consumer.

    Please define the word ``rebate.'' As part of your definition, 
please clarify whether or not you consider administrative fees, 
inflation payments, product discounts, prospective rebates, care 
management fees, procurement fees or any other type of fee or payment 
that isn't a retrospective rebate to be a rebate.

    Answer. The definition of ``rebate'' is negotiated and documented 
in each customer agreement. Such negotiated definitions typically 
either expressly include or exclude manufacturer administrative fees or 
price protection guarantee amounts (i.e., inflation payments) paid by 
drug manufacturers. They generally expressly exclude (i) any purchase 
discounts or concessions related to the purchase of pharmaceutical 
products to be dispensed by our pharmacies and (ii) fees paid by drug 
manufacturers for services or other products we provide directly to 
those drug manufacturers.

    Question. Please provide, across your books of business (i.e., 
commercial, Medicare, Medicaid), a list of each of the different types 
of rebates, charges, and/or fees that you incorporate into your 
contracts.

    Answer. The following discounts, fees, or other payments are 
contemplated by the rebate agreements we have negotiated with drug 
manufacturers on behalf of our payer customers: rebates or discounts; 
price protection guarantee or inflation payments; and manufacturer 
administrative fees.

    No manufacturer administrative fees are billed or collected on 
Medicare Part D, Medicaid Managed Care, CHIP, and QRPDP utilization.

    Additionally, certain rebate agreements contemplate the drug 
manufacturer reimbursing OptumRx for expenses incurred in notifying 
health care providers and impacted consumers in the event of a 
manufacturer drug recall (e.g., printing or postage costs) and payment 
of interest penalties for late rebate payments.

    Question. Rebates, by definition, must be passed along to the 
employer, health plan, or consumer. Please provide, across your books 
of business (i.e., commercial, Medicare, Medicaid), details on which of 
the rebates/fees detailed in my prior question are passed along to the 
consumer and/or plan and which are kept by the PBM.

    Answer. For all customers, the definition of ``rebates,'' and any 
rights we have to retain a portion of such rebates collected on behalf 
of our customers as compensation for our services to such customer, is 
negotiated and documented in each customer agreement. In some but not 
all of our agreements, customers may require that the value of any 
administrative fees paid by drug manufacturers to the PBMs for services 
provided by the PBM to the drug manufacturers be passed through, just 
like rebates, to the customer and/or directly to the member through 
point-of-sale discounts. Based on our agreements with our customers, 
our customers have chosen to receive approximately 98 percent of the 
value of the discounts we negotiate from drug manufacturers. The 
balance is used to compensate OptumRx for its services.
                             fiduciary duty
    Question. Each of you have argued that you are the one entity in 
the drug supply chain that exists to help lower the cost of 
prescription drugs. You claim that your value comes in saving 
taxpayers, plans, and consumers money.

    Would you be willing to accept a fiduciary standard in your 
contracts? In other words, do you believe you have a fiduciary duty to 
the plan or employer you contract with--to act in their best interest 
and not your own? If not, why not?

    Answer. OptumRx operates in a highly competitive industry where we 
must continually innovate, reduce the total cost of care, and improve 
clinical care to win new business and retain existing customers. We 
serve highly sophisticated customers that hold us accountable for 
delivering results and the lowest net cost.
                           paying pharmacists
    Question. Following a series of reports in The Columbus Dispatch, 
Ohio has taken a number of actions over the past year to crack down on 
several PBM practices. Efforts to date have included investigations, 
lawsuits, and policy changes to address the egregious use of spread-
pricing, alleged breaches of contract, accusations of anti-competitive 
behavior, a misuse of taxpayer dollars, and a general lack of 
transparency.

    PBMs are responsible for creating pharmacy networks, setting the 
price patients and health plans pay for prescription drugs, 
adjudicating claims, and reimbursing pharmacies for dispensed drugs. In 
addition, nearly all PBMs own proprietary pharmacies that directly 
compete with the PBM-created retail network. Do you design plans that 
incentivize or require patients to use a pharmacy owned by your 
affiliate over a competing retail pharmacy. If yes, do you believe this 
represents a conflict of interest? If yes, how do you ensure there is 
no resulting anticompetitive misuse of pharmacy and patient data?

    Answer. OptumRx does not believe its ownership of affiliated 
pharmacies creates a conflict of interest. Preferred network pharmacy 
options deliver greater drug cost savings and value to plans and their 
members through our pharmacy care services model that is integrated 
with pharmacies that we operate. OptumRx discloses its ownership of 
pharmacies to customers, and customers ultimately choose the pharmacy 
network plan design that best meets their needs.

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. Can you answer the following questions to help us 
understand the pharmacy benefit manager business model and how you make 
formulary decisions?

    What percent of rebates are passed to the consumer under Medicare 
Part D?

    Answer. OptumRx shares with its customers approximately 98 percent 
of the discounts it obtains from manufacturers based on the agreements 
we have negotiated with our customers. We pass through an even greater 
percentage of the discounts we negotiate with manufacturers to our 
Medicare Part D plan customers. Part D plans in turn use those 
discounts to help reduce premiums for consumers.

    Question. What percent of rebates are passed to the consumer in the 
private insurance market?

    Answer. We have heeded the call for change by taking direct action 
to ensure that the discounts we obtain directly lower consumers' out-
of-pocket costs at the pharmacy counter. Last year, we implemented a 
point-of-sale discount solution at scale for fully insured group 
customers so that consumers receive the benefit of discounts at the 
pharmacy counter. This action has already made nearly 6 million 
consumers eligible for point-of-sale discounts. Eligible consumers 
filling prescriptions on discounted brand drugs are seeing average 
savings of $130 per eligible prescription. We believe it can also 
improve prescription drug adherence by as much as 16 percent. By the 
end of 2019 we expect more than nine million consumers will be eligible 
for these point-of-sale discounts. In March of this year, we announced 
a decision to expand this point-of-sale discount solution to all new 
employer-sponsored plans beginning in January 2020. This action means 
real out-of-pocket savings for consumers at the pharmacy counter who 
take brand drugs with discounts.

    Question. Do you have any comments on how health plans should use 
their share of the rebates to lower drug prices for patients with high 
deductibles?

    Answer. We encourage our customers to make negotiated prescription 
drug discounts available at the point-of-sale, and indeed beginning 
January 1, 2020, we will not write new employer-based coverage that 
does not provide for point-of-sale discounts.

    Question. What is the process of deciding on which tier a generic 
will be placed in your formularies?

    Answer. OptumRx manages pharmacy benefits on behalf of our 
customers, including self-insured employer groups, fully insured health 
plans, union funds, Medicare, Medicaid, and Federal and State 
government employee plans. In that role, we promote use of clinically 
effective, low net-cost prescription drugs for consumers when 
medications are needed.

    This work starts with an independent, clinically based formulary 
design process. OptumRx's Pharmacy and Therapeutics (P&T) committee is 
comprised of independent physicians and pharmacists who evaluate 
existing and emerging drugs based on scientific evidence and review and 
appraise those drugs in an unbiased and evidence-based way. The P&T 
committee meets regularly, and its deliberations are open and 
transparent to OptumRx's customers and prospective customers.

    A drug's cost plays no role in the P&T committee's clinical review. 
Cost only becomes relevant after the P&T committee has identified drugs 
in a particular therapeutic class that are clinically effective and 
should be covered. If the P&T committee determines that more than one 
drug in a particular class is clinically effective, OptumRx will 
consider net cost--among other factors such as improving adherence, 
product availability, market share, potential disruption to patients, 
and negotiated price protection guarantees--when negotiating formulary 
placement for that therapeutic category.

    For approximately 90 percent of prescriptions processed, OptumRx 
can identify a generic drug in a particular therapeutic class, and give 
that drug preferred placement on its formulary over the more expensive 
branded (or ``on-patent'') drug. If there is no generic product 
available, there may still be other therapeutically equivalent branded 
alternatives. If so, OptumRx negotiates with those competing brand 
manufacturers to obtain discounts, and generally places the drugs that 
drive the lowest overall net cost for the therapeutic category in a 
preferred position on the formulary.

    OptumRx has been effective in driving utilization of clinically 
effective low-cost medications. OptumRx's negotiated network discounts 
and clinical tools are reducing annual drug costs, on average, by 
$1,600 per person for our customers. Even greater savings can be 
achieved by customers who implement evidence-based utilization 
management and other OptumRx clinical programs.

    OptumRx also ensures that these cost-savings go to our customers. 
Our customers receive approximately 98 percent of the value of the 
discounts we negotiate from drug manufacturers. The application of 
discounts is subject to audit and verification by an independent third-
party on behalf of any of our customers. In those limited instances in 
which we retain some of the discount, it is because our customers have 
chosen to pay us that way. Additionally, we have led the industry in 
promoting point-of-sale discounts for consumers.

    Question. Are generics always tiered as preferred (versus branded 
drugs)?

    Answer. For approximately 90 percent of prescriptions processed, 
OptumRx can identify a low-cost generic drug in a particular 
therapeutic class and give that drug preferred placement on its 
formulary over a more expensive branded (or ``on-patent'') drug. There 
are a small number of instances in which OptumRx may achieve a lower 
net cost for its customers and consumers by preferring a branded drug 
over its generic alternative. When that occurs, OptumRx works to ensure 
that these cost-savings go to our customers. Our customers receive 
approximately 98 percent of the value of the discounts we negotiate 
from drug manufacturers.

    Question. How quickly are generics placed on formularies once FDA 
clears them?

    Answer. Generics are generally added to our standard formularies 
shortly after launch. Generics do not get reviewed by OptumRx's P&T 
committee since the FDA's approval signifies that it has determined 
that the generic has the same active ingredients as the brand and is 
determined to be a bioequivalent of the brand. There are a small number 
of instances in which OptumRx may achieve a lower net cost for its 
customers and consumers by preferring a branded drug over its generic 
alternative. When that occurs, OptumRx works to ensures that these 
cost-savings go to our customers. Our customers receive approximately 
98 percent of the value of the discounts we negotiate from drug 
manufacturers.

    Question. Given the struggles we hear about patients accessing 
insulin, what measures are you taking to ensure that diabetes products 
and different types of insulin are placed on a preferred tier when 
establishing a formulary?

    Answer. In large part because OptumRx has insulin on its High 
Deductible Health Plan (HDHP) preventive drug list, and encourages its 
customers to do the same, we have helped our customers keep Out-of-
Pocket (OOP) costs low for insulin products. Indeed, 76 percent of our 
customers' enrollees who need insulin pay nothing at the pharmacy 
counter, or pay only a fixed copay. Due to policy terms, including the 
fact that insulin is on OptumRx's HDHP preventive drug list, the 
average OOP cost for a 30-day supply of insulin is approximately $41 
per month for our commercial plan and Medicare enrollees, which is less 
than eight percent of the average list price for major insulin 
products.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
               transparency, rebates, and spread pricing
    Question. During the hearing, I asked an initial question on spread 
pricing and wanted to follow up here. According to the Centers for 
Medicare and Medicaid Services (CMS), total gross spending in 2017 on 
prescription drugs was $154.9 billion in Medicare Part D, $30.4 billion 
in Part B, and $67.6 billion in Medicaid.

    One of the main challenges in lowering the price of prescription 
drugs is that there is a disturbing lack of transparency all along the 
supply chain, from research and development to what the patient is 
expected to pay at the counter. Further, the out-of-pocket costs for 
drugs varies greatly and unpredictably from patient to patient. That is 
why Senate Special Committee on Aging Chairwoman Collins and I 
introduced legislation that would codify the Drug Spending Dashboards 
at the CMS. The dashboards provide cost and spending information for 
drugs in the Medicaid, Medicare Part B, and Medicare Part D programs. 
With regards to transparency in the prescription drug supply chain, 
please provide answers to the following questions.

    Is it the policy and practice of your company to negotiate with 
drug manufacturers in good faith and obtain the best and lowest prices 
possible for patients and American taxpayers?

    Answer. Yes. We would not win new business or retain current 
customers if we did not negotiate the best possible prices. PBMs are 
the only entity in the supply chain working to drive down costs for 
patients and American taxpayers.

    Question. Is it the policy and practice of your company that 
patients, providers, researchers, policymakers, and the American people 
in general, know how taxpayer dollars are being spent in the Medicare 
and Medicaid programs?

    Answer. Yes.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by manufacturer list price; rebate 
paid by the manufacturer to you (the PBM); the amount reimbursed to 
pharmacies by the PBM; and the amount insured and uninsured patients 
pay out of pocket, before coupons, discounts, and other forms of 
patient assistance offered at the point of sale?

    If so, please provide useful and easily accessible links to where 
policymakers and the public can find such information. If not, please 
disclose how much each drug you work with clients to provide costs, 
broken down by manufacturer list price; rebate paid by the manufacturer 
to you (the PBM); the amount reimbursed to pharmacies by the PBM; and 
the amount insured and uninsured patients pay out of pocket, before 
coupons, discounts, and other forms of patient assistance offered at 
the point of sale

    Answer. OptumRx makes pricing and discount information available to 
customers, and reimbursement and out-of-pocket information available to 
pharmacies, subject to appropriate confidentiality provisions. At the 
consumer level, OptumRx provides solutions to help consumers make 
better decisions, including our MyScript Finder solution, which 
provides members with easy to understand price and benefit 
transparency. OptumRx shares approximately 98 percent of all discounts 
it negotiates with its customers in accordance with the applicable 
agreements. Pharmacy reimbursement figures vary widely based upon the 
drugs at issue and applicable pharmacy network provisions. Dollars paid 
via patient assistance programs such as discount cards and coupons are 
often not known to OptumRx.

    Question. Please provide a list of actions your company has taken 
to ensure that pharmacists are enabled and allowed to communicate to 
patients how they can pay the lowest out-of-pocket cost possible for 
their prescription drugs.

    Answer. OptumRx does not have gag clauses in pharmacy contracts 
that prevent a pharmacist from communicating with patients how they can 
pay the lowest out-of-pocket cost possible for their prescription 
drugs. Our pharmacy contracts require pharmacies to accurately submit 
their usual and customary cash prices to OptumRx. We use this 
information when the claim is processed to help ensure the beneficiary 
is paying the lowest cost at the pharmacy. OptumRx complies with the 
``Patient Right to Know Drug Prices Act'' and the ``Know the Lowest 
Price Act of 2018.''

                                 ______
                                 
     Prepared Statement of Derica Rice, Executive Vice President, 
                CVS Health; and President, CVS Caremark
    Chairman Grassley, Ranking Member Wyden, and members of the 
committee, thank you for the opportunity to join you today.

    My name is Derica Rice, and I am an executive vice president at CVS 
Health and president of CVS Caremark. I joined CVS Health because I 
believe in the company's vision of helping patients on their path to 
better health. We want to make health care more accessible, more 
affordable and improve health outcomes for the communities we serve.

    We have long been at the forefront of putting our patients' health 
first and improving the public health of our communities, through 
company-wide initiatives such as removing tobacco from our stores and 
waging a multi-front fight against the opioid epidemic. We provide 
millions of dollars in charitable support to free clinics and community 
health centers--the organizations reaching our Nation's most vulnerable 
populations with the care that they need. And it is why, at CVS Health, 
we decided to stop selling tobacco products more than 4 years ago--even 
at the cost of $2 billion in annual sales revenue.

    And our purpose--helping people on their path to better health--is 
what drives us to provide more affordable, accessible, and effective 
health care, and to deliver better health outcomes, at a lower cost. 
Never has our work been more important than today. The rising cost of 
health care and prescription drugs affects every household in this 
Nation and are critical issues for consumers and policy makers. Our job 
is to work with the employers, unions, and government programs we serve 
to ensure that when their members get to the pharmacy counter, they get 
medicines they need at the lowest possible cost. As drug prices 
increase and consumers shoulder more of the burden, we believe we can, 
and we must, do more to ensure affordable care.

    In the spirit of our common goal of reducing health-care costs for 
consumers and the overall system, I'm here today to share what we, as 
CVS Caremark, are doing to directly reduce consumers' out-of-pocket 
costs at the pharmacy counter, and to discuss polices that would help 
further advance that agenda. Our goal as a pharmacy benefit manager 
(PBM) is simple: to reduce costs and improve health outcomes. We do 
this by negotiating discounts with manufacturers, designing formularies 
that encourage the use of generics and biosimilars, and creating new 
tools to help bring escalating drug prices under control.

    Our work on behalf of our clients to deliver the lowest cost 
medicines and the best possible outcomes helps them maintain a healthy 
workforce at an affordable price. Over the last 3 years (2016-2018), we 
have saved our clients $141 billion in drug costs. At the same time, in 
2018 alone, 44 percent of our clients saw their net prescription drug 
prices decline and 85 percent of our members utilizing their 
prescription benefit spent less than $300 on their prescriptions.

    Despite this, we recognize that consumers are often faced with 
challenging out-of-pocket costs, so we at CVS Health continue to 
develop solutions to help lower how much they spend on prescription 
drugs. Manufacturers alone set the price of their medications. What we 
do is create value for the employers, health plans and government 
programs we serve in four key ways:

    First, we negotiate the lowest cost possible on behalf of our 
clients and foster competition among drug manufacturers when more than 
one clinically equivalent drug is available.

    Second, we encourage the use of generics and lower-cost biosimilars 
because they are proven to improve adherence and outcomes, while also 
lowering costs. Our research shows that use of generics actually 
improves outcomes and saves lives, largely because they are more 
affordable for patients and therefore increase patient adherence to 
their medicines.

    Third, we help reduce drug costs by providing physicians with 
information that enables them to prescribe the most cost-effective and 
clinically appropriate medications for their patients. That means 
prescribers can see the actual cost of the drug to the member and up to 
five potentially lower-cost options, and make informed decisions that 
can help save their patients money. We have also made dramatic strides 
in reducing the administrative burden for providers and patients by 
broadening availability of electronic tools to help with prescription 
management like mobile and online prescription scheduling and reminders 
on refills.

    Fourth, we have developed additional tools to help bring escalating 
drug prices under control. We recently announced our Guaranteed Net 
Cost pricing model, a new pricing option that provides our clients with 
a guaranteed price for retail, mail and specialty drug products, 
regardless of product or price inflation. This heightens our focus on 
the lowest actual cost of the drug and under this model 100 percent of 
the rebates are passed through.

    Rebates are not secret or hidden payments to PBMs--our clients have 
full visibility into the amount of the rebates we secure. Over ninety-
eight percent of these discounts are passed directly to plan sponsors, 
who typically use them to reduce premiums and other costs for their 
members.

    Pharmaceutical manufacturers insist that drug price increases are 
driven by rebates. This is simply not true. If that was the case, 
rebates and list prices should be highly correlated. To the contrary, 
data show that in many cases list prices are increasing faster for 
drugs with smaller rebates than for medications with substantial 
rebates.

    We believe strongly that our PBM tools bring tremendous savings and 
value to the clients we serve. We focus every day on delivering the 
value our clients expect and easing the burden of high drug prices for 
their members. To help consumers manage their out-of-pocket costs, we 
were among the first to introduce rebates at the point-of-sale in the 
commercial market, enabling our clients to pass along the value of 
negotiated rebates on branded drugs to their members at the pharmacy 
counter. Currently, almost 10 million of our clients' members are in 
plans offering these savings.

    Two years ago, the administration raised the idea of point-of-sale 
rebates in the Medicare Part D program. Given our goal of keeping out-
of-pocket costs lower for American seniors, we were the first Medicare 
Part D plan to offer point-of-sale rebates through our SilverScript 
Allure plan--which leaves the choice to individual beneficiaries as to 
what plan best serves their needs.

    We have encouraged clients, particularly those who offer a high-
deductible health plan, to offer benefit plans similar to what we at 
CVS Health provide our own employees. Our covered employees have point-
of-sale rebates while they are in the deductible phase, in addition to 
zero-dollar copays for medications that prevent disease. This includes 
not only generic medications that may prevent the onset of chronic 
conditions but also some key brand drugs like insulin. We believe 
point-of-sale rebates combined with a zero-dollar copay preventive drug 
list are effective in reducing high out-of-pocket costs for members in 
high deductible health plans and help increase adherence which improves 
health outcomes and keeps costs down. At the end of the day, however, 
we believe in the value of providing choices. A one-size-fits-all 
approach that limits choice would not be appropriate for every health 
plan and their beneficiaries.

    For patients in high-deductible plans with a health savings 
account, using a preventive drug list to make medications for common 
chronic conditions available at a zero-dollar copay can lead to better 
adherence and significant cost savings. As I mentioned, we take this 
approach with our own employees. CVS Health fully pays for certain 
drugs, including a number of generic medications, for its covered 
employees and dependents under the preventive drug list even before 
they meet their deductible. This has improved our generic dispensing 
rate, reducing costs for both our employees and CVS Health.

    As a health-care company, we place a high priority on preventive 
care, and medication adherence is a key component of achieving better 
health outcomes for patients. Our metrics for preventive drug regimens 
for conditions such as hypertension, hyperlipidemia, heart failure, 
diabetes, asthma/COPD and depression show that health-care costs for 
patients with these conditions are reduced when they take their 
medications as prescribed. For example, for patients with congestive 
heart failure, CVS Health found that they spend nearly $8,000 less per 
year by adhering to their medication.

    We continue to develop additional innovations to help bring 
escalating drug prices and costs under control, especially for chronic 
conditions.

    CVS Health has taken a condition-specific approach through our 
Transform Care programs to help manage chronic conditions effectively, 
preventing wherever possible more serious adverse events, and improving 
clinical outcomes, reducing hospitalizations, emergency care and 
overall costs. We also have announced an initiative to improve chronic 
kidney disease and dialysis. Not only are we creating new tools to 
better identify and manage kidney disease, we are also working to 
provide more home dialysis, which studies have shown leads to increased 
satisfaction and better outcomes in appropriate patients.

    And most recently, we opened our new HealthHUB locations to help 
elevate the store into a convenient neighborhood health care 
destination that brings easier access to better care at a lower cost. 
With personalized support programs and MinuteClinic services, the 
HealthHUB teams are focused on improving care for patients managing 
chronic conditions, with a focus on recommending next best clinical 
actions and driving medical cost savings. This concept combines the 
best of today's CVS Pharmacy with the future of accessible, low-cost 
health services and offers trusted advice.

    In addition to developing these unique and innovative delivery 
system reforms, we have launched patient-centered programs to help 
consumers save money and increase price transparency across multiple 
points of care, thus giving our members far greater access to more 
affordable drugs.

    As we've interacted with consumers, they have told us that they 
want to know whether their drug is covered and what their out-of-pocket 
costs are going to be. So, we now provide member-specific information 
in the doctor's office, at the pharmacy counter and directly to 
consumers on their phones and online. We call this real-time benefits. 
That means prescribers can see the actual cost of the drug to the 
member based on their current coverage, and up to five potentially 
lower-cost options, enabling them to make informed decisions and help 
patients save money while improving their care.

    Real-time prescription benefits information is integrated directly 
into the pharmacist's existing workflow, making it easy for them to 
engage CVS Caremark members about potentially lower-cost alternatives, 
based on the member's specific formulary coverage. Additionally, our 
approximately 30,000 CVS pharmacists can use our proprietary search 
tool, Rx Savings Finder, to quickly identify available savings 
opportunities for customers.

    And customers can use our app and online tool, which lets members 
check and compare prescription drug prices on their computer, phone or 
other devices. In addition to being able to request refills and view 
their prescription history, members are able to use the app to see what 
their out-of-pocket costs for a specific medication will be and find 
lower-cost alternatives to talk about with their doctor or pharmacist. 
More than 230,000 searches per month are conducted in this tool.

    But as much as we have been able to accomplish, we also understand 
that more must be done. Because of the rise of high deductible health 
plans without adequate coverage for preventive drugs, consumers 
sometimes do not see the benefit of the discounts PBMs negotiate from 
manufacturers at the pharmacy counter, especially in their deductible 
phase if they are enrolled in a plan without point-of-sale rebates.

    As many of you noted in the last hearing, often there is limited to 
no competition on drugs because of the myriad manipulative practices in 
our patent system that prevent competition from coming to market and 
restrict the FDA from advancing policies that can speed adoption of 
biosimilars and generics. We support the FDA's focus on bringing more 
lower-cost alternatives to market faster. We also support many of the 
policies proposed by members of this committee, including the chairman 
and Ranking Member Wyden, that would bring more competition to the 
market, create more transparency, and limit out-of-pocket expenses for 
seniors.

    We have identified specific policy solutions that could lower drug 
costs as Congress and the administration consider the range of 
solutions and next steps.

    First, we believe Medicare and Medicaid programs should be able to 
utilize the full breadth of tools that are used in the private 
marketplace, including for the plans that cover members of Congress and 
Federal employees.

    We also believe Congress should require the adoption of real-time 
benefits to give doctors and patients transparency and information on 
lower-cost options when the prescription is written.

    We support transparency proposals, such as the one recently 
introduced by a bipartisan group of Senators on this committee to make 
the amount of rebates collected and passed through that is now shared 
with CMS available to MedPAC and MACPAC as well.

    We think Medicare should also encourage Part D providers to include 
a point-of-sale rebate option in their plan bids. Point-of-sale rebate 
plans do not make sense for everyone, which is why we oppose mandating 
it for all plans. But it should be an available option for the seniors 
who are facing higher drug costs, so they have the opportunity to 
choose a point-of-sale rebate plan if it works for them.

    We believe Congress should enact an out-of-pocket spending cap for 
Medicare beneficiaries and change the reinsurance component of Medicare 
Part D in keeping with what MedPAC has recommended.

    Changing the rules governing health savings accounts, or HSAs, by 
giving plans the ability to offer more coverage prior to the deductible 
being met would make a big difference for consumers. Currently, plans 
paired with HSAs are unable to offer first-dollar coverage of services 
such as chronic condition management. Medications may only be covered 
prior to the deductible being met if they are preventive, and the 
government has taken a very limited position on what is considered 
preventive.

    We support policies, including legislation led by members of this 
committee, to allow first-dollar coverage of all preventive 
medications, as well as treatment for chronic disease. This one change 
could immediately lower out-of-pocket costs for millions of Americans, 
while saving the health care system billions of dollars by improving 
medication adherence and preventing future costs.

    We support increased access to generics and biosimilars. 
Biosimilars have the potential to save the health system $54 billion 
over 10 years, but we need more of them on the market. In the European 
Union, 53 biosimilars have been approved, while only 17 have been 
approved in the United States and most of them are not on the market. 
We encourage the administration to finalize interchangeability guidance 
to improve competition in the biologic market.

    Additionally, we support efforts to address anti-competitive 
behavior. CVS Health is a longstanding supporter of the CREATES Act, 
and we thank Chairman Grassley for his leadership on this issue. The 
CREATES Act would address cases where brand manufacturers abuse safety 
protocols to keep generic and biosimilar competitors off the market.

    We also support ending ``pay-for-delay,'' a tactic that allows 
brand manufacturers to pay generic competitors to keep products off the 
market and extend market exclusivity.

    As you know, the Office of Inspector General at HHS recently 
proposed a rule that would require any discount we negotiate for 
Medicare Part D plans and Medicaid Managed Care Organizations to be 
applied at the pharmacy counter, in effect, providing 100-percent 
point-of-sale rebates. We fully support the administration's objectives 
to lower drug prices and out-of-pocket costs for consumers. However, we 
found that under the proposed rule, if finalized, approximately 15 
percent of beneficiaries would benefit, approximately another 15 
percent may benefit, and approximately 70 percent of beneficiaries 
would have higher costs in increased premiums--increases that would be 
higher than any savings they see at the pharmacy counter.

    At a time when consumers want more choices, this rule mandates 100-
percent point-of-sale rebates as the only option. It might be right for 
some patients, but it will raise health-care costs across the board 
while only benefiting a small minority of patients. The question for 
policymakers is whether the positives of such a system outweigh the 
negatives. From our perspective, they do not.

    Today, we pass along effectively 100 percent of the rebates to 
Medicare Part D plans, which use them, in general, to lower plan 
premiums, reducing costs for both beneficiaries and the government. 
This is a tremendously successful program in not only providing a 
needed benefit to seniors but keeping premium costs to beneficiaries 
stable. The CMS actuaries indicate that the proposed rule would upend 
this stability by increasing premiums by 19 percent initially and by 25 
percent after the impacts have been fully incorporated into the plans' 
costs. If these changes are implemented some seniors will either decide 
to drop current Part D coverage or sign up for coverage only when they 
are faced with high costs, thereby incurring a penalty.

    If rebates are forced at point-of-sale only, it could also undercut 
the negotiating power of PBMs to advocate for lower prices from the 
drug manufacturers by making competitively sensitive discount 
information widely available, therefore reducing manufacturer 
willingness to provide deep, differentiated discounts. This will likely 
lead to higher net drug prices.

    Unfortunately, nothing in this proposal would require drug 
manufacturers to lower drug prices by the rebate amounts that exist 
today. In fact, the proposed rule provides drug manufacturers with two 
windfalls. The CMS actuaries' analysis estimates that manufacturers 
will keep 15 percent of the rebates they currently pass along as higher 
net drug prices, and second, that manufacturers will pay as much as 
$39.8 billion less over 10 years in lower discount payments in the 
coverage gap of Part D.

    While we oppose the proposed rule, CVS Health is proactively 
working with pharmaceutical manufacturers to ensure that the potential 
effects of this rule would not have a negative financial impact on Part 
D plans and beneficiaries. In March 2019, we sent a letter to leading 
drug companies asking them not to increase their net prices for 
prescription drugs as a result of the rule, which could cause increases 
in premiums and out-of-pockets costs for Part D beneficiaries.

    We appreciate this committee's attention and work on the 
challenging issue of drug pricing. And, Mr. Chairman, aligned with your 
leadership, we continue to advocate for policies that foster 
competition, lower consumer costs and restrain anti-competitive 
behavior. We look forward to continuing to work with you and every 
member of this committee.

    Thank you again for the opportunity to testify, and I am happy to 
answer any questions.

                                 ______
                                 
           Questions Submitted for the Record to Derica Rice
               Questions Submitted by Hon. Chuck Grassley
      collection, use, and sharing of personal health information
    Question. Consumers are becoming more and more concerned about the 
data collection and sharing practices of companies. While these issues 
have been most prevalent in the social media and tech industry, 
companies in the pharmaceutical supply chain also have access to 
tremendous amounts of sensitive, personal health information of the 
individuals they serve. For example, the company Livongo partners with 
CVS Caremark to provide low-cost or no-cost blood sugar meters to 
diabetic patients. The meters are always ``connected'' to Livongo's 
``Diabetes Response Specialists.'' As the company's website states, 
``When readings are out of range, our Diabetes Response Specialists 
call or text [the individual] within minutes.'' While these innovations 
may be highly beneficial for individuals in managing their health, it's 
also important for this committee to fully understand what types of 
information is collected, how or why it's stored or shared, and for 
what purposes PBMs themselves and other affiliated drug supply chain 
participants (such as insurers) use the information.

    Health information is extremely sensitive. It's the most personal 
of all the information we share. So I want to know more about each of 
your companies' data collection, sharing, and protection practices.

    Does your company collect and store health information from the 
end-users of the prescriptions you provide? For example, information or 
records of a diabetic individual's blood sugar levels.

    Answer. We do collect limited data on members' drug utilization and 
outcomes in order to help our members manage their health. This can 
include adherence data and other forms of patient tracking to ensure 
that prescribed medicines are having their intended effects.

    Question. Does your company make any treatment, cost, or coverage 
decisions based on the health information you collect from an 
individual?

    Answer. We do not. We occasionally have prior authorization or step 
therapy requirements that a patient must meet before being authorized 
for costly medications, and we may retain that data.

    Question. Does your company share health information with third 
parties? And, if so, does your company profit from that sharing?

    Answer. CVS Caremark does share information with business 
associates in compliance with the Health Insurance Portability and 
Accountability Act (HIPAA) and applicable State laws. We do not 
monetize Personally Identifiable Health Information (PHI), but do 
monetize some anonymized data similar to other companies that cannot be 
used to identify or track individuals.

    Question. Do you believe customers are fully aware of your 
information collection and sharing practices?

    Answer. We inform all CVS Caremark clients of our data collection 
and sharing practices. Individual members have access to and receive 
CVS Caremark's Notice of Privacy Practices. For CVS Caremark websites 
and mobile applications, the applicable Privacy Policy is available to 
all users.
  impact of vertical integration between pbms and insurance companies
    Question. The PBM industry has experienced significant 
consolidation within the past 10 years, which has contributed to 
concerns about the potential abuse of market power, barriers to market 
entry, and exclusionary practices. In 2012, for example, Express 
Scripts acquired Medco Health Solutions--a nearly $30 billion 
transaction that merged two of the country's three largest PBMs.\1\ 
More recently, PBMs are also vertically integrating with insurers/
payers, reflected by the 2018 acquisitions of Express Scripts Holding 
Co. (a PBM) by Cigna Corp. (a payer) and of Aetna Inc. (a payer) by CVS 
Health Corp. As a result, the three largest PBMs are all vertically 
integrated with insurance companies. According to a report from the 
Kaiser Family Foundation, the two combined entities, along with 
UnitedHealth and Humana, will cover 71 percent of all Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees.\2\ 
Vertical integration can result in increased efficiencies and consumer 
benefits. I can also, however, lead to higher barriers to entry for 
competition, leading to further consolidation. FDA Commissioner Scott 
Gottlieb recently warned that ``consolidation and market concentration 
make the rebating and contracting schemes [of PBMs] all that more 
pernicious. And the very complexity and opacity of these schemes help 
to conceal their corrosion on our system--and their impact on 
patients.''\3\
---------------------------------------------------------------------------
    \1\ See ``FTC Closes Eight-Month Investigation of Express Scripts, 
Inc.'s Proposed Acquisition of Pharmacy Benefits Manager Medco Health 
Solutions, Inc.,'' Federal Trade Commission (April 2, 2012), available 
at https://www.ftc.gov/news-events/press-releases/2012/04/ftc-closes-
eight-month-investigation-express-scripts-incs.
    \2\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.
    \3\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients'' (Mar. 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.htm.

    I'd like to talk about consolidation, including the recent 
integration of PBMs with insurance companies. Last year, I wrote to the 
Justice Department on this issue. It's reported that the three largest 
PBMs--who are before us today--now cover 71 percent of Medicare Part D 
enrollees and 86 percent of stand-alone drug plan enrollees.\4\ Such 
market power has raised concerns. FDA Commissioner Scott Gottlieb said, 
``the consolidation and market concentration make the rebating and 
contracting schemes [of PBMs] all that more pernicious.''\5\
---------------------------------------------------------------------------
    \4\ Juliette Cubanski, Anthony Damico, and Tricia Neuman, 
``Medicare Part D in 2018: The Latest on Enrollment, Premiums, and Cost 
Sharing'' (May 17, 2018), available at https://www.kff.org/medicare/
issue-brief/medicare-part-d-in-2018-the-latest-on-enrollment-premiums-
and-cost-sharing/.
    \5\ FDA Commissioner Scott Gottlieb, M.D., ``Capturing the Benefits 
of Competition for Patients'' (Mar. 7, 2018), available at https://
www.fda.gov/NewsEvents/Speeches/ucm599833.htm.

    I want to hear briefly from you on whether the PBM industry is 
competitive. For example, are there high barriers to entry for new 
---------------------------------------------------------------------------
competitors?

    Answer. The PBM industry is an intensely competitive market which 
has driven down prices for millions of Americans and for the 
businesses, unions and government programs that PBMs serve. PBMs 
compete against one another to obtain the lowest prices possible from 
the drug manufacturers and promote access to generic drugs and 
biosimilars which helps to keep costs down. In addition to providing 
services on the client side, they also build competing pharmacy 
networks and work to reduce wasteful spending, fraud and abuse within 
the system. As a result, PBMs save money for patients on prescription 
drug and related medical costs--an average of $941 annually. In fact, 
the FTC has described the market in which PBMs operate as ``competitive 
. . . characterized by numerous, vigorous competitors who are expanding 
and winning business from traditional market leaders.'' A variety of 
different PBMs offer businesses, labor, consumers and government a 
variety of choices when considering options for best managing their 
pharmacy benefit. HHS recently indicated that the estimate there are 
approximately 60 PBMs currently operating in the United States.

    Question. I'm also interested in what effect the most recent 
consolidations of PBMs and insurers has had on the bottom line for the 
government and consumer.

    Do these arrangements result in a lower cost to the government--as 
a payer--and the consumer? Please explain.

    Answer. In terms of what the CVS Health acquisition of Aetna has 
set out to do for the consumer experience, as a combined company we are 
working to connect consumers with the powerful health resources of CVS 
Health in communities across the country and Aetna's network of 
providers to help remove barriers to high quality care. We are also 
building a lasting relationship with consumers, making it easier for 
consumers to access the information, resources and services they need 
to achieve their best health.

    We believe that access is a critical component of building a 
simpler and more responsive and affordable health care experience for 
consumers. We have already seen that new products and services 
developed by the combined company are becoming available to the health 
care marketplace, regardless of one's insurer, pharmacy benefit manager 
(PBM) or pharmacy of choice. While we cannot speak to every transaction 
in the health space, we believe that by fully integrating Aetna and CVS 
Health, we can develop new ways to engage consumers in their total 
health and wellness through personal contacts and deeper collaboration 
with their primary care physicians. As a result, we expect patients 
will benefit from earlier interventions and better-connected care, 
leading to improved health outcomes and lower medical costs.

                                 ______
                                 
                Questions Submitted by Hon. John Cornyn
                           manufacturer money
    Question. What is the total dollar amount that you obtain from 
pharmaceutical manufacturers in any form such as rebates, fees, etc.?

    Answer. Through negotiations with drug manufacturers and other PBM 
programs, from 2016-2018, CVS Caremark has saved its clients more than 
$141 billion in pharmacy spend, including the delivery of $67 billion 
in rebates to clients and their members. We pass through 100 percent of 
rebates for Medicare and about 98 percent of rebates for clients in our 
other lines of business.

    Question. What is the total dollar amount that you remit to health 
plans?

    Answer. From 2016-2018, CVS Caremark has saved its clients more 
than $141 billion in pharmacy spend, including the delivery of $67 
billion in rebates to clients and their members. Over the last 3 years 
we've kept drug price growth nearly flat, saving our clients and their 
members more than $141 billion as a result of PBM management, a 30-
percent cost avoidance on pharmacy spend. Last year, 44 percent of our 
clients saw a decline in their prescription drug prices. Our client 
arrangements typically include additional fees for services that the 
client asks us to provide, in particular, managing and improving 
patient adherence since improving adherence to medication is one of the 
best ways to manage chronic conditions and keep costs down. In 2018, 
Caremark passed through $300 million to our clients in the form of 
rebates.
                              biosimilars
    Question. Managed Care Organizations are on record as widely 
supportive of the potential of biosimilars. However, most MCOs have 
continued to support originator brand products and have not preferred 
and often excluded less expensive biosimilars. For example, most MCOs 
have kept Remicade (a treatment for rheumatoid arthritis and other 
diseases) as the preferred agent on their formularies, and in most 
cases to the exclusion of its biosimilar, Infliximab.

    Why do you tout support for biosimilars while, at the same time, 
inhibiting adoption of these less expensive products?

    Answer. We support the development of biosimilars, and believe they 
are a critical piece of lowering drug costs for patients and our 
clients. With regards to specific formulary decisions, we prefer 
products that provide the lowest net cost for our clients. While a 
biosimilar may have a lower list price, it is important that they 
compete on total costs with the brand to create savings for patients 
and plans.

    Question. HHS may broaden the scope of its proposed rule and 
eliminate rebates between Medicare Advantage plans and manufacturers 
for Part B drugs.

    Would this realign incentives to encourage preferred access for 
lower-cost drugs, such as biosimilars?

    Answer. We do not believe this would advantage biosimilars. 
Eliminating rebates would not lower the net cost of the drug, and may, 
in fact, increase drug costs.

    Question. What changes can we recommend/make to help you prefer 
lower-cost drugs, such as biosimilars, without rebates?

    Answer. Creating an environment that allows for biosimilars to 
provide a lower net cost than their competitors is critical. We 
therefore urge you to focus on barriers to entry of biosimilars, such 
as brand evergreening that make the development of generics and 
biosimilars more costly. If it is less costly to bring a competitor to 
market generics and biosimilars will have the flexibility to provide 
larger discounts on their products.

    Question. Why is there such a disparity in reimbursed pharmacy 
prices for specialty generic drugs in Part D (e.g., Imatinib)? Does 
ownership of specialty pharmacy influence your reimbursement decision?

    Answer. Reimbursement for specific products varies by client based 
on their contract with Caremark. However, CVS's ownership of our 
specialty pharmacy does not influence our reimbursement decisions. All 
plans in Part D use transparent pricing with their PBMs for pharmacy 
reimbursement.

    Question. I'm concerned with the recent trend of PBM's allowing 
brand companies to ``pay for position'' on insurance formularies, which 
results in seniors losing access to lower-cost generics and 
biosimilars.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs?

    Answer. We may exclude a generic or biosimilar if it is not the 
lowest net cost product. This practice allows us to provide the lowest 
costs to our clients and patients.
                 delays and denials in cancer treatment
    Question. I have received stories of cancer patients facing delays 
or denials for their treatment due to PBM actions. Data shows that 
breast cancer patients who experienced a 3-month or more delay in 
treatment had a 12-percent lower 5-year survival rate compared with 
breast cancer patients with only a 0- to 3-month delay.

    What percent of patients experience a 14-day or longer delay in 
receiving an oral oncolytic prescribed by their oncologist?

    Answer. Less than 3 percent of members experience a 14-day or 
longer delay in receiving an oral oncolytic prescribed by their 
oncologist.

    Question. What are the primary reasons patients experience delays 
or denials for their treatments?

    Answer. Most frequently, members experience an initial denial of 
coverage when a treatment is requested for a diagnosis for which the 
treatment is not indicated in the labeling approved by the U.S. Food 
and Drug Administration and for which there is no support in the 
recognized compendia and clinical practice guidelines (e.g., National 
Comprehensive Cancer Network Clinical Practice Guidelines) or when the 
members' clinical characteristics do not meet the criteria or 
guidelines for coverage of the requested treatment (e.g., no 
confirmation of HER2-positive breast cancer). Members may also 
experience a delay or denial when the initial request does not include 
all of the required clinical information.

    Question. What percent of determinations to delay or deny treatment 
for cancer patients are made by an oncologist or healthcare 
professional with oncology training?

    Answer. Initial denials of coverage are based on coverage criteria 
that have been reviewed by an oncologist or healthcare professional 
with oncology training and approved by the CVS Caremark National 
Pharmacy and Therapeutics Committee. Generally, appeals of initial 
denials are reviewed by an oncologist or healthcare professional with 
oncology training.

    Question. Why is a PBM-owned specialty pharmacy better qualified to 
manage a cancer patient's adherence and side effects than a community 
cancer clinic with a medically integrated pharmacy?

    Answer. Cancer patients are managed by their treating physicians--
whether it's in a cancer clinic or elsewhere--and much of their 
treatments are covered under the medical benefit and not the pharmacy 
benefit. We think both entities provide services within their 
expertise. Specialty pharmacies lead efforts to coordinate patient care 
with physicians and other health professionals to avoid gaps in care 
and assure that patients are receiving and taking the proper 
medications. CVS Health helps make it easier for patients and their 
providers to start and stay on specialty therapies. Our high-touch care 
management offers patients embedded nurse support through CareTeam 
Choice and a seamless patient experience across a continuum of care, 
including convenient retail access and digital tools. This whole-
patient management goes beyond the specialty drug regimen to help 
improve clinical outcomes while also helping to reduce total health-
care costs.
              direct and indirect remuneration (dir) fees
    Question. Many community-based cancer clinics have established 
medically integrated pharmacies so patients can access their oral 
chemotherapy prescriptions or other medications at the point-of-care. 
These practices are often assessed large DIR which are based on certain 
quality measures targeted toward primary care.

    Shouldn't pharmacies be evaluated on the type of drug dispensed and 
disease managed rather than a one-size fits all approach?

    Does assessing large DIR fees on medically integrated pharmacies 
drive patients to PBM-owned specialty pharmacies?

    Answer. CVS Health believes that performance criteria should be 
meaningful to the practice of retail pharmacy and actionable toward 
meeting achievable goals.

    Specialty pharmacies have a different set of measurements under our 
pay-for-
performance program than retail pharmacies, and all specialty 
pharmacies that participate in our networks, whether PBM-owned or not, 
have equal opportunities to achieve their goals.

    Question. According to CMS, from 2012 to 2017 PBMs imposed a 45,000 
percent increase in the amount of DIR fees pharmacies had to pay PBMs 
and PDPs under Part D, and revenues earned from these fees increased 
225 percent per year during this period.\6\ I thought PDPs and PBMs 
were supposed to pay pharmacies for dispensing drugs to patients. Why 
do pharmacies have to pay DIR fees to PBMs at all?
---------------------------------------------------------------------------
    \6\ CMS Proposed Rule: Modernizing Part D and Medicare Advantage to 
Lower Drug Prices and Reduce Out-of-Pocket Expenses, 83 Fed. Reg. 
62152, 62174 (November 30, 2018).

---------------------------------------------------------------------------
    Why are pharmacies forced to pay DIR and other fees to PBMs?

    Answer. Spending under pharmacy pay-for-performance programs in 
Medicare Part D are accounted for under the Direct and Indirect 
Remuneration (DIR) form Part D plans have to submit to CMS. Given the 
structure of Part D, fees paid by pharmacies to PBMs under pay-for-
performance are passed along to the PBM who then passes along the fees 
to the Part D plan. The Part D plans use these fees to reduce premiums. 
This is why the CMS actuaries indicated that accounting for these fees 
at the point-of-sale would increase Federal spending by $16.6 billion 
over 10 years and increase beneficiary premium costs by $5.7 billion 
over 10 years. Pay-for-performance is used throughout Medicare 
including for hospital, physician and Medicare Advantage payments. CVS 
Health believes that pharmacy pay-for-
performance programs increase value for Medicare beneficiaries by 
incentivizing pharmacies to improve performance and lower costs.

    Question. According to CMS, PBMs justify DIR fees as adjustments to 
improve quality. CMS also found that PBMs and PDPs withhold 
substantially more in reductions in payments than as rewards paid to 
pharmacies.\7\ Aren't so-called ``quality adjustments'' that'' collect 
more for ``poor performance'' than they pay out for ``high 
performance'' just another way for PBMs to collect even more money from 
pharmacies?
---------------------------------------------------------------------------
    \7\ Id. at 62174.

    Why do PBMs collect more in quality payment adjustment than they 
---------------------------------------------------------------------------
pay pharmacies under Part D?

    Answer. PBMs do not collect more in quality payments than what they 
pay pharmacies. Fees associated with pay-for-performance are a small 
percentage of overall pharmacy reimbursement. Any pay-for-performance 
fees paid by pharmacies are directly passed to Medicare Part D plan 
sponsors who use them to lower beneficiary premiums.
                  formulary placement/generic tiering
    Question. In 2011, 71 percent of generic drugs in Part D were on 
the lowest tier designed for generics; by 2019, that number decreased 
to only 14 percent of generics. According to an Avalere study, this 
practice cost seniors $22 billion in higher out-of-pocket costs since 
2015, costs that could have been avoided through the proper formulary 
placement of lower-cost generics. This practice, known as ``paying for 
position,'' allows brands to block uptake of lower-cost generics and 
biosimilars, thereby unnecessarily increasing out-of-pocket costs for 
seniors.

    Do you ever exclude generic or biosimilar competitors from 
formulary placement, or place these lower-cost drugs in higher cost-
sharing tiers that are generally reserved for non-preferred or brand 
drugs? Do you ever consider portfolio or bundled rebates with brand 
manufacturers?

    Answer. We may exclude a generic or biosimilar if it is not the 
lowest net cost product. This practice allows us to provide the lowest 
costs to our clients and patients. We do not bundle rebates across 
multiple products for a manufacturer.

    Question. When you place generics on your formularies, do you place 
that generic favorably to brand products--in other words, on generic-
only tiers?

    Answer. We strive to place generics on the lowest possible tier 
when they provide the lowest net cost. We place products in relation to 
their higher-cost counterparts in a manner to provide savings to 
patients and give them an economic incentive to choose lower-cost 
options.

    Question. When a generic becomes available, do you place it on your 
formularies immediately?

    Answer. The time frame for adding generic drugs to a formulary 
varies depending on the type of plan and the plan sponsor's formulary 
strategy. For CVS Caremark template formularies with an ``open'' 
formulary strategy, a generic drug may be added to the formulary as 
soon as it becomes available in the market and is added to our 
adjudication drug file. For template formularies with a ``closed'' 
formulary strategy, generally generic drugs will be reviewed soon after 
their availability in the market. In most cases, a generic drug will be 
added to the closed template formularies. However, a generic drug may 
not be added to the closed template formularies when the net cost to 
clients exceeds the net cost of the reference brand drug or other 
alternatives in the same therapeutic class.

                                 ______
                                 
                 Questions Submitted by Hon. John Thune
    Question. You referenced legislation in your testimony that I've 
worked on with Senator Carper to apply value-based insurance design to 
high-deductible health plans for chronic disease management. If 
enacted, how do you expect plans to utilize this tool and what will be 
the impact on drug prices and health care spending more broadly?

    Answer. We encourage Congress to enact proposals to allow high 
deductible plans with a health savings account (HSA) more options at 
providing first dollar drug coverage, especially for those with chronic 
diseases. Currently, HSA rules allow employers to cover prescription 
drugs at little or no cost under a preventative drug list--this 
coverage is allowed outside the patient's deductible. However, once the 
patient actually gets sick, the patient has to start paying for drugs 
as part of the deductible in their high-deductible plan. CVS Health 
supports the Chronic Disease Management Act (S. 2410, 115th Congress), 
legislation led by Senator John Thune and Senator Tom Carper, which 
would give high deductible health plans paired with HSAs the ability to 
offer first dollar coverage for chronic disease management. If this 
legislation was enacted, health plans will structure their benefits 
differently, and we would foresee plans covering prescription drugs and 
some health-care services before the deductible has been met. We 
anticipate this could lower health care costs overall and improve 
patient outcomes by ensuring access to care and medications for costly 
chronic conditions.

    Question. You've shared your ability to leverage technology such as 
real-time benefit tools to help patients and providers understand drug 
costs at the point of prescribing, as well as how technology can be 
used to help identify opportunities to provide enhanced support and 
medication management for enrollees. What policies can we consider to 
incentivize greater uptake of these tools?

    Answer. Caremark uses real-time benefits technology to provide 
member-specific drug pricing information in the doctor's office, at the 
pharmacy counter, and directly to patients through digital tools. 
Prescribers using the tool have visibility into a patient's covered 
benefits, where they are in their deductible phase, what they will pay 
out of pocket for a specific drug, and any lower cost, clinically 
appropriate alternatives. Through the Check Drug Cost Tool on the 
Caremark member portal and app, patients are using this real-time 
benefits information to identify savings. Medicare should drive the 
adoption of real time benefits to give beneficiaries and physicians 
meaningful, actionable transparency to lower costs. This can be done by 
mandating that prescribers use e-prescribing and real-time benefit 
tools, or otherwise incentivizing its use.

                                 ______
                                 
                Questions Submitted by Hon. Richard Burr
    Question. Pharmacy benefit managers (PBMs) offer a variety of 
contract designs to health insurance plans, allowing the insurer or 
client to choose the best structure for their customers. During the 
Finance Committee hearing on April 9, 2019, each witness stated that, 
in the contracts structured to allow for the passthrough of rebate 
dollars at the point of sale, PBMs do not keep any portion of the 
rebate. If the PBM does not keep a portion of the rebate, what type of 
revenue do PBMs receive from these contracts? What percent of your 
contracts are point of sale and what percent utilize a structure 
providing a percentage of the rebate back to the PBM?

    Answer. We cover approximately 10 million lives in the commercial 
sector with point-of-sale rebates, out of approximately 60 million 
lives covered on the commercial side. In aggregate, we pass along 98 
percent of our rebates to clients, and in Medicare Part D effectively 
100 percent of the rebates are passed through. Overall, the vast 
majority of our clients are receiving 100 percent of the rebates we 
collect, and a small number compensate us by allowing us to retain a 
portion of rebates. Clients that receive 100 percent of rebates 
compensate us for our services in other ways, including per member per 
month fees or the use of spread pricing.

    Question. It is our understanding that contracts with 
pharmaceutical manufacturers may also take a variety of forms. In 
calendar years 2016, 2017 and 2018, what was the total dollar amount 
that you obtained from pharmaceutical manufacturers in any form such as 
rebates, fees, etc.? What is the total dollar amount that was passed on 
to health insurance plans with which you have an agreement or contract?

    Answer. Over the last 3 years, we've kept drug price growth nearly 
flat, saving our clients and their members $142B as a result of PBM 
management, a 30-percent cost avoidance on pharmacy spend. Last year, 
44 percent of our clients saw a decline in their prescription drug 
prices. Our client arrangements typically include additional fees for 
services that the client asks us to provide, in particular, managing 
and improving patient adherence since improving adherence to medication 
is one of the best ways to manage chronic conditions and keep costs 
down. In 2018, Caremark passed through $300 million to our clients.

                                 ______
                                 
                 Questions Submitted by Hon. Tim Scott
    Question. One challenge that I see, when considering the medical 
treatment marketplace, is that we have a new wave of life-saving 
treatments--of incredible cures we could never have dreamed of, even 10 
or 15 years ago--for which cost, by necessity, is going to be a major 
issue. You look, for instance, at a condition like sickle cell disease. 
For the average SCD patient who reaches age 45, lifetime treatment 
costs are at roughly $1 million--and there are complications that can 
make that figure even higher. Now that we see therapies coming down the 
pipeline that could erase those long-term costs and drastically improve 
the quality of life for sickle cell patients, the question becomes, how 
can our current payment systems adapt to--and absorb--the high costs 
necessary to bring treatments like these to market and to ensure that 
we continue to see innovations like these ones moving forward?

    Answer. We believe the best way to absorb the costs of treatment in 
the system is by promoting competition to incent manufacturers to 
continue to innovate and bring new treatments to market. Therefore, we 
believe policies that would lower barriers to entry for generic and 
biosimilars provide the best way to mitigate growing costs, and ensure 
long-term innovation. These include eliminating gamesmanship of the FDA 
REMS program, preventing brand manufacturer ``evergreening'' and 
``product hopping,'' ending pay-for-delay settlements, and modernizing 
the Orange and Purple Books. All of these improvements would prevent 
brand manufacturers from artificially maintaining monopolies and lower-
costs long term.

    Question. And along the same lines, beyond creating some much-
needed clarity around value-based arrangements--which I've been working 
with Senators Cassidy and Warner to accomplish legislatively--are there 
steps that Congress could take to facilitate these innovative payment 
models?

    Answer. Among the most cost-effective ways to improve health 
outcomes that involve beneficiaries in their care is to improve 
medication adherence and access to preventive care services. However, 
current laws, such as the anti-kickback statute (AKS) and civil 
monetary penalties (CMP) law, often inhibit these types of activities 
because of their overly broad reach and severe penalties. As a result, 
many patient engagement activities that could lead to better health, 
including helping with medication adherence and health management, have 
been unintentionally limited. To address this, Congress could allow for 
broader CMP exceptions and corresponding AKS safe harbors that would 
permit incentives for: (1) activities that prevent the exacerbation of 
a current condition or illness by recognizing these as a form of 
``preventive care,'' and (2) activities that promote compliance with a 
treatment regimen by recognizing these as promoting access to care just 
as do activities that improve a beneficiary's ability to obtain medical 
items and services.

    Question. I'm also interested in the role that technology can play 
in helping to drive down drug costs--as well as to increase medication 
adherence. Some estimates suggest that between 50 and 75 percent of 
patients don't take their medications as prescribed, and that one in 
five new prescriptions go unfilled. And study after study shows that 
cost is a key factor here. As a consequence, we see roughly 125,000 
deaths from non-adherence every year, along with more than $100 billion 
in excess costs to the health-care system.

    To what extent can technology help providers and patients to make 
more informed and cost-effective choices about prescriptions--and to 
then adhere to these prescriptions?

    And maybe more to the point, to the extent that these technological 
tools are out there, what steps are you and your clients taking to 
encourage physicians and patients to use them?

    Answer. Caremark uses real-time benefits technology to provide 
member-specific drug pricing information in the doctor's office, at the 
pharmacy counter, and directly to patients through digital tools. 
Prescribers using the tool have visibility into a patient's covered 
benefits, where they are in their deductible phase, what they will pay 
out of pocket for a specific drug, and any lower cost, clinically-
appropriate alternatives. Through the Check Drug Cost Tool on the 
Caremark member portal and app, patients are using this real-time 
benefits information to identify savings. Medicare should drive the 
adoption of real time benefits to give beneficiaries and physicians 
meaningful, actionable transparency to lower costs. This can be done by 
mandating that prescribers use e-prescribing and real-time benefit 
tools, or otherwise incentivizing its use.

                                 ______
                                 
                Questions Submitted By Hon. Bill Cassidy
    Question. Are there ever cases where a patient in your health plan 
or one of the health plans for whom you negotiate as a PBM pays more 
for a medicine than the plan spends on a net basis, when you reimburse 
the pharmacy for that same medicine? In those cases, what entity 
receives the benefit of the difference between the amount the patient 
pays and the net amount the plan pays?

    Answer. Our contracts with all dispensing pharmacies in our network 
require that CVS Caremark members always get the benefit of at least 
the lower of the pharmacy's cash price and the plan's copay. If a CVS 
Caremark plan member's copay for a drug is greater than the dispensing 
pharmacy's contracted rate, it is not our practice to collect that 
difference from the pharmacy.

    Question. In calendar years 2015, 2016, and 2017, what percent of 
your revenue was from fees paid by plans, fees paid by manufacturers, 
other fees, pharmacy spread or rebates? Same question as to profits. Of 
all revenue generated from part D contracts, what percent did you 
retain?

    Answer. We do not break down our revenue in this manner. Rather, 
our financials are tracked by business sector--retail pharmacy, 
pharmacy services, and health-care benefits. The PBM and Part D 
businesses are a part of the pharmacy services segment, which also 
includes mail and specialty pharmacies. Overall revenues in our 
pharmacy services sector increased by 2.7 percent. The company's number 
of pharmacy network claims processed increased 5.6 percent compared to 
2017. But the comparable average revenue per pharmacy network claim 
processed decreased by 2.7 percent during that same period.

    Question. Should a patient ever pay more out of pocket for a 
medicine than what you pay the pharmacy for that medicine?

    Answer. Patient out-of-pocket costs are dictated by the insurance 
plans. As a PBM, however, we do encourage our clients with high 
deductible health plans to use point-of-sale rebates--and now cover 
approximately 10 million lives under point-of-sale rebates. We also 
encourage our clients to use a preventive drug list and cover many 
drugs on that list at a zero copay as we do in our own health plan. 
Moreover, we support expanding the ability of high deductible health 
plans to offer first dollar coverage for certain drugs and chronic 
conditions, and have worked with Congress and the administration to 
advance a change to the rules around high deductible health plans and 
health savings accounts.

    Question. PBM revenue from fees has risen, illustrated below. 
Further, PBM's retained revenue as a percent of net retail drug spend 
has consistently increased. What do you attribute this increase to?

[GRAPHIC] [TIFF OMITTED] T0919.013


    Answer. Over the last 3 years we've kept drug price growth nearly 
flat, saving our clients and their members $142B as a result of PBM 
management, a 30-percent cost avoidance on pharmacy spend. Last year, 
44 percent of our clients saw a decline in their prescription drug 
prices. Our client arrangements typically include additional fees for 
services that the client asks us to provide, in particular, managing 
and improving patient adherence since improving adherence to medication 
is one of the best ways to manage chronic conditions and keep costs 
down. In the Medicare space, we pass 100 percent of the rebates and any 
administrative fees to our Part D plan clients.

    Question. How are bona fide service fees established? What was your 
revenue generated in part D by bona fide fees in 2015, 2016, and 2017?

    Answer. PBMs provide services to the Part D plan sponsor for which 
they are paid fees. Manufacturers have also historically paid a service 
fee to PBMs for the provision of some or all of the following services: 
calculating the amount of rebates payable for products dispensed to the 
beneficiaries of each plan sponsor and invoicing the manufacturer for 
rebates; providing the manufacturer with reports on product utilization 
and rebate calculations; utilizing internal control measures to protect 
against payment of unearned rebates, etc. In the Medicare space, we 
pass 100 percent of the rebates and any administrative fees to our Part 
D plan clients.

    Question. A Health Affairs article suggests plans may prefer paying 
PBMs using rebates instead of fees, as ``Using retained rebates to 
cover PBM costs in lieu of fees could artificially lower reported 
administrative costs and make it easier to meet government medical loss 
ratio (MLR) requirements.'' Is it true that paying the PBM a percent of 
rebates would keep that revenue from counting towards a plan's MLR?

    Answer. Based on CMS guidance, this cannot happen. CMS requires all 
retained rebates be reported as a reduction in drug spend and are 
incorporated into the bid premium.

    Question. Would you support an industry-wide standard set of 
performance metrics by which a PBM would set its pharmacy contracts, 
which would be tailored based on regional patient populations, to give 
certainty for local pharmacies?

    Answer. CVS Health supports a pay-for-performance pharmacy model 
that allows pharmacies to execute using set performance criteria 
aligned with Medicare Part D plans' objectives, such as meeting/
exceeding acceptable star ratings for drug adherence as set and agreed 
upon by CMS each plan year (health outcomes focused), and also aligned 
with benefit plan designs (cost containment focus). We believe such 
measures should be actionable by the pharmacy.

                                 ______
                                 
                Questions Submitted by Hon. Steve Daines
    Question. In Medicare Part D, beneficiaries' deductible and 
coinsurance payments are calculated based on the price negotiated 
between the PBM and the pharmacy.

    Does this take into account rebates and discounts the PBM 
negotiates separately with pharmaceutical manufacturers?

    If yes, what percentage of the time is this the case?

    Answer. Other than CVS Health's current Allure plan option (where 
some rebates are shared with beneficiaries directly at the pharmacy 
counter), rebate dollars are used to reduce premiums in Part D rather 
than to reduce deductibles and coinsurance payments.

    Question. In calendar years 2016, 2017, and 2018, what share of 
brand prescriptions covered by the Part D plans you contract with were 
filled in the deductible or required beneficiaries to pay coinsurance? 
What was the total amount beneficiaries spent out of pocket for those 
prescriptions? What would beneficiaries' total out-of-pocket spending 
have been under the same cost sharing structure if their payments were 
based on the net price to the Part D plan, inclusive of rebates and 
other price concessions, rather than the price negotiated between your 
PBM and the pharmacy?

    Answer. The Medicare Part D program has been successful in 
providing beneficiaries with broad access to pharmacy services and 
prescription drugs--all while keeping premiums low, customer 
satisfaction high, and consistently operating under budget. We pass 
along effectively 100 percent of rebates to Part D plan sponsors. 
Research firm Oliver Wyman projected that over the next decade, PBM-
negotiated rebates will save the program more than $600 billion. While 
the program is successful, CVS Health has proven to be a leader in 
supporting comprehensive Part D reform, like what MedPAC has 
recommended, particularly to address beneficiaries' out of pocket 
spending. We recommend Congress evaluate the potential benefit of 
shifting manufacturer liability to the catastrophic phase from the 
current coverage gap discount phase. This will incentivize 
manufacturers around their drug costs as they will face liability when 
the beneficiary enters the catastrophic phase. We also believe Congress 
should establish a true out-of-pocket cap to protect high cost 
beneficiaries--similar to the protections afford by MA plans--and 
increase plan liability in the catastrophic phase. This type of reform 
would realign and improve incentives for plans and manufacturers while 
simplifying the benefit structure. To maximize savings, it should be 
done as part of a package that enhances PBM formulary tools.

                                 ______
                                 
                 Questions Submitted by Hon. Ron Wyden
                       spread pricing in medicaid
    Question. A PBM practice that has come up quite a bit recently is 
the practice of spread pricing. Spread pricing occurs when PBMs charge 
health plans more for prescription drugs than they actually reimburse 
pharmacies, and then pocket the different as profit.

    Do you engage in spread pricing practices?

    If yes, do you engage in such practices in Medicaid? If so, please 
list each State you operate in where you have a contract with a 
Medicaid managed care plan where you employ spread pricing; list each 
Medicaid managed care plan you have contracts with where you employ 
spread pricing; describe whether and how you disclose the use of such 
practices to the plans; describe whether you disclose such practices 
directly to the State; and list any States where you have direct 
contracts with the State Medicaid agency as a PBM for fee-for-service 
individuals.

    Answer. CVS Caremark contracts with 39 managed care organizations 
(MCOs) to help manage Medicaid drug benefits across 35 States and the 
District of Columbia. Our PBM does not contract with Medicaid MCOs in 
States where all Medicaid benefits (medical and pharmacy) are managed 
exclusively under the fee-for-service model, or in States where 
Medicaid drug benefits are carved out of MCO coverage. CVS Caremark 
does not currently choose to operate solely as a pharmacy benefits 
administrator (PBA) for State fee-for-service programs, but could 
potentially do so in the future.

    While a majority of our Medicaid MCO contracts are ``pass-
through,'' where all PBM services and network costs are paid for 
through an administrative fee, CVS Caremark may also contract with an 
MCO using the traditional, or spread pricing methodology. ``Spread 
pricing'' is simply the term used to describe the difference in pricing 
from what a PBM is paid from its clients for claims for their enrollees 
to what a PBM reimburses its contracted pharmacies for those claims--no 
different than what any business pays its suppliers vs. what it is paid 
by its end users. This compensation model is often requested by PBM 
clients, including many of the commercial, employer and government 
plans PBMs support, because it provides them with stability and 
certainty around their drug costs. In its June 2018 report on MCOs and 
PBMs operating in Medicaid, following a review of nearly 40 million 
claims, the Ohio Department of Medicaid found that MCOs that were using 
this traditional pricing model were saving the State $145 million 
annually.

    Clients, based on the region, State or population they serve, may 
choose a distinct contracting model over another, or use a combination 
of the two. In every case, the MCO always chooses the model as part of 
the RFP and procurement process and dictates the level of pricing 
transparency included in the contract, consistent with State and 
Federal Medicaid contract and reporting requirements.

    MCOs maintain the right to audit PBMs based on contract terms and 
conditions, including pricing, and Medicaid MCOs and their 
subcontractors, including PBMs, must also comply with State Medicaid 
model contracting requirements as well as State and Federal Medicaid 
disclosure and reporting requirements, including the 2016 Medicaid and 
CHIP Managed Care Final Rule.
                             rebate demands
    Question. The use of rebates as a negotiating tool has led to 
problematic incentives in the prescription drug supply chain. For 
example, drug companies have argued that they increase list prices in 
response to demands from PBMs for high or increasing rebates.

    Does your company currently have, or has your company had since 
January 2013, any agreements with drug manufacturers that require 
equivalent rebates, even in the case of a drug for which the list price 
has been lowered?

    Answer. No.

    Question. Does your company currently have, or has your company had 
since January 2013, any agreements with drug manufacturers that require 
advance notice of changes in the list price of drugs, including 
reductions or increases in list price?

    Answer. No.
                            revenue sources
    Question. Please provide an annual breakdown of the following 
components of the revenue you received from drug manufacturers from 
January 1, 2013 through December 31, 2018: dollar amount and percent of 
revenue from rebates; dollar amount and percent of revenue from 
administrative fees; dollar amount and percent of revenue from 
distribution fees; dollar amount and percent of revenue from marketing 
fees; dollar amount and percent of revenue from clinical case 
management fees; and all other sources of revenue from manufacturers 
not listed above.

    Answer. Our financial disclosures are in Forms 10-Q and 10-K and 
can be found on the CVS Health investor relations website (https://
investors.cvshealth.com/investors/sec-filings/default.aspx).
                           part d negotiation
    Question. The PBM market has changed dramatically over the past 
several years. Many Part D health plans also operate as PBMs, including 
your companies. While Part D has done a great job offering Medicare 
beneficiaries drug coverage they did not have access to before, Part D 
has not been successful at keeping up with the growing cost of 
medicines. PBMs and Part D plans claim they bargain to get lower 
prices, but the HHS Inspector General found that almost 4 in 10 brand 
name drugs in Part D offered no rebate or discount to Part D plans.

    Why have Part D plans been ineffective at bringing down the cost of 
almost half of brand-name medicines?

    Answer. Pharmaceutical manufacturers set the price of their drugs. 
Once they set the price, we negotiate to try to lower those costs. PBMs 
are effective managers of drug costs and we kept our overall client 
drug price growth trend in 2018 to 1.2 percent. A number of 
restrictions on Part D plans contribute to findings of the HHS 
Inspector General, including requirements that Medicare Part D plans 
cover two drugs from every category or class, and that they cover all 
or substantially drugs in the six protected classes.

    The mandatory coverage of two drugs in each category or class has 
negative effects on a PBM's ability to drive competition between drugs 
to gain the largest discounts, and fundamentally undermines the 
development of evidence-based formularies. The mandate overrides the 
activities of Pharmacy and Therapeutic (P&T) Committees, which make 
their own assessments on clinical appropriateness and therapeutic 
alternatives. CMS requires Part D plans to have a robust P&T Committee 
process in place and should rely on that system to determine the 
appropriate medications to be placed on formulary. The protected class 
policy increases net drug costs in the program, as it eliminates 
manufacturers' incentives to offer discounts--thus removing any form of 
price competition for these drugs. The tiering exceptions process also 
drug manufacturers to work with physicians to degrade the effectiveness 
of PBMs and Part D plans to control drug costs through effective 
formulary management. In areas where Part D plans have formulary 
flexibility similar to the commercial market, they drive savings 
comparable to or even greater than what is done on the commercial side.

                                 ______
                                 
              Questions Submitted by Hon. Robert Menendez
    Question. Should the CREATES Act become law, what commitment can 
your company making to covering generics as soon as they are approved 
and passing those savings on to patients?

    Answer. The CREATES Act would prohibit brand manufacturers from 
abusing the FDA Risk Evaluation and Mitigation Strategies Program and 
other restrictive distribution schemes to delay generic development. 
Currently brand manufacturers can use these tricks to keep generic 
firms from acquiring the necessary samples to develop generics or 
biosimilars. Passing the CREATES Act would get lower cost products to 
the market faster and save patients money.

    The time frame for adding generic drugs to a formulary varies 
depending on the type of plan and the plan sponsor's formulary 
strategy. For CVS Caremark template formularies with an ``open'' 
formulary strategy, a generic drug may be added to the formulary as 
soon as it becomes available in the market and is added to our 
adjudication drug file. For template formularies with a ``closed'' 
formulary strategy, generally generic drugs will be reviewed soon after 
their availability in the market. In most cases, a generic drug will be 
added to the closed template formularies. However, a generic drug may 
not be added to the closed template formularies when the net cost to 
clients exceeds the net cost of the reference brand drug or other 
alternatives in the same therapeutic class.

    Question. What are your concerns with point-of-sale rebates and 
what alternatives do you propose to such rebates to improve consumer 
savings at the pharmacy counter?

    Answer. Caremark encourages our commercial clients to use point-of-
sale rebates, as CVS Health does in our own employee health plan. Our 
Part D plan, SilverScript also offers a Part D plan with POS rebates 
for 2019 (Allure, the only Part D plan sponsor with such an offering). 
Caremark covers approximately 10 million lives under point-of-sale 
rebates in its commercial business.

    We believe that Part D plans should be required to offer a third 
option that provides for partial point-of-sale rebates such as our 
Allure plan, but this should be an option rather than a mandate. While 
it may benefit some patients, it increases premium costs for all 
beneficiaries. The unique structure of Part D does not make mandating 
point-of-sale rebates the only option for a preferred policy choice. 
Such a policy would only benefit approximately 15 to 30 percent of 
beneficiaries while making 70 percent of beneficiaries worse off, raise 
premiums by 20 to 30 percent, and cost the government close to $200 
billion over 10 years in new spending.

    Question. What are the specific steps your company is taking to 
move PCSK9 inhibitors off the specialty tier in Medicare Part D and to 
fixed copay tiers given that prices went down by 60 percent and are no 
longer above the specialty tier threshold?

    Why haven't your plans moved it already, given that CMS allows 
plans to make positive mid-year formulary changes that improve patient 
access and affordability?

    Answer. CMS generally will not approve mid-year changes that will 
cost the plan, and potentially CMS, money.

                                 ______
                                 
             Questions Submitted by Hon. Benjamin L. Cardin
              drug rebate rule and higher part d premiums
    Question. In January, the Department of Health and Human Services 
released a proposal to reform prescription drug rebates paid by 
pharmaceutical manufacturers to pharmacy benefit managers under 
Medicare Part D. The OIG proposal attempts to ban most rebates by 
eliminating their regulatory protections and creating two new safe 
harbor provisions: one to expressly protect discounts applied directly 
at the point-of-sale (POS) for consumers, and another to protect 
certain service fees that manufacturers pay to PBMs for services 
furnished to health plans. The only service fees that would be 
permissible under the proposal are those that are fixed, and not based 
on a percentage of sales and not based on volume or the value of other 
business generated between the parties. The proposed rule was designed 
to address the Department's concerns with the current rebate system, 
which HHS believes rewards high list prices, discourages the use of 
generics and biosimilars, and does not reflect patient out-of-pocket 
costs. For consumers, this proposal may result in lower costs at the 
pharmacy counter, but Part D premiums may increase as a result.

    Could you explain which Part D beneficiaries could see savings on 
their drug costs at the pharmacy counter and which Part D beneficiaries 
could not see lower drug costs?

    Answer. As the CMS actuaries point out in the preamble to the HHS 
OIG rebate proposed rule, a majority of beneficiaries will face higher 
costs under the proposal, as their premium increase will be greater 
than any savings they see at the pharmacy counter. Our own estimates 
indicate that 70 percent of beneficiaries will likely be financially 
worse off if this proposal is adopted, only 15 percent of beneficiaries 
would benefit, and another 15 percent may benefit. The beneficiaries 
who would benefit are those who take expense drugs that have rebates, 
the beneficiaries who would not benefit are those who are taking few to 
now drugs, or taking drugs without rebates (such as generics and many 
specialty medications).
    perverse incentive to place more expensive drugs on formularies
    Question. In a Senate Finance Committee hearing had a few weeks 
ago, many pharmaceutical companies argued that the current rebate 
structure incentivizes high list prices. These companies argue that the 
higher the list price of the drug, the greater the rebates, and 
therefore, the more profit the PBM earns. While contracts between PBMs, 
Part D Plans, and pharmaceutical companies require PBMs to pass through 
100 percent of the negotiated rebate back to insurance plans, I worry 
that this structure could incentivize PBMs to favor a more expensive 
drug on the formulary because they could get a higher rebate.

    Is there an incentive for a PBM to place a higher cost drug on the 
Part D formulary because the PBM receives a larger rebate for that more 
expensive drug? Why or why not?

    Answer. No, there is not an incentive because of the rebate. It is 
not the size of the rebate that drives the decision making, but whether 
the product has the lowest net cost for our clients.
               six protected classes proposal and access
    Question. This past November, the Centers for Medicare and Medicaid 
Services released a proposed rule for 2020 to help tackle drug pricing. 
Among the proposed changes is one, which would alter the current rules, 
governing the ``six protected classes.'' The concept of the protected 
classes has been around since the launch of the Medicare Part D 
program, and it was instituted to ensure that some of our most 
vulnerable patients would have access to their needed drugs by 
requiring formularies to cover nearly all protected drugs. These 
classes are anticonvulsants, antidepressants, antipsychotics, 
immunosuppressants, antiretrovirals, and antineoplastics.

    Some people have argued that these protected classes have led to 
higher drug prices because formularies are required to include this 
prescription coverage, and there are limited tools left to help lower 
prices. In an effort to increase competition, this proposed new rule 
would do a couple of different things. The first aspect of the 
administration's proposal would allow Part D sponsors to implement 
broader use of prior authorization and step therapy for protected class 
drugs, including to determine use for protected class indications. Any 
time there is a mention of plans using prior authorization or step 
therapy there is an immediate concern of restricting patient access to 
needed drugs or medical services.

    Could you explain why your company would favor such utilization 
management tools like step therapy or prior authorization?

    Answer. Step therapy is a successful and clinically evidence-based 
technique used by nearly all Medicare, Medicaid, self-insured 
companies, and health insurance plans nationally. It is used by plans 
to manage the utilization of drugs that are very high in cost. Pharmacy 
benefit programs frequently implement a variety of guidelines and 
programs that are designed to ensure that patients receive clinically 
appropriate and cost-effective therapies. Sometimes this can involve 
programs that promote a generic drug or lower-cost brand-name 
alternative drug before higher cost non-preferred drugs are covered. 
Without these programs in place, the cost of the benefit will increase 
with no corresponding increase in quality.

    Question. Do you believe there is a danger that using step therapy 
or prior authorization could possibly restrict patients from having 
access to medication that has been successful for them? Why or why not?

    Answer. No, because exceptions policies are in place to allow 
beneficiaries to receive needed drugs.

    Question. If you were to use step therapy or prior authorization 
for drugs in the six protected classes, how would you ensure patients 
would continue to have access to their needed medications in one of the 
six protected classes?

    Answer. In most of the protected classes there are several 
alternatives--for example, there is a wide variety of drugs in the 
immunosuppressant class and numerous generics in the antidepressant and 
antipsychotic classes. We believe Part D plans' Pharmacy and 
Therapeutics (P&T) Committees are well-qualified and structured to 
ensure that beneficiaries have an appropriate choice of drugs in these 
classes on the plan's formulary. Furthermore, the current exceptions 
processes would remain in place.

    Question. The second aspect of the administration's proposed change 
to the six protected classes is the proposal to allow drug coverage 
formularies to exclude a protected class drug from a Part D formulary 
if the drug represents a new formulation of a single-sourced drug, 
regardless of whether the older formulation remains on the market. My 
understanding is that this administration is trying to target 
pharmaceutical companies who participate in the anticompetitive 
practice of ``evergreening.'' This is a practice where pharmaceutical 
companies make slight alterations to a drug's packaging, color, and 
formulation without an added or new benefit. However, we also 
understand that seemingly small changes to a drug can still make a big 
difference to patient well-being. We have heard from Maryland 
physicians that the creation of combination antiretroviral pills was a 
huge step forward in the fight against HIV. Even though these 
combination pills or extended release versions didn't have a new 
chemical formula, they made a world of difference to the HIV patients 
taking over a dozen pills a day. These vulnerable patients are 
obviously very concerned that they could lose coverage for new and 
better drugs, especially when their old drugs may no longer be 
available. HIV treatments have come a long way in the last few decades, 
and proper antiretroviral treatment is vital to ensuring an end to the 
HIV epidemic.

    Question. Do you think the proposed rule anticipates a situation 
where a pharmaceutical company stops producing an older version of a 
drug when a new formulation is available, but the newer formulation is 
not covered by a Part D plan? Why or why not?

    Answer. Brands will sometimes cease production of an older version 
of a product in the interest of promoting a new formulation and 
preventing uptake of impending generic competition for the old 
formulation. This is commonly referred to as ``product hopping'' and 
allows them to keep prices artificially high. In instances that you are 
describing, if the newer product provides a genuine benefit to patients 
we would work to get such products on formulary. Otherwise we would use 
traditional utilization management tools to ensure patients have access 
to the appropriate drugs.

    Question. What would your company do to ensure that patients 
continue to have access to their medication in this situation?

    Answer. Transition fills are permitted in Part D for those 
established on a therapy, and the exceptions process is always in place 
for those who require an off-
formulary medication.
                       appeals process in general
    Question. Another complaint that I have heard from physician groups 
is that many formularies do not cover newer drugs that they consider to 
be necessary for hard-to-treat diseases, even if the drugs are very 
well-studied.

    With technology changing so rapidly, how do your companies ensure 
that you keep up with the medical and surgical experts and new 
research, so that your authorization decisions are in line with the 
most recent medical innovations and physician standards?

    Answer. CVS Caremark has a National Pharmacy and Therapeutics 
Committee (P&T) Committee that ensures the appropriate use of 
utilization management tools, including step therapy and prior 
authorization programs.

    The CVS Caremark P&T Committee is an external advisory body of 
experts from across the country, composed of 21 independent health care 
professionals, including physicians and pharmacists, all of whom have 
broad clinical backgrounds and/or academic expertise regarding 
prescription drugs. Included in this committee is a physician who is a 
medical ethicist that is responsible for assisting in the decision-
making process by facilitating the discussion, as needed, and to 
provide unbiased feedback with respect to the logic and appropriateness 
of the conclusions drawn and the decisions reached.

    The committee meets face-to-face on a quarterly basis, and, as 
needed, on an ad hoc basis. It is responsible for formulary 
development, reviewing all existing standard formularies, and reviewing 
and approving all utilization management criteria (i.e., prior 
authorization, step therapy, etc.). It bases its decisions on 
scientific evidence, standards of practice, peer-reviewed medical 
literature, accepted clinical practice guidelines and other appropriate 
information.
                 direct and indirect remuneration fees
    Question. I have heard from independent pharmacies in Maryland that 
have struggled with Pharmacy Benefit Managers and direct and indirect 
remuneration (DIR) fees. According to independent pharmacies, there are 
times when DIR fees are based on performance, and these fees range from 
$2-$7 for certain types of maintenance prescriptions and are often 
collected retroactively--weeks or even months after a prescription was 
filled. A PBM can take money back from the pharmacy when the pharmacies 
haven not met a PBM's performance standard. In these instances, the PBM 
claws back money and creates a situation where the pharmacy does not 
receive adequate reimbursement to cover its costs. As a result, DIR 
fees can be a significant financial loss to pharmacies and an 
additional cost burden to patients.

    Could you explain what performance measures are considered when 
determining a DIR fee?

    How is that performance measure communicated to the pharmacy?

    How much does your company receive in DIR fees?

    How much does your company receive in performance-related DIR fees?

    Are those fees passed on to the consumer? If so, how?

    Answer. Our performance metrics address certain activities such as: 
increasing patient participation in Medicare medication therapy 
management consultations; comprehensive medication reviews; engaging 
and reporting metrics related to diabetes disease management programs; 
appropriately reducing high-risk medications in the senior population; 
and actively engaging customer satisfaction and service programs.

    Under Medicare Part D, financial flows that may be either positive 
or negative that cannot be accurately approximated at the point-of-sale 
are accounted for under Direct and Indirect Remuneration (DIR) 
reporting to CMS. These amounts are factored into CMS's calculation of 
final Medicare payments to Part D plans. CVS Caremark provides pharmacy 
pay-for-performance metrics clearly in our contracts with pharmacies 
and provides informational support to pharmacies to help them 
understand the program and achieve their goals.

    Pharmacy pay-for-performance fees accounted for under DIR are 
directly passed to Medicare Part D plan sponsors who use them to lower 
beneficiary premiums. This is why the CMS actuaries indicated that 
accounting for these fees at the point-of-sale would increase Federal 
spending by $16.6 billion over 10 years and increase beneficiary 
premium costs by $5.7 billion over 10 years.
                             drug shortages
    Question. Currently there are over 270 drugs in shortage. Drug 
shortages happen for many reasons such as manufacturing and quality 
problems, natural disasters, and inventory practices of wholesalers and 
pharmacies. Drug shortages cause harm to providers, hospitals, and most 
importantly patients. Pharmacists and providers must spend significant 
amounts of time on researching alternative drug treatments for the 
patient, which may not always be the most optimal therapies.

    As a pharmacy benefit manager, you have contractual agreements with 
pharmaceutical companies in order to place their drugs on a plan's 
formulary. While I understand that drug shortages happening in both the 
inpatient and outpatient settings, there may be a role PBMs can play in 
protecting patients.

    For the prescription drugs you negotiate to cover on a plan 
formulary, could you use your negotiating power to ensure a drug is 
available to a patient? Why or why not?

    Answer. The PBM's role is strictly related to making the lowest 
cost available to our plans.

    Question. What do you do to ensure that patients have the drugs 
they need?

    Answer. As a broader enterprise, CVS Health is dedicated to using 
its purchasing power to ensure a consistent supply of drugs for 
patients across all of our health care entities, by negotiating with 
multiple suppliers to protect against unpredictable manufacturing 
interruptions.

                                 ______
                                 
               Questions Submitted by Hon. Sherrod Brown
                              biosimilars
    Question. During the hearing, each of you expressed support for 
biosimilars and most of you indicated you try and take advantage of 
available biosimilars to help lower costs. When I asked each of you to 
identify solutions to help ensure a robust biosimilar marketplace here 
in the U.S., most of you mentioned things Congress or the 
administration could do to help ensure uptake of biosimilars--from 
lowering the exclusivity period for biologics to finalizing guidance on 
interchangability at the FDA. However, none of you offered any 
solutions or ideas for what your company could do to help ensure timely 
uptake of biosimilars, a robust U.S. biosimilars market, and a 
resulting cost savings to patients to taxpayers.

    Most of the biosimilars currently approved and on the market in the 
U.S. are reimbursed through the medical benefit. What are the 
similarities and differences in how rebates are passed onto patients 
and providers in the medical benefit versus pharmacy benefit. In your 
answer, please describe these similarities and differences across each 
of your books of business (i.e., commercial, Medicare, Medicaid).

    Answer. CVS Caremark offers services to manage drug utilization 
within the medical benefit for clients.

    To the extent that rebates are paid for drug claims processed 
through the medical benefit, they are treated in a similar fashion to 
rebates paid for claims under the pharmacy benefit. That is 100 percent 
of the rebates are passed through to some clients, and other clients 
may allow us to retain some an agreed-upon portion of rebates as 
compensation for our services. The client who determines how those 
rebate dollars are used, often either to reduce premiums or to lower 
costs at the point of sale.

    As a result of a recent CMS rule that will allow in 2020 limited 
use of step therapy in Medicare Advantage plans for Part B covered 
drugs, medical rebates may become a consideration for MA plans.

    Question. Do any of your plans require the use of a higher list 
price, branded product over the use of a therapeutically equivalent 
lower list price generic or biosimilar product? Why? If a plan 
restricts the use of a biosimilar or generic product in lieu of an 
innovator or brand name product, do patients pay more out of pocket 
than they would if the biosimilar was preferred?

    Answer. CVS Caremark offers services to manage drug utilization 
within the medical benefit for clients. In these instances we use 
similar strategies to those seen in the commercial benefit (patient and 
physician education and communication, prior authorization, preferred 
products, etc.). Similar to the pharmacy benefit, we prefer products to 
target lower cost strategies for clients for each therapeutic class in 
the context of clinical appropriateness and market factors. Rebates can 
play a role to the extent that the lowest net cost product may provide 
a rebate to the plan sponsor that reduces cost for the plan and 
patients.

    However, we believe a bigger driver of biosimilar adoption are the 
incentives for providers that often lead them to higher-cost products, 
such as the ASP+6 percent model in Medicare Part B that pays doctors 
more for the use of high cost products with not penalty for forgoing 
lower-cost, equally effective treatments.

    Question. Recognizing most biosimilars are paid for via medical 
benefit, please explain whether you use step-therapy to restrict access 
to biosimilars for your patients in any medical benefit you manage 
across each of your books of business (i.e., commercial, Medicare, 
Medicaid). What role do rebates playing in your consideration for 
patient access to biosimilars in each of these instances?

    Answer. CVS Caremark offers services to manage drug utilization 
within the medical benefit for clients. In these instances, we use 
similar strategies to those seen in the commercial benefit (patient and 
physician education and communication, prior authorization, preferred 
products, etc.). Similar to the pharmacy benefit, we prefer products 
that provide the lowest net cost for clients. Rebates can play a role 
to the extent that the lowest net cost product may provide a rebate to 
the plan sponsor that reduces cost for the plan and patients.

    Question. How can and will your company help ensure a robust 
biosimilars market here in the U.S.?

    Answer. We continue to support the development of a robust 
biosimilars marketplace. We support policies such as ending abuses of 
FDA's REMS program, eliminating pay-for-delay settlements, and ending 
patent ``evergreening'' to get competition to market faster. 
Additionally, we will continue to aggressively negotiate on behalf of 
our clients and their patients in order to get access to the lowest 
net-cost therapies, which we believe will be biosimilars in the long 
term.

    Question. I have heard concerns that ``rebate walls'' are 
responsible for keeping new biosimilars off of formularies, where a 
manufacturer offers conditional rebates on a bundle of their products 
in order to incentive PBMs to exclude a new biosimilar competitor from 
their formularies. Have you ever decided to place a drug on a preferred 
tier because of the rebates you receive for other drugs from that 
manufacturer? If you do not do this, do you support this practice being 
carried out by your competitors?

    Answer. CVS Caremark does not negotiate with manufacturers to 
obtain rebates that are bundled across multiple products. However, 
insulin manufacturers have sometimes offered rebates for an insulin 
product that would vary, in part, depending on the formulary coverage 
of another insulin product produced by the same manufacturer. For 
example, if two insulin products offered by a manufacturer were both 
covered on a formulary, then the manufacturer might offer a higher 
rebate amount than if only one of the products was covered on a 
formulary. The rebate amounts applied would depend on the formulary 
that a client chose to utilize.

    Question. What more can and will you do to counteract efforts to 
rebate-block or bundle rebates to block biosimilar formulary placement? 
Will you commit to taking these actions as more biosimilars become 
available in Part D?

    Answer. We remain committed to biosimilars as an important tool in 
reducing costs for our clients and their members. When engaged in 
negotiations on competing products we remain committed to providing our 
clients with the lowest net cost option, and believe that as more 
biosimilars enter the market those negotiations will serve to lower 
costs for clients and their members.
                            rebates vs. fees
    Question. During the hearing, Senator Cassidy asked each of you 
about the trend in PBM contracting where a larger share of your 
reimbursement and payment is a result of ``fees'' which you are able to 
pocket, as opposed to ``rebates'' which must be passed back to the 
plan/consumer.

    Please define the word ``rebate.'' As part of your definition, 
please clarify whether or not you consider administrative fees, 
inflation payments, product discounts, prospective rebates, care 
management fees, procurement fees or any other type of fee or payment 
that isn't a retrospective rebate to be a rebate.

    Answer. Rebates are simply negotiated discounts off the 
manufacturer selected list price of the product. The size or amount of 
rebates is based on the formulary placement and plan design features 
that are selected by the PBM client. We do include inflation payments 
as part of ``rebates.'' Under rebate agreements, we may earn an 
administrative fee from manufacturers for the services we provide to 
them in connection with rebate billing, collection and distribution. In 
the Medicare space, we pass 100 percent of the rebates and any 
administrative fees to our Part D plan clients.

    Question. Please provide, across your books of business (i.e., 
commercial, Medicare, Medicaid), a list of each of the different types 
of rebates, charges, and/or fees that you incorporate into your 
contracts.

    Answer. Our contracts include formulary rebates, rebates that are 
tied to drug inflation, and administrative fees, as are described in 
question seven.

    Question. Rebates, by definition, must be passed along to the 
employer, health plan, or consumer. Please provide, across your books 
of business (i.e., commercial, Medicare, Medicaid), details on which of 
the rebates/fees detailed in my prior question are passed along to the 
consumer and/or plan and which are kept by the PBM.

    Answer. As mentioned in question seven, we pass 98 percent of 
rebates along to plan sponsors, and at every level these rebates are 
typically being used to reduce premium costs to benefit consumers in 
accessing coverage. In Medicare Part D, we pass along effectively 100 
percent.
                             fiduciary duty
    Question. Each of you has argued that you are the one entity in the 
drug supply chain that exists to help lower the cost of prescription 
drugs. You claim that your value comes in saving taxpayers, plans, and 
consumers money.

    Would you be willing to accept a fiduciary standard in your 
contracts? In other words, do you believe you have a fiduciary duty to 
the plan or employer you contract with--to act in their best interest 
and not your own? If not, why not?

    Answer. CVS Health believes that including a fiduciary standard in 
our contracts with our clients is inappropriate standard, would create 
many challenges to creating an drug benefit, and would likely increase 
costs for our clients. ERISA defines the term ``fiduciary'' as a person 
who (i) exercises any discretionary control respecting management of 
such plan or exercises any authority or control respecting management 
or disposition of its assets or (ii) has any discretionary authority or 
discretionary responsibility in the administration of such plan.\8\
---------------------------------------------------------------------------
    \8\ 29 U.S.C. Sec. 1002(21)(A).

    The U.S. Supreme Court has ruled that a person is a fiduciary for 
an ERISA plan only ``to the extent'' a person has or exercises such 
discretionary authority or control on behalf of a plan. Following this 
decision, multiple Federal courts have ruled that the PBM was not 
acting in a fiduciary capacity in managing its PBM-related services 
(e.g., negotiating with drug manufacturers or retail pharmacies or 
managing its formulary), but rather managing its own business which did 
---------------------------------------------------------------------------
not involve the discretionary control of plan assets.

    In light of this well-settled law, there are many concerns about 
the effect that imposing a fiduciary duty on PBMs on behalf of the 
ultimate payer would have on the PBMs' ability to negotiate drug 
prices. Such a requirement may impact how PBMs interact with their 
clients and their beneficiaries depending upon how the fiduciary duty 
is defined, and who it applies to (sponsor or beneficiary). Overall, 
imposing a fiduciary duty on a PBM would pose a challenge for payers 
trying to control costs while the payer is providing a sustainable 
benefit to their plan members in an era of rising launch prices for 
drugs and ongoing, annual increases in drug prices.

    The imposition of a fiduciary duty may reduce the flexibility that 
a plan sponsor has with regards to structuring their financial 
arrangement with their PBM and could lead to one-size-fits-all 
solutions. There may be only one way of contracting that would meet the 
definition of a fiduciary without some potential for incurring legal 
liability. Additionally, it could restrict payers' ability to uniquely 
design their benefit to meet their beneficiaries' specific needs while 
implementing ways to provide cost savings, including formulary 
preferences, exclusions, and utilization management techniques. There 
is also the possibility that it would prevent payers from having their 
PBM obtain better pricing from retail pharmacies through use of managed 
networks. The reality of the marketplace is that one-size-fits-all plan 
designs would not work for everyone because not all payers have the 
same level of economic resources or the same size and type of patient 
populations.
                           paying pharmacists
    Question. Following a series of reports in The Columbus Dispatch, 
Ohio has taken a number of actions over the past year to crack down on 
several PBM practices. Efforts to date have included investigations, 
lawsuits, and policy changes to address the egregious use of spread-
pricing, alleged breaches of contract, accusations of anti-competitive 
behavior, a misuse of taxpayer dollars, and a general lack of 
transparency.

    PBMs are responsible for creating pharmacy networks, setting the 
price patients and health plans pay for prescription drugs, 
adjudicating claims, and reimbursing pharmacies for dispensed drugs. In 
addition, nearly all PBMs own proprietary pharmacies that directly 
compete with the PBM-created retail network. Do you design plans that 
incentivize or require patients to use a pharmacy owned by your 
affiliate over a competing retail pharmacy. If yes, do you believe this 
represents a conflict of interest? If yes, how do you ensure there is 
no resulting anticompetitive misuse of pharmacy and patient data?

    Answer. CVS Caremark is the pharmacy benefit management (PBM) 
business of CVS Health. As a PBM, CVS Caremark administers prescription 
drug benefits for our clients who include large employers, health 
plans, State government employee plans, and government payors (e.g., 
Medicare and Medicaid), and others. As a PBM, CVS Caremark also manages 
the development and maintenance of a vast network of retail pharmacies 
across the United States. We're proud of our extensive pharmacy 
network, which has nearly 68,000 participating pharmacies, including 
independently-owned, community-based pharmacies, other local pharmacies 
in grocery stores and mass merchants, as well as regional and national 
chains. The pharmacists serving our members are trusted health-care 
providers and their interventions help patients take their medications 
as directed by their physicians, ultimately improving outcomes and 
managing overall health-care costs.

    CVS Pharmacy is the retail pharmacy chain of CVS Health and is 
probably the most recognizable part of the broader enterprise due to 
our presence in 10,000 communities across the U.S. CVS Pharmacy is 
focused on providing our customers with convenient access to their 
medications as well as other products and services they need to stay 
healthy. In addition, CVS Pharmacy participates in pharmacy networks 
for health plans and PBMs other than CVS Caremark.

    CVS Caremark also partners with pharmacies that directly compete 
with CVS Pharmacy. For example, Caremark considers independently-owned 
pharmacies to be important partners in creating the networks we offer 
our PBM clients to ensure their members have convenient access to their 
medications. Independent pharmacies account for about 40 percent of the 
CVS Caremark's network of more than 68,000 pharmacies, and the number 
of independent pharmacies in our network has remained consistent for 
the past 25 years.

    Question. After investigating the issues brought to light by The 
Columbus Dispatch, Ohio's Medicaid report found that CVS Caremark often 
paid CVS pharmacies substantially more than unaffiliated pharmacies for 
the same generic drugs under the Medicaid program. An investigation by 
the State legislature in Arkansas also found that CVS Caremark was 
paying CVS pharmacies a significantly higher price for medications than 
they were paying independent pharmacies. You have mentioned that there 
is a firewall between the two sides of the company; however, the 
results of the State's investigation seem to be less clear. How will 
CVS Caremark ensure taxpayers that it isn't using their money to pay 
its own stores more to drive competitors out of business in Medicaid or 
the Part D program?

    Answer. Since CVS Pharmacy and Caremark merged, CVS Health has 
maintained stringent firewall protections between our CVS Pharmacy 
retail business and our CVS Caremark PBM business. We take these 
protections very seriously.

    The question regarding whether an effective firewall exists between 
CVS's retail and PBM businesses was fully reviewed by the Federal Trade 
Commission. The FTC and Federal regulators were satisfied that the two 
companies are indeed kept separate. The firewall has detailed and 
elaborate privacy and security policies and procedures in place that 
ensure that the protected health information (PHI) of each covered 
entity (including each health plan) is only accessed and disclosed as 
permitted by that covered entity and in accordance with the standards 
set forth in the Health Insurance Portability and Accountability Act 
(HIPAA) and its implementing regulations.

    There are many safeguards in place to do this, technical, physical 
and administrative as HIPAA requires, preventing the inappropriate 
sharing of PHI between the PBM CVS/Caremark and CVS Health, and the 
inappropriate use or sharing of PHI generally. The firewall also 
prohibits CVS/Caremark from sharing other confidential and competitive 
information, such as the reimbursement rates for its pharmacy networks, 
with the CVS/pharmacy segment.

    Further, a June 2018 report from the Ohio Department of Medicaid 
found after a review of over 35 million Medicaid claims adjudicated by 
CVS Caremark in 2017-2018 that there was no evidence of anti-
competitive behavior between the retail and PBM business units and that 
CVS Caremark reimbursed independent pharmacies at a higher rate than 
chains, including CVS Pharmacy.

    As with any PBM, overall average reimbursement will vary based on 
the mix of drugs being dispensed by a pharmacy. A pharmacy's drug mix 
impacts the weighted volume of higher and lower discounted drugs being 
dispensed, and therefore the overall average reimbursement levels 
across a PBM's pharmacy provider network.

    For example, a pharmacy dispensing a greater volume of drugs that 
is more deeply discounted (e.g., certain generics) based on its patient 
population's disease prevalence would have a reimbursement rate that 
reflects its average discount.
                          setting drug prices
    Question. All of you helped me establish a few basic facts during 
the hearing on April 9th. First, we established that PBMs do not set 
drug prices. Second, we established that nothing in the 
administration's proposed rebate rule would require any PhRMA company 
to lower the price any drug. And--in fact--no PhRMA company is willing 
to commit to lowering the price of their drugs if this rule goes into 
effect. We know this because of the answers to QFRs each of the PhRMA 
representatives gave to Chairman Grassley and Ranking Member Wyden as a 
follow-up to a prior Finance Committee hearing.

    Following the administration's proposed rebate rule, CVS Caremark 
wrote to several pharmaceutical manufacturers to ask them to commit to 
not INCREASING their prices if the Trump rebate rule is finalized. Has 
any manufacturer responded to your letter and made a commitment to 
keeping their prices at or below where they are today?

    Answer. The overwhelming majority of manufacturers who responded to 
the survey could not agree without qualifications or caveats. A handful 
of smaller pharmaceutical companies did commit.

                                 ______
                                 
             Questions Submitted by Hon. Michael F. Bennet
    Question. Can you answer the following questions to help us 
understand the Pharmacy Benefit Manager business model and how you make 
formulary decisions?

    What percent of rebates are passed to the consumer under Medicare 
Part D?

    Answer. Effectively 100 percent of rebates are passed on to the 
Part D plan sponsor, where they are used to lower premiums for 
beneficiaries. This is why the CMS actuaries estimated that costs to 
the government would increase by $196 billion over 10 years if rebates 
are passed at the point of sale, and that beneficiary premiums would 
ultimately increase by 25 percent.

    Question. What percent of rebates are passed to the consumer in the 
private insurance market?

    Answer. In aggregate, we pass along 98 percent of all rebates to 
our clients.

    Question. Do you have any comments on how health plans should use 
their share of the rebates to lower drug prices for patients with high 
deductibles?

    Answer. We encourage our commercial clients, especially those that 
use high-
deductible plans, to use our point-of-sale (POS) rebate option to lower 
drug costs at the pharmacy counter for their beneficiaries. CVS 
Health's own health plan for our employees uses POS rebates, and across 
all our clients we cover approximately 10 million lives under POS 
rebates.

    Question. What is the process of deciding on which tier a generic 
will be placed in your formularies?

    Answer. Tier placement for generic products varies depending on the 
type of plan (e.g., Medicare, managed Medicaid, fully-insured, self-
funded, etc.) and the plan sponsor's formulary strategy. Generally, for 
CVS Caremark template formularies, tier placement is guided by 
established business rules appropriate for the type of plan and 
formulary strategy. Often generic drugs will be placed on the lowest 
cost sharing tier. In some instances, generic drugs may be placed on 
higher tiers based on cost or clinical considerations. CVS Caremark 
template formularies, including tier placement, are reviewed by the CVS 
Caremark National Pharmacy and Therapeutics Committee.

    Question. Are generics always tiered as preferred (versus branded 
drugs)?

    Answer. No. In some instances, generics may be higher cost and we 
look to provide the lowest net cost to our clients.

    Question. How quickly are generics placed on formularies once FDA 
clears them?

    Answer. The time frame for adding generic drugs to a formulary 
varies depending on the type of plan and the plan sponsor's formulary 
strategy. For CVS Caremark template formularies with an ``open'' 
formulary strategy, a generic drug may be added to the formulary as 
soon as it becomes available in the market and is added to our 
adjudication drug file. For template formularies with a ``closed'' 
formulary strategy, generally generic drugs will be reviewed soon after 
their availability in the market. In most cases, a generic drug will be 
added to the closed template formularies. However, a generic drug may 
not be added to the closed template formularies when the net cost to 
clients exceeds the net cost of the reference brand drug or other 
alternatives in the same therapeutic class.

    Question. Given the struggles we hear about patients accessing 
insulin, what measures are you taking to ensure that diabetes products 
and different types of insulin are placed on a preferred tier when 
establishing a formulary?

    Answer. Although tier placement of particular products may vary by 
formulary, all of the CVS Caremark template formularies include at 
least one product of each type of insulin (rapid acting, short acting, 
intermediate acting, long acting and mixes) on a preferred tier. We 
also recognize that rising insulin prices are deeply concerning. Over 
the last 3 years, we've see the list price for insulin increase 47 
percent. Our job as a PBM is to help blunt the impact of these prices 
increases for our clients. When possible we use competition in a drug 
category to help drive down costs.

    We also offer a clinical program called Transform Diabetes Care 
that helps members better monitor and manage their diabetes between 
doctor's visits. The program has helped members achieve and maintain a 
1-point improvement in A1C over 12 months. To put this result into 
perspective, every 1 percentage point improvement in A1C among patients 
with uncontrolled diabetes is estimated to save $1,400 per member per 
year in medical savings. Fifty percent of patients with uncontrolled 
diabetes in the program were moved to controlled status.

                                 ______
                                 
            Questions Submitted by Hon. Robert P. Casey, Jr.
               transparency, rebates, and spread pricing
    Question. During the hearing, I asked an initial question on spread 
pricing and wanted to follow up here. According to the Centers for 
Medicare and Medicaid Services (CMS), total gross spending in 2017 on 
prescription drugs was $154.9 billion in Medicare Part D, $30.4 billion 
in Part B, and $67.6 billion in Medicaid.

    One of the main challenges in lowering the price of prescription 
drugs is that there is a disturbing lack of transparency all along the 
supply chain, from research and development to what the patient is 
expected to pay at the counter. Further, the out-of-pocket costs for 
drugs varies greatly and unpredictably from patient to patient. That is 
why Senate Special Committee on Aging Chairwoman Collins and I 
introduced legislation that would codify the Drug Spending Dashboards 
at the CMS. The dashboards provide cost and spending information for 
drugs in the Medicaid, Medicare Part B, and Medicare Part D 
programs.\9\ With regards to transparency in the prescription drug 
supply chain, please provide answers to the following questions.
---------------------------------------------------------------------------
    \9\ S. 709, 116th Congres, Prescription Drug Pricing Dashboard Act. 
Online at: https://www.congress.gov/bill/116th-congress/senate-bill/
709?q=%7B%22search%22%3A%22drug+dash
board%22%7D&s=1&r=1. Accessed April 23, 2019.

    Is it the policy and practice of your company to negotiate with 
drug manufacturers in good faith and obtain the best and lowest prices 
---------------------------------------------------------------------------
possible for patients and American taxpayers?

    Answer. Yes. Part D is highly competitive and incentivizes Part D 
plans to get the best deals possible.

    Question. Is it the policy and practice of your company that 
patients, providers, researchers, policymakers, and the American people 
in general, know how taxpayer dollars are being spent in the Medicare 
and Medicaid programs?

    Answer. Both Medicare Part D and Medicaid require extensive 
reporting requirements that we comply with, that allow CMS to 
understand how the program is working. CVS Health supports legislation 
to give MedPAC and MACPAC access to appropriate data. Reporting to CMS 
and health plan clients in Part D is very granular as it is done at the 
NDC level.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by manufacturer list price?

    Answer. No, but it is tracked and reported in aggregate to CMS for 
Part D plans.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by rebate paid by the manufacturer 
to you (the PBM)?

    Answer. Yes, for Part D.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by the amount reimbursed to 
pharmacies by the PBM?

    Answer. Yes, for Part D.

    Question. Is it the policy and practice of your company to disclose 
how much a drug costs, broken down by the amount insured and uninsured 
patients pay out of pocket, before coupons, discounts, and other forms 
of patient assistance offered at the point of sale?

    Answer. Yes, for Part D.

    Question. If so, please provide useful and easily accessible links 
to where policymakers and the public can find such information. If not, 
please disclose how for each drug you work with clients to provide 
costs, broken down by manufacturer list price.

    Answer. PBMs do not set the manufacturer list price. We negotiate 
with manufacturers only after they have set the price. PBM 
reimbursement to pharmacies is not based upon the manufacturer list 
price either.

    Question. If so, please provide useful and easily accessible links 
to where policymakers and the public can find such information. If not, 
please disclose how for each drug you work with clients to provide 
costs, broken down by rebate paid by the manufacturer to you (the PBM); 
the amount reimbursed to pharmacies by the PBM; and the amount insured 
and uninsured patients pay out of pocket, before coupons, discounts, 
and other forms of patient assistance offered at the point of sale.

    Answer. The information in the questions above is provided to CMS 
and health plans via the prescription drug events (PDE) reports and 
Direct and Indirect Remuneration (DIR) reports in Medicare Part D. 
These are reported retrospectively. The granular information is not 
available to the public; however, the public can and extensively does 
use the CMS Plan Finder tool. Plan finder details the members monthly 
out-of-pocket costs for the specific drugs the member takes by month. 
Plan finder pricing is updated every two weeks, so the public has 
access to current pricing data. Furthermore, members get monthly 
explanation of benefits statements detailing their out of pocket 
spending.

    Coupons and patient assistance programs are generally not allowed 
in Medicare Part D. In any case, PBMs have no insight into those dollar 
flows as they are done at the pharmacy counter outside the claim's 
process. PBMs do not cover uninsured patients and do not have insight 
to their pharmacy costs.

    Question. Please provide a list of actions your company has taken 
to ensure that pharmacists are enabled and allowed to communicate to 
patients how they can pay the lowest out-of-pocket cost possible for 
their prescription drugs.

    Answer. CVS Caremark does not use so-called ``gag clauses,'' and 
CVS Health supported Federal legislation to ban them.

                                 ______
                                 
                 Prepared Statement of Hon. Ron Wyden, 
                       a U.S. Senator From Oregon
    This morning, the Finance Committee continues our work on 
pharmaceutical price-gouging, which does enormous harm to consumers and 
taxpayers. There's a lot of work to do in the days ahead, but this 
committee has already put points on the board. Just last week, Congress 
passed our bipartisan legislation that stopped a blatant scheme big 
pharmaceutical companies had used to rip off Medicaid and taxpayers.

    This morning, the committee is joined by executives from several 
pharmacy benefit managers. I see this hearing as a chance to examine 
one of the most gnarled, confounding riddles in American health care 
today. Pharmacy benefit managers are among the most profitable 
companies in the Nation. What PBMs do to earn all those profits is a 
mystery.

    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. With Americans learning about schemes like ``spread pricing'' 
in Medicaid, whether PBMs bring any real value to taxpayers is a 
mystery.

    PBMs are supposed to be negotiators who get better deals on 
prescription drugs for patients. What they are is middlemen who've 
raked in profits while drug prices have shot into the stratosphere. And 
as most people will tell you, there are already too many middlemen 
taking a cut in the American health-care system.

    Let's run through a little history and some basic facts with PBM 
101. PBMs first showed up decades ago, back when prescription drugs 
were becoming more common. They told insurers, ``We're the ones who 
know drug pricing, so we'll handle the negotiations for you.'' But 
there is scant evidence PBMs have held drug prices down in a meaningful 
way. In fact, most of the evidence shows the opposite.

    Pharmacy benefit managers make more money when they pick a higher-
priced drug over a lower-priced drug. The logic on this issue isn't 
exactly graduate-level. PBM profits are based on taking their slice of 
the prescription drug pie. More expensive drugs mean there's a bigger 
pie. When there's a bigger pie, there's a bigger slice for PBMs.

    Pharmacy benefit managers guard their operations with greater 
secrecy than HBO is guarding the ending of ``Game of Thrones.'' There 
has never been more outrage in America over the rising costs of 
prescription drugs. If PBMs had clear, hard evidence proving that 
they're getting patients a better deal on prescription drugs, they'd be 
leafleting the countryside and shouting it from rooftops. Instead, they 
work overtime to keep patients and taxpayers in the dark.

    Today the committee will be told a thousand different versions of 
the same talking point: ``We're all about getting the best possible 
price for patients.'' But there won't be actual proof. Bottom line, 
PBMs are middlemen who strike deals with drug makers in secret. In my 
experience, that kind of negotiation rarely results in an act of 
charity for consumers.

    Now, because of this committee's special jurisdiction, I want to 
look at a few specifics with respect to our Federal health-care 
programs.

    First on Medicaid: a PBM scheme known as ``spread pricing'' to rip 
off taxpayers via Medicaid set off alarm bells in States nationwide. 
It's got nothing to do with the cost of cream cheese. Here's how it 
works. PBMs are paying one set price to pharmacies for a particular 
drug, but they're turning around and charging Medicaid and other 
health-care payers far more for that same prescription.

    Chairman Grassley and I are digging into this. We've asked the 
Health Department Inspector General to take a hard look. If there are 
changes that can be made to clamp down on this exploitation of 
Medicaid, I hope the committee will consider them. In my view, it's as 
clear a middleman rip-off as you're going to find.

    Now let's look at Medicare, where there are a few issues to 
examine. First, Part D is one of the few health benefits in America 
today that does not have an out-of-pocket cap. That means seniors with 
catastrophic illnesses could be facing costs of thousands and thousands 
of dollars. These are mostly people on fixed incomes, and growing old 
in America is already too expensive. This is a flaw that needs to be 
fixed, and I've proposed legislation to fix it.

    Next, Medicare Part D encourages drug makers and PBMs to push 
seniors onto more expensive drugs. That's because, after a certain 
amount of spending on drugs, seniors and Medicare are on the hook for 
85 percent of the costs. After that point, PBMs pay only 15 percent, 
and drug makers are off the hook entirely. So it's good business for 
the drug industry when seniors cross that threshold as fast as 
possible.

    Second, rebates are working against the seniors who need the 
benefit most. Drug rebates in Part D get sent straight to insurance 
companies. In theory, they use the rebates to lower premiums, which 
sounds good if you're healthy. It's not such a great deal for seniors 
who are battling illnesses. The amounts they pay for their 
prescriptions are based on list prices, not on the prices factoring in 
rebates.

    That's why I introduced the C-THRU Act, so that patients can 
finally see whether these rebates are worth that trade-off. If they 
aren't, C-THRU makes sure that the benefit of the rebate goes directly 
to seniors at the pharmacy window.

    The administration has also proposed new rule changes having to do 
with this issue. I'm concerned its solution could produce a windfall 
for drug makers and that the administration is unprepared to take the 
next steps that rein in drug makers and bring down list prices.

    Very briefly in closing, I want to thank Chairman Grassley for 
bringing this hearing together. I already mentioned the work he and I 
are doing with respect to Medicaid and so-called spread pricing. He and 
I are also working together to investigate the role PBMs played in 
sending insulin prices through the roof. We sent detailed letters to 
several of the witnesses here this morning. We're looking forward to 
seeing their responses and the associated documents. And I'm also 
looking forward to Q&A today.

                                 ______
                                 
                                 [GRAPHIC] [TIFF OMITTED] T0919.006
                                 

                                 ______
                                 

                           From FiercePharma

             UnitedHealthcare Demands Drug Rebates Even if 
                    Pharma Cuts List Prices: Analyst

                           By Eric Sagonowsky

February 11, 2019

If drugmakers think they can save on rebates if they cut list prices as 
politicians and public opinion are demanding--well, forget it, says 
UnitedHealthcare, which sent new demands to pharma companies, an 
analyst wrote.

The insurance and pharmacy benefits giant is demanding long notices 
ahead of any drug price cuts, according to the letter, which two 
drugmakers confirmed to Bernstein analyst Ronny Gal. And 
UnitedHealthcare expects equivalent rebates whenever list prices are 
cut, the analyst wrote in a Friday note to investors.

The news comes as drug companies look to price reductions as a new 
strategy to fight high rebates and gain goodwill with lawmakers and the 
Trump administration. On Monday, Sanofi announced that it is cutting 
its Praluent price by 60%, following Amgen's move to chop Repatha's 
list price by the same percentage. The PCSK9 cholesterol drugs are 
among many that have a large ``gross-to-net'' price gap, or high list 
prices--and high rebates and discounts paid out to the supply chain.

Lowering list prices means smaller costs for patients, but the strategy 
would also mean lower revenues for PBMs.

UnitedHealthcare asked for seven quarters' notice--a full 21 months--
when companies intend to lower prices, Gal wrote. The ``drug companies 
are not too happy about'' the UnitedHealthcare letter, he added, as 
many are considering price reductions.

Gal published another note Monday with UnitedHealthcare's response. The 
insurance giant's investor relations team reached out to the analyst 
and said they believed the original report on the letter was 
misleading. For one, UnitedHealthcare's OptumRx sent the letters in 
late December and early January, before the administration's recent 
rebate proposal, Gal wrote, adding that they relate only to rebates in 
Medicare Part D.

The company explained that Part D contracts ``are done on an annual 
basis and must be submitted to CMS six months ahead of coming into 
effect,'' Gal wrote. UnitedHealthcare needs the time to calculate drug 
cost structures, Gal wrote, summarizing the discussion. And on 
maintaining rebates, UnitedHealthcare told the analyst patient premiums 
would rise with lower rebates.

An OptumRx spokesman told FiercePharma the company in April 2018 ``led 
the way in providing prescription drug discounts at the point of sale 
for millions of consumers and OptumRx negotiates with pharmaceutical 
manufacturers every day to reduce the prices they charge, including 
list prices.''

``Our goal in asking for advance notice of price changes in the lengthy 
Part D bid process is to achieve greater transparency and 
predictability in consumer premiums and out-of-pocket costs,'' he said. 
Plus, the company ``passes the vast majority of Medicare Part D rebates 
back to health plans, so our negotiations regarding rebates have 
virtually no impact on our bottom line.''

Drug rebates and high list prices have come under growing fire, and the 
Trump administration recently unveiled a plan to shake up pricing in 
Medicare Part D and Medicaid. The plan involves outlawing rebates and 
instead allowing discounts for patients and fee-for-service deals for 
PBMs. The PBM industry pushed back, but pharma companies support the 
idea. Quickly after rolling out the plan, HHS secretary Alex Azar 
called on Congress to extend the proposal to commercial markets.

The letters have not been made public; Gal wrote that he heard of its 
existence through conversations with pharma executives.

The new Trump plan is only one out of many in a heated debate over 
pricing in recent years. Last week, five pharma CEOs and a top 
executive at Johnson & Johnson agreed to testify at an upcoming Senate 
committee hearing on drug prices.

Meanwhile, at least one drugmaker is taking a different tack to lower 
costs for patients. Gilead Sciences, facing huge rebates in hepatitis 
C, previously unveiled a plan to launch authorized generics to its big-
selling drugs Epclusa and Harvoni, rather than cut list prices.

                             Communications

                              ----------                              


                    American Pharmacists Association
Chairman Grassley, Ranking Member Wyden, and Members of the Committee, 
the American Pharmacists Association (APhA) is pleased to submit the 
following Statement for the Record for the U.S. Senate Finance 
Committee Hearing ``Drug Pricing in America: A Prescription for Change, 
Part III.''

APhA, founded in 1852 as the American Pharmaceutical Association, 
represents nearly 60,000 pharmacists, pharmaceutical scientists, 
student pharmacists, pharmacy technicians, and others interested in 
improving medication use and advancing patient care. APhA members 
provide care in all practice settings, including community pharmacies, 
physicians' offices, hospitals, long-term care facilities, specialty 
pharmacy, community health centers, managed care organizations, hospice 
settings and the uniformed services.

Both Congress and the Administration have pointed out ongoing 
pharmaceutical benefit manager (PBM) practices in the Medicare program 
negatively impacting patient costs, care and access. Additional 
proposals from the Administration have emphasized PBMs operate in a 
consolidated, opaque space and pose a barrier to pharmaceutical 
companies lowering their prices \1\ and spend a significant amount of 
effort trying to rectify the negative impact certain PBM practices have 
had on patients and pharmacies.
---------------------------------------------------------------------------
    \1\ HHS. American Patients First--The Trump Administration 
Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. May 
2018, available at: https://www.hhs.gov/sites/default/files/
AmericanPatientsFirst.pdf.
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Build Off a Good Start

APhA appreciates the strong bipartisan support of the Committee for 
recent legislation signed into law that prohibits PBMs' use of so-
called pharmacist ``gag clauses'' in Medicare and private health plans, 
to support the flow of information between pharmacists and their 
patients. These laws increase patients' access to more affordable and 
cost-effective medicines by empowering pharmacists to inform patients 
that a medication may be less expensive if purchased at the ``cash 
price,'' rather than through their insurance plan. For years, 
pharmacists have been frustrated by their inability to help their 
patients who they knew were struggling with high co-
payments. APhA also looks forward to working with the Committee to 
lower patients' out-of-pocket costs.

Similarly, APhA hopes the Committee will build off these bipartisan 
results to pass legislation prohibiting Medicare Part D plan sponsors/
PBMs from retroactively reducing payment on clean claims submitted by 
pharmacies which would, in turn, increase transparency in drug pricing, 
decrease beneficiaries' out-of-pocket costs and Medicare catastrophic 
coverage costs.

Address Retroactive DIR Fees

In 2018, APhA's House of Delegates passed a resolution stating ``APhA 
opposes retroactive direct and indirect remuneration (DIR) fees and 
supports initiatives to prohibit such fees on pharmacies.''\2\ APhA has 
long had policy supporting the pharmaceutical industry's adoption of a 
``transparent pricing'' system which would eliminate hidden discounts, 
free goods, and other subtle economic devices,\3\ like rebates between 
manufacturers and PBMs. As recognized by the Centers for Medicare and 
Medicaid Services (CMS), certain PBM practices, can result in higher 
prices at point-of-sale and consequently, higher beneficiary copays. 
DIR fees were originally designed to capture rebates and other 
mechanisms not included at the point-of-sale. However, DIR fees by PBMs 
are now being used beyond their original purpose to retroactively 
adjust pharmacies' payment months after the sale, sometimes below the 
price paid by the pharmacy. As stated by CMS in the November 2017 
proposed Medicare Part D rule, ``[b]etween 2010 and 2015, the amount of 
all forms of price concessions received by Part D sponsors and their 
PBMs increased nearly 24 percent per year, about twice as fast as total 
Part D gross drug costs, according to the cost and price concession 
data Part D sponsors submitted to CMS for payment purposes.''\4\
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    \2\ APhA. House of Delegates. Current Adopted Policy Statements 
1963-2018. (JAPhA 58(4):356 July/August 2018). Pg. 115. Available at: 
https://media.pharmacist.com/hod/APhA_Policy_
and_Procedures_2018.pdf.
    \3\ APhA. House of Delegates. Current Adopted Policy Statements 
1963-2018 (JAPhA NS8:362 July 1968) (JAPhA NS44(5):551 September/
October 2004) (Reviewed 2006) (Reviewed 2011) (Reviewed 2016). Pg. 31. 
Available at: https://www.pharmacist.com/sites/default/files/files/
16898%20CURRENT%20ADOPTED%20POLICY%20MANUAL%20-%20FINAL.pdf.
    \4\ CMS. Medicare Program; Contract Year 2019 Policy and Technical 
Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-
for-Service, the Medicare Prescription Drug Benefit Programs, and the 
PACE Program. Proposed Rule. November 28, 2017. Available at: https://
www.federalregister.gov/documents/2017/11/28/2017-25068/medicare-
program-contract-year-2019-policy-and-technical-changes-to-the-
medicare-advantage-medicare.
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Retroactive DIR Fees Increase Costs for Pharmacies and Patients

There is simply no connection between price concessions given by 
manufacturers to PBMs and the prices paid by pharmacies to their 
wholesalers. Thus, DIR fees ``recovered'' from pharmacies by PBMs are 
totally illogical (i.e., recovering money from pharmacies that 
pharmacies did not ``receive'' in the first place). Because current 
point-of-sale prices or copays paid by beneficiaries can be based on 
the contracted price before DIR is extracted, many beneficiaries 
actually pay higher out-of-pocket costs. CMS has cited numerous 
research that further suggest higher cost sharing can impede 
beneficiary access to necessary medications, which leads to poorer 
health outcomes and higher medical care costs for beneficiaries and 
Medicare. Therefore, APhA strongly urges the Committee to prohibit 
PBMs' use of such fees as part of their payment methodology for 
pharmacies.

Retroactive DIR Fees Increase Medicare Catastrophic Coverage Costs

As you know, Medicare-enrolled seniors pay pharmacies a copay for 
medications, while the full price of the drug is credited against the 
patient's coverage limit. The PBM administering Medicare's prescription 
benefit decides to use retroactive DIR fees to take back a portion of 
the pharmacy's reimbursement for the actual costs of the patient's 
medication, often causing pharmacies to ultimately dispense a 
medication below cost, which jeopardizes maintenance of patient access. 
In addition, the original higher price--not the DIR adjusted price--is 
still counted against the patient, pushing them more quickly into 
Medicare's ``doughnut hole'' coverage gap in which they become 
responsible for a much greater portion of their prescription costs. 
Even after the coverage gap closes in 2020, the use of DIR fees 
significantly increases costs as these patients enter Medicare's 
catastrophic coverage phase, in which taxpayers are now on the hook for 
80% of each patient's health care expenses.

Focus on Patient Care Services: Pharmacists Stand Ready to Help

APhA continues to remind HHS when developing mechanisms to lower drug 
costs to separately consider the reimbursement of the product cost, 
which is fixed for pharmacists, from the cost of dispensing and any 
related patient care service or performance incentive payment to 
provide adequate reimbursement under a business sustainable model that 
improves and does not disrupt our nation's pharmacy distribution 
system. Unfortunately, the current system still fails to provide a 
specific payment incentive for pharmacies to provide needed patient 
care services. A situation the Committee could remedy by passing 
legislation enabling beneficiaries to access pharmacist-provided 
patient care services under Medicare Part B. Last year, 56 Senators 
signed onto S. 109, the Pharmacy and Medically Underserved Areas 
Enhancement, a bill that enjoyed the support of many members of the 
Finance Committee. Such legislation would help improve health outcomes, 
increase quality, reduce costs and consequently, increase the viability 
and longevity of the Medicare program. In addition, this legislation 
aligns with team-based and cost effective health care by facilitating 
opportunities for early intervention so as to minimize long term health 
care costs, such as those associated with preventable higher-cost 
conditions. Providing coverage for patient care services by 
pharmacists, the medication expert on the health care team, would be a 
major step forward in making sure medications are appropriate and 
taken/ used correctly which would begin to address the $672 billion 
spent annually on medication-related problems and nonoptimized 
medication therapy, including nonadherence,\5\ and maximize the federal 
government's significant investment in Medicare patients' medications.
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    \5\ Watanabe , Jonathan H. et al. Cost of Prescription Drug-Related 
Morbidity and Mortality. Annals of Pharmacology. First published March 
26, 2018. Available at: http://journals.
sagepub.com/eprint/ic2iH2maTdI5zfN5iUay/full.

APhA would like to thank the Committee for continuing to work with us 
and other pharmacy stakeholders to increase transparency of PBM 
practices for pharmacies and patients. We appreciate your ongoing 
leadership addressing the barriers to innovation which continue to 
increase America's rising health care costs. Please contact Alicia 
Kerry J. Mica, Senior Lobbyist, at [email protected] or by phone to 
(202) 429-7507 to arrange a meeting with us to discuss the many 
services pharmacists provide to improve patient care, outcomes and 
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reduce costs.

                                 ______
                                 
                 American Society of Clinical Oncology

                       2318 Mill Road, Suite 800

                          Alexandria, VA 22314

                            T: 571-483-1300

                            F: 571-366-9530

                              www.asco.org

April 9, 2019

The Honorable Chuck Grassley
Chair
U.S. Senate
Committee on Finance
Washington, DC 20510

The Honorable Ron Wyden
Ranking Member
U.S. Senate
Committee on Finance
Washington, DC 20510

Dear Chairman Grassley and Ranking Member Wyden,

The American Society of Clinical Oncology (ASCO) appreciates the 
committee's ongoing efforts to examine prescription drug pricing and 
consider solutions to lower costs for patients. ASCO shares your 
concern about the rising cost of prescription drugs and stands ready to 
work with you on real solutions that address the affordability of 
cancer drugs.

ASCO is the national organization representing more than 45,000 
physicians and other health care professionals specializing in cancer 
treatment, diagnosis, and prevention. We are committed to ensuring that 
evidence-based practices for the treatment of cancer are available to 
all Americans.

As the committee continues its ``Drug Pricing in America: A 
Prescription for Change'' series of hearings with today's hearing 
focused on pharmacy benefit managers (PBMs), ASCO offers for your 
review the ``ASCO Position Statement: Pharmacy Benefit Managers and 
Their Impact on Cancer Care.''

We hear serious concerns from our members about the negative effects of 
certain PBM practices on patients and the cancer care system. These 
include errors in filling prescriptions, treatment doses being altered 
without consultation with oncology care providers, duplicate patient 
copays due to incomplete dispensing, and drug waste resulting from 
incorrect doses or treatments being sent directly to a patient's home. 
ASCO members also express frustration with utilization management 
techniques used by PBMs, especially prior authorization and step 
therapy. ASCO's ``Policy Statement on the Impact of Utilization 
Management Policies for Cancer Drug Therapies'' goes into further 
detail on ASCO's recommendations around prior authorization and step 
therapy.

If you have questions on any issue involving the care of individuals 
with cancer or would like to be directed to ASCO's thoughts on a 
specific issue related to drug pricing, please contact Jennifer 
Brunelle at [email protected].

Sincerely,

Monica M. Bertagnolli, M.D., FACS, FASCO
President, American Society of Clinical Oncology

                                 ______
                                 

       American Society of Clinical Oncology Position Statement: 
       Pharmacy Benefit Managers and Their Impact on Cancer Care

Introduction

Cancer drugs are a critical component of treatment for many cancer 
types as well as for the prevention and control of symptoms. They also 
represent an increasing component of cancer care cost. Prescription 
drugs now account for 10% to 17% of national healthcare 
spending.\1\, \2\ Spending on cancer drugs in the United 
States has increased substantially over the last 5 years, from $28 
billion in 2013 to $51 billion in 2017, and is expected to continue 
this upward trend.\3\ The arrival of new, more expensive prescription 
drugs has contributed to this increase, a trend that is likely to 
continue. ASCO has weighed in on the rising cost of cancer care several 
times, including position statements on the affordability of cancer 
drugs and utilization management.\4\, \5\
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    \1\ Sood N, Shih T, Van Nuys K, Goldman D. The Flow of Money 
Through the Pharmaceutical Distribution System. USC Shaeffer--Leanord 
D. Schaeffer Center for Health Policy and Economics. June 2017, http://
healthpolicy.usc.edu/documents/USC%20Schaeffer_Flow%20of%20
Money_2017.pdf.
    \2\ National Academy of Sciences, Engineering and Medicine. 2017. 
Making Medicines Affordable: A National Imperative. Washington, DC: The 
National Academies Press, https://doi.org/10.17226/24946.
    \3\ IMS Institute for Healthcare Informatics. Medicines Use and 
Spending in the U.S. April 2018, https://www.iqvia.com/-/media/iqvia/
pdfs/institute-reports/medicine-use-and-spending-in-the-us-a-review-of-
2017-and-outlook-to-2022.pdf.
    \4\ American Society of Clinical Oncology. American Society of 
Clinical Oncology position statement on addressing the affordability of 
cancer drugs. J Oncol Pract 14(3): 187-192, 2017.
    \5\ American Society of Clinical Oncology. American Society of 
Clinical Oncology policy statement on the impact of utilization 
management policies for cancer drug therapies. J Oncol Pract 13:758-
762, 2017.

With cancer care costs rising, new strategies have emerged in the 
public and private sectors to curb spending while also aiming to 
preserve and improve quality. One such strategy is utilization of 
pharmacy benefit manager companies (PBMs), third-party administrators 
of prescription drug programs used by a variety of sponsors including 
commercial health plans, self-insured employer plans, Medicare Part D 
plans, the Federal Employees Health Benefits Program, and others. The 
PBM industry has grown exponentially since its inception in the 1980s 
and has become highly concentrated. The three largest PBMs (Express 
Scripts, OptumRx, and CVS Caremark) collect more than $200 billion a 
year to manage prescription services for 266 million Americans in both 
public and private plans. They cover 85% of the market.\6\ 
Additionally, each of these PBMs own a specialty pharmacy company.
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    \6\ National Academy of Sciences, Engineering and Medicine. 2017. 
Making Medicines Affordable: A National Imperative. Washington, DC: The 
National Academies Press. Available at https://doi.org/10.17226/24946.

PBMs were originally created to serve as third-party administrators of 
pharmacy claims, but now leverage their market power to obtain lower 
prices on drugs. Employers and other plan sponsors also use PBMs to 
outsource the complicated work of designing and maintaining formularies 
to those with more specialized expertise. Although PBMs have the 
potential to generate cost savings for payers and plan sponsors, it is 
not clear those savings necessarily accrue to patients.\7\ Stakeholders 
have been challenged in achieving detailed understanding of this issue 
because of the proprietary and confidential environment in which PBMs 
operate.\8\
---------------------------------------------------------------------------
    \7\ Robert Goldberg. Drug Costs Driven by Rebates. Center for 
Medicine in the Public Interest, http://bionj.org/wp-content/uploads/
2015/11/drug-costs-driven-by-rebates.pdf.
    \8\ Centers for Medicare and Medicaid Services. Medicare Part D--
Direct and Indirect Remuneration (DIR). 2017, https://www.cms.gov/
newsroom/mediareleasedatabase/fact-sheets/2017-fact-sheet-items/2017-
01-19-2.html.

ASCO members and others in the oncology community have also shared 
experiences and voiced concerns about a potentially negative role PBMs 
can have on patient care. Members of ASCO's State Affiliate Council and 
other ASCO members have expressed concern that, while employing certain 
cost containing practices, PBMs may in some cases be interfering with 
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the doctor-patient relationship and lowering the quality of care.

As the leading organization for physicians and oncology professionals 
caring for people with cancer, ASCO is committed to promoting access to 
high quality, high value cancer care. Given the enormous leverage PBMs 
have over the delivery of cancer care--and in view of concerns raised 
by leaders of state hematology oncology societies across the country--
the ASCO Board of Directors has placed a priority on understanding and 
addressing the role of PBMs in oncology and its effect on patient care.

The purpose of this ASCO Position Statement is to provide a summary of 
issues our members have raised about the role of PBMs in oncology, to 
share questions that have surfaced about PBM practices and their impact 
on physicians and patients, to assert ASCO's immediate position on key 
issues, and to highlight areas of concern the Society plans to explore 
more deeply as part of a focused policy effort.

The recommendations put forth in this statement are as follows:

      PBMs and the payers with whom they work for should take 
immediate steps to address quality of care concerns related to the 
cancer patients they serve, including assuring that changes to 
prescribed therapy for patients with cancer are made only in the 
context of prior consultation and approval of their physician.

      Pharmacies should not be prevented from sharing with patients 
their most cost-effective option for purchasing needed medications 
(i.e., gag clauses). To this end, CMS should eliminate contractual 
requirements that prevent pharmacists from sharing with patients their 
most cost-effective option for purchasing required medications.

      CMS should leverage its regulatory authority to: (1) require 
that PBMs provide detailed accounting of DIR fees, and (2) instruct 
contractors and PBMs to discontinue application of current Star 
performance ratings and related DIR claw backs on oncology dispensing 
physicians and practice-based pharmacies, instead relying on measures 
and standards that are more appropriate to the specialty.

      CMS should enforce its ``Any Willing Provider'' provision in 
Medicare Part D, preventing PBMs from excluding qualified in-office 
dispensing or provider led pharmacies from its networks.

      CMS should consider extending use of the JW modifier to better 
identify sources and cost of waste related to chemotherapy drugs in 
both Part B and Part D. Such data should be made public. Private payers 
should consider similar strategies.

      Pharmacy and Therapeutics committees should include full and 
meaningful participation by oncology specialists.

PBMs and Cancer Care: Overview of the Issues

PBMs are responsible for developing and managing prescription drug 
benefits in the public and private insurance sectors. Their role 
includes processing prescription drug claims and negotiating contracts 
with pharmacies and pharmaceutical manufacturers. The expansion of 
prescription drug benefits, particularly with implementation of 
Medicare Part D, has created a higher demand for management and 
administration of prescription drugs for health plans, employers, and 
government entities (referred to in this statement collectively as 
``plan sponsors''). PBMs also own and operate specialty and mail-order 
pharmacies.

Because PBMs now participate in plans that cover so many lives, they 
naturally have significant influence over the way patients access their 
medications.\9\ Recently two major PBMs announced plans to merge with 
large insurers. Pending approval by the federal government, CVS Health 
is set to acquire Aetna Inc. and Cigna is set to acquire Express 
Scripts. If approved, this will lead to greater market integration and 
an ever-increasing role of PBMs.
---------------------------------------------------------------------------
    \9\ PBM DIR Fees Costing Medicare and Beneficiaries: Investigative 
White Paper on Background, Cost Impact, and Legal Issues. Prepared by 
Frier Levitt, LLC. Commissioned by the Community Oncology Alliance. 
January 2017.

As for-profit companies, PBMs generate revenue in various ways from 
pharmaceutical manufacturers, pharmacies and plan sponsors. PBMs obtain 
revenue from pharmaceutical manufacturers in the form of rebate 
payments for ``preferred'' formulary status, which results in increased 
---------------------------------------------------------------------------
market-share by encouraging utilization of the drugs chosen.

Negotiated contracts defining reimbursement to pharmacy network 
providers (including chain and community pharmacies, physician 
dispensers and physician practices with on-site pharmacies) also serve 
as a source of revenue for PBMs. The ``spread'' or price difference 
generated by what is charged to plan sponsors and reimbursed to 
pharmacies for the same prescription has resulted in significant 
revenue for PBMs.

From plan sponsors, PBMs generate revenue through contracts for 
administration of prescription drug benefits within the health plans. 
PBMs charge administration and service fees to plan sponsors for 
processing prescriptions, creating and managing formularies, and 
processing claims. These are often managed separately from the rest of 
an employer's health plan.

PBMs assert there is no link between drug price growth and the rebates 
they are receiving.\10\ The lack of transparency around rebate 
arrangements prevents verification of such claims. Regardless, the 
impact of PBMs on oncology care providers and patient quality of care 
is increasingly apparent. The American Medical Association (AMA) has 
adopted Resolution 225-A-18 which asks the AMA to assess the impact 
PBMs have on patient's timely access to medications, patient outcomes, 
and the ``erosion of physician-led medication therapy management.'' 
\11\
---------------------------------------------------------------------------
    \10\ Pharmaceutical Care Management Association. No Correlation 
Between Increasing Drug Prices and Manufacturer Rebates in Major Drug 
Categories, https://www.pcmanet.org/wp-content/uploads/2017/04/Visante-
Study-on-Prices-vs.-Rebates-By-Category-FINAL-3.pdf.
    \11\ American Medical Association. House of Delegates Resolution 
225-A-18, https://policysearch.ama-assn.org/policyfinder/detail/
pharmacy%20benefit%20manager?uri=%2FAMA
Doc%2Fdirectives.xml-D-120.933.xml
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The Role of PBMs in Utilization Management
As PBMs have grown, so have their restrictions and requirements on 
pharmacies, providers and patients. ASCO previously identified concerns 
about certain utilization management practices, the burden they often 
represent to both physicians and patients, and their potential to erode 
access and quality of care.These include: (i) prior authorization 
requirements, (ii) restrictive formularies, (iii) step therapy (fail-
first) requirements, and (iv) specialty tiers.\12\ While PBMs are more 
of an intermediary or agent for payers, ASCO's concerns about--and 
opposition to--certain utilization management practices also apply to 
PBMs that employ these same policies. ASCO members have reported that 
some patients have had their medication or dosage changed by PBMs 
without prior approval by--or consultation with--the treating 
physician. They have also reported increasing administrative burdens 
that require additional staff and resources--solely to navigate prior 
authorization requirements and patient financial assistance programs. 
The issue has drawn attention across the medical community: the 
American Medical Association (AMA) has identified this as a priority 
and has issued prior authorization and utilization management 
principles, which broadly align with ASCO's recommendations.\13\
---------------------------------------------------------------------------
    \12\ American Society of Clinical Oncology. American Society of 
Clinical Oncology policy statement on the impact of utilization 
management policies for cancer drug therapies. J Oncol Pract 13:758-
762, 2017.
    \13\ American Medical Association. 2016. Prior Authorization and 
Utilization Management Reform Principles, https://www.ama-assn.org/
sites/default/files/media-browser/principles-with-signatory-page-for-
slsc.pdf.
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Restricted Networks and Distribution
ASCO has previously stated its concerns about payer policies that 
require oncologists to administer chemotherapy agents that have been 
prepared outside the physician's office by an entity under contract 
with the payer (so called ``brown bagging'' and ``white bagging'').\14\ 
``Brown bagging'' refers to arrangements in which the drug is purchased 
through a specialty pharmacy and shipped directly to the patient; the 
patient then takes the drug to the physician's office for 
administration. ``White bagging'' refers to arrangements in which the 
drug is purchased through a specialty pharmacy and shipped to the 
provider's office for administration. ``Brown bagging'' is especially 
concerning, as there is little control over how hazardous or unstable 
medications are stored and handled prior to administration in the 
physician's office. Concerns about ``white bagging'' and ``brown 
bagging'' carry the same concerns about medication access and quality 
whether they are used by payers or PBMs.
---------------------------------------------------------------------------
    \14\ American Society of Clinical Oncology. ``Brown Bagging'' and 
``White Bagging'' of Chemotherapy Drugs. 2016, https://www.asco.org/
sites/new-www.asco.org/files/content-files/advocacy-and-policy/
documents/2016-ASCO-Brown-Bagging-White-Bagging-Brief.pdf.

As well, PBMs increasingly are shifting drug dispensing away from 
physicians and toward pharmacies they own or with which they are 
affiliated, which can negatively impact patient care and access.\15\ 
PBMs actively incentivize--and in some cases require--patients to use 
mail order or specialty pharmacies in lieu of a dispensing physician. 
Such actions are problematic, as it means PBMs are both competing and 
determining reimbursement rates for pharmacists.\16\ Certain states do 
not allow in-
office dispensing or provider-led pharmacies, and such arrangements may 
not be appropriate in every practice setting. However, some studies 
have suggested that practices with medically integrated services may 
improve patient adherence to treatment regimens.\17\
---------------------------------------------------------------------------
    \15\ Pharmacy Benefit Managers' Attack on Physician Dispensing and 
Impact on Patient Care: Case Study of CVS Caremark's Efforts to 
Restrict Access to Cancer Care Prepared by Frier Levitt, LLC 
Commissioned by the Community Oncology Alliance. August 2016, https://
www.communityoncology.org/wp-content/uploads/2016/08/
PBMs_Physician_Dispensing-White
Paper_COA FL.pdf.
    \16\ National Community Pharmacists Association. Letter to Senate 
Judiciary Committee. April 4, 2018, https://www.ncpanet.org/newsroom/
news-releases/2018/04/09/pharmacy-associations-urge-senate-judiciary-
committee-to-hold-hearing-on-pbms.
    \17\ Egerton, Nancy. In-Office Dispensing of Oral Oncolytics: A 
Continuity of Care and Cost Mitigation Model for Cancer Patients. 
American Journal of Managed Care, 22, 4.
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Rebates and Discounts
The lack of transparency in which PBMs operate has caught the attention 
of many stakeholders in the healthcare community, including plan 
sponsors who are employers. The National Pharmaceutical Council (NPC) 
has affirmed that employers are increasingly concerned with pharmacy 
benefit transparency, complexity, and rebates. A recent NPC survey 
revealed that a large percentage of employers agree PBMs lack 
transparency and are overly complicated. Skepticism about the role of 
rebates in achieving an ``aligned and effective health care supply 
chain'' has also been expressed. More than 69% of large employer's 
surveyed report their organizations would welcome an alternative to 
rebate-driven approaches to managing pharmacy benefit costs.\18\
---------------------------------------------------------------------------
    \18\ National Pharmaceutical Council. Toward Better Value: Employer 
perspectives on what's wrong with the management of prescription drug 
benefits and how to fix it. 2017, http://www.npcnow.org/system/files/
research/download/npc-employer-pbm-survey-final.pdf.

Numerous states have passed bills requiring greater transparency from 
PBMs, including Maximum Allowable Cost (MAC) list mandates and more. 
Scarce information is available about the size and frequency of rebates 
PBMs receive from manufacturers, nor is it understood the extent to 
which patients experience actual benefits of these rebates and 
---------------------------------------------------------------------------
discounts.

At the federal level, several legislative proposals call for greater 
transparency.\19\, \20\ The 2018 HHS Blueprint for American 
Patients First also addresses PBM transparency.\21\ The Blueprint 
requests comments on different approaches to learning more about the 
complex financial dealings of the pharmaceutical industry-at-large. In 
addition to elimination of gag clauses, it also suggests modification 
of the Anti-Kickback Statute (AKS) Safe Harbor that allows for rebates.
---------------------------------------------------------------------------
    \19\ Senate Bill 413/H.R. 1038, Improving Transparency and Accuracy 
in Medicare Part D Spending Act, https://www.congress.gov/bill/115th-
congress/senate-bill/413.
    \20\ House Resolution 1316, Prescription Drug Price Transparency 
Act, https://www.
congress.gov/bill/115th-congress/house-bill/1316.
    \21\ U.S. Department of Health and Human Services. 2018. American 
Patients First Blueprint, https://www.hhs.gov/about/news/2018/05/11/
trump-administration-releases-blueprint-lower-drug-prices-and-reduce-
out-pocket-costs.html.
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Gag Clauses
According to the National Conference of State Legislatures, at least 26 
states have passed legislation that would prohibit a practice known as 
a ``gag clause'' on pharmacists.\22\ Gag clauses, increasingly used by 
PBMs, are contractual requirements that bar a pharmacist from informing 
patients about lower-cost drug options. These options could include 
simply purchasing the drug for cash, rather than using insurance. In 
these circumstances, patients could pay cash at the pharmacy, rather 
than go through their insurance coverage, thereby avoiding costs that 
may be solely due to the PBM payment structure. CMS recently issued a 
letter to Part D plan administrators, reminding them that such clauses 
are considered ``unacceptable.'' \23\ Patients with insurance coverage 
are still challenged by high copays for prescriptions and out-of-pocket 
deductibles. Pharmacies should not be prevented from sharing with 
patients their most cost-effective option for purchasing needed 
medications (i.e., gag clauses).
---------------------------------------------------------------------------
    \22\ National Conference of State Legislatures. Prohibiting PBM 
``Gag Clauses'' that Restrict Pharmacists from Disclosing Price 
Options: Recent State Legislation 2016-2018, http://www.ncsl.org/
Portals/1/Documents/Health/Pharmacist_Gag_clauses-2018-14523.pdf
    \23\ Centers for Medicare and Medicaid Services. CMS Sends Clear 
Message to Plans: Stop Hiding Information from Patients. May 17, 2018, 
https://www.cms.gov/Newsroom/MediaRelease
Database/Press-releases/2018-Press-releases-items/2018-05-17.html.
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Direct and Indirect Remuneration Fees
As a means of setting drug reimbursement at the lowest price, CMS 
implemented direct and indirect remuneration (DIR) fees, which are 
intended to determine actual net cost of drugs covered under Part D. 
DIR fees were initially authorized as part of the Medicare 
Modernization Act of 2003. CMS defines DIR as additional compensation 
received after the point-of-sale that serves to change the final cost 
of the drug for the payer, or the price paid to the pharmacy for the 
drug.\24\ Through DIR fees, plan sponsors and PBMs are required to 
report all ``direct'' and ``indirect'' remuneration received from 
third-parties, including drug manufacturers.\25\ Because manufacturer 
rebates paid to PBMs are not known until a prescription has been 
dispensed to the patient and a claim processed at the point-of-sale, 
such remuneration is calculated and reconciled after Medicare pays the 
PBM. In this way, CMS ensures that taxpayers are only paying PBMs what 
the drugs ultimately cost. However, it can also mean that dispensing 
pharmacies discover--after reconciliation--they owe additional money to 
the PBM.
---------------------------------------------------------------------------
    \24\ Medicare Modernization Act of 2003. 42 CFR 423.308.
    \25\ Centers for Medicare and Medicaid Services. Medicare Part D--
Direct and Indirect Remuneration (DIR). 2017, https://www.cms.gov/
newsroom/mediareleasedatabase/fact-sheets/2017-fact-sheet-items/2017-
01-19-2.html.

A 2017 CMS report found that DIR fees used by PBMs do not decrease 
point-of-sale cost for patients and can, in fact, increase patient out-
of-pocket costs. Patients incur cost-sharing based on the price at 
their pharmacy, rather than the final, post-DIR reconciled price paid 
by CMS to the PBM. This can push a patient more rapidly into the 
``donut hole'' where they have higher out-of-pocket costs. At the same 
time, DIR fees can reduce patient premiums and some government costs by 
shifting costs to the catastrophic phase of the benefit.\26\ CMS has 
proposed several ways to improve the administration of DIR fees in the 
Medicare program, but has yet to implement significant changes.
---------------------------------------------------------------------------
    \26\ Centers for Medicare and Medicaid Services. Medicare Part D--
Direct and Indirect Remuneration (DIR). 2017, https://www.cms.gov/
Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-
01-19-2.html.

Recently, PBMs have created a separate--and additional--DIR fee 
structure, known among pharmacists and physicians with in-office 
dispensing and pharmacies as ``claw backs.'' This involves retroactive 
collection of fees by PBMs, the amounts of which are based on 
physicians' and pharmacists' performance according to certain metrics. 
PBMs justify imposition of these performance-based DIR fees by 
referencing CMS' Star Rating System. The Star Rating System is used by 
CMS in Medicare Advantage and Medicare Part D to measure performance on 
plans covering drug services. The Star Rating System measures relate 
largely to medication adherence for conditions such as diabetes, 
hypertension, and cholesterol; and was designed to apply to Part D plan 
sponsors, not pharmacies. No such measures exist for medication 
management in oncology.\27\
---------------------------------------------------------------------------
    \27\ Centers for Medicare and Medicaid Services. 2018 Part C and D 
Star Ratings Measures, https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovGenin/Down
loads/2018MeasureList.pdf.

Despite lacking oncology measures and its misapplication on pharmacies 
instead of plan sponsors, these fees are nevertheless charged directly 
to oncology pharmacy providers, who assert this is done in a way that 
that lacks transparency and is highly profitable for PBMs. These 
performance-based fees are not required by HHS or CMS regulations, and 
appear to have no basis in statute.\28\
---------------------------------------------------------------------------
    \28\ PBM DIR Fees Costing Medicare and Beneficiaries: Investigative 
White Paper on Background, Cost Impact, and Legal Issues. Prepared by 
Frier Levitt, LLC. Commissioned by the Community Oncology Alliance. 
January 2017.
---------------------------------------------------------------------------

Addressing Key Concerns: Transparency, Drug Waste, and Benefit Design

Key concerns that impact ASCO members and their patients with cancer 
fall primarily into four categories:

      Quality and access to care.
      Transparency of PBM operations and pricing.
      Impact on drug waste and/or cost.
      Benefit design.
Quality and Access to Care

ASCO members have expressed several concerns about PBMs and their 
impact on care. These include mistakes in filling prescriptions, 
altering treatment dosages for patients without consulting their 
oncology care provider, incomplete dispensing resulting in duplicate 
patient copays, and delays in treatment related to prior authorization 
demands and other problems.

Many of the practices employed by PBMs are utilization management 
strategies. ASCO has previously asserted its position against policies 
that attempt to incentivize, force, or coerce patients to accept anti-
cancer therapy alternatives that are not recommended by their 
oncologist. Such practices can threaten both the outcomes for patients 
and the well-being of their families or care takers. Utilization 
management processes--whether directed by a health plan or PBM--should 
result in timely and clear determinations that are consistent with the 
health insurer's coverage and other policies; decisions should reflect 
evidence-based practice; and payers should implement utilization 
management policies in a way that minimizes administrative burdens on 
both providers and patients.\29\ Public and private payers should take 
immediate steps to assure that changes to prescribed therapy for 
patients with cancer are made only in the context of prior consultation 
and approval by their physician.
---------------------------------------------------------------------------
    \29\ American Society of Clinical Oncology. American Society of 
Clinical Oncology policy statement on the impact of utilization 
management policies for cancer drug therapies. J Oncol Pract 13:758-
762, 2017.

Timely access to therapies may be harmed by PBM-imposed network 
restrictions. Some PBMs require that patients use only their 
proprietary specialty pharmacy for certain drugs, despite the 
possibility that the patient could access the drug more cheaply and 
quickly from a different pharmacy. It is not uncommon that PBMs allow 
the first fill of an oral oncology drug to be carried out at the local 
or practice pharmacy. Thereafter, all other prescription refills are 
often required to go through the PBM-associated specialty pharmacy. 
Because the largest administrative burden and staff time commitment are 
attached to the first prescription--which includes preauthorization, 
peer-to-peer review, patient education, enrollment into copay 
assistance, and seeking foundation support to fill the financial gap--
this puts the PBM-associated specialty pharmacy at an unfair advantage. 
ASCO is opposed to requirements that limit patients to exclusive use of 
---------------------------------------------------------------------------
PBM-owned or affiliated pharmacies.

Additionally, PBM accreditation standards required for participating 
pharmacies are costly and do not have relevance for oncology care. They 
often are applied in a manner that inappropriately limits the 
dispensing of specialty drugs. CMS has stated that it has received 
complaints from pharmacies that Part D plan sponsors have begun to 
require accreditation of pharmacies, including accreditation by 
multiple organizations or additional Part D plan-/PBM-specific 
credentialing criteria for network participation. In a final rule, CMS 
clearly stated that it does not support the use of a PBM-specific 
credentialing criteria that inappropriately limits dispensing of 
specialty drugs to certain pharmacies.\30\
---------------------------------------------------------------------------
    \30\ Centers for Medicare and Medicaid Services. Contract Year 2019 
Policy and Technical Changes to the Medicare Advantage, Medicare Cost 
Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit 
Programs, and the PACE Program.

Some oncology practices that provide in-office dispensing have been 
excluded from PBM networks entirely, despite Medicare's Any Willing 
Provider (AWP) requirements. CMS has received many complaints from 
pharmacies expressing concern with the process PBMs have adopted for 
complying with the AWP requirements. To address these concerns, CMS 
issued a final rule clarifying that Part D plan sponsors must contract 
with any pharmacy that meets the Part D plan sponsor's standard terms 
and conditions for network participation. They also may not exclude 
pharmacies with unique or innovative business or care delivery models 
from participating in their contracted pharmacy network solely because 
they do not fit in a Part D plan sponsor's particular pharmacy type 
classification.\31\ CMS should enforce its ``Any Willing Provider'' 
provision in Medicare Part D, preventing PBMs from excluding qualified 
in-office dispensing or provider led pharmacies from its networks. This 
enforcement would also prevent PBMs from enacting disproportionate 
incentives for patients to only access PBM-operated specialty 
pharmacies, thus preserving patients' ability to choose the most 
appropriate pharmacy that meets their needs.
---------------------------------------------------------------------------
    \31\ Centers for Medicare and Medicaid Services. CMS Finalizes 
Policy Changes and Updates for Medicare Advantage and the Prescription 
Drug Benefit Program for Contract Year 2019 (CMS-4182-F), https://
www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2018-Fact-sheets-
items/2018-04-02.html.

Additionally, CMS should instruct contractors and PBMs to discontinue 
application of current Star performance ratings and related DIR claw 
backs on oncology dispensing physicians and practice-based pharmacies, 
instead relying on measures and standards that are more appropriate to 
the specialty. Star performance ratings were not intended for this 
purpose and, as currently structured, are not appropriate for oncology 
practice. Both flat and percentage-based fees unfairly disadvantage 
cancer care providers without demonstrably improving quality or patient 
---------------------------------------------------------------------------
outcomes.

ASCO remains committed to ensuring that patients are able to obtain 
timely, high-quality treatment and services at the lowest cost 
possible. Fragmentation of medication management, which occurs when 
cancer drug dispensing and distribution are operated by third parties 
such as PBMs, has the potential to place cancer patients at higher risk 
for errors and life-threatening toxicities unless additional steps are 
taken to ensure patient safety and quality standards are met. When 
managed at the clinic site, the pharmacy has direct access to the 
patient's electronic records. Forty-seven states offer some degree of 
in-office dispensing of drugs or provider-led closed pharmacies. In 
general, specialty pharmacy certifications are readily achievable and 
can be used to assure appropriate patient safety standards in this 
setting. ASCO is opposed to increasingly narrow networks that limit 
patient choice by excluding pharmacy options such as in-office or 
provider-led closed pharmacies that are convenient, cost effective, and 
safe for patient care.
Transparency of PBM Operations and Pricing
In contrast to expanding efforts by the federal government to make 
healthcare prices more public, little is known about PBM financial 
arrangements.\32\ Scarce information is available about the size and 
frequency of rebates PBMs receive from manufacturers, nor is it 
understood the extent to which patients experience actual benefits of 
these rebates and discounts. The ever-changing mix of rebates, 
discounts and performance-based DIR fees make it nearly impossible for 
cancer care professionals to anticipate how much prescribed treatments 
will cost their patients. New and different terms are introduced by 
PBMs to refer to the same financial arrangements, which adds to the 
confusion.
---------------------------------------------------------------------------
    \32\ Centers for Medicare and Medicaid Services. 2016, https://
www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-
Reports/Medicare-Provider-Charge-Data/Physician-and-Other-
Supplier.html.

Numerous states have passed bills requiring greater transparency from 
PBMs, including Maximum Allowable Cost (MAC) list mandates and more. As 
mentioned earlier, 26 states have passed bills to prevent gag clauses, 
to encourage pharmacists and dispensing physicians to feel empowered to 
---------------------------------------------------------------------------
talk to patients about the best possible price for their drugs.

CMS, specifically the Medicare program, should build on these efforts 
by leveraging its regulatory authority. For example, CMS should make 
clear the prohibition on gag clauses and should require a more 
stringent and detailed accounting of DIR fees. Collecting and 
ultimately publishing such data would help plan sponsors, employers and 
providers understand the financial arrangements for which they are 
being asked to contract, ultimately helping to ensure patients are able 
to be fully informed about price differences and ways to obtain their 
drugs at the lowest cost.
Impact on Drug Waste and/or Cost
A 2016 article by researchers at Memorial Sloan Kettering Cancer Center 
found that nearly $3 billion was being lost annually in waste of cancer 
drugs.\33\ Cancer care providers and patients have common interest in 
reducing the amount of waste in the healthcare system. Providers seek 
to restrain costs and growth in expenditures in their practice, through 
quality improvement and efficient scheduling practices that help reduce 
waste.\34\ Patients have a natural interest in reducing their out of 
pocket costs. There is growing concern that PBMs may be contributing to 
the costly waste in cancer care. ASCO members have described situations 
in which a PBM sent the wrong dosage or type of medication or sent 
medication directly to a patient's home, only to have it expire before 
they are able to get to their physician's office. Each mistake and 
wasted vial of cancer medication represents an important expense for a 
cancer patient and a lost opportunity for appropriate treatment.
---------------------------------------------------------------------------
    \33\ Bach, Peter et al. (2016). Overspending driven by oversized 
single dose vials of cancer drugs. BMJ 2016; 352 doi: https://doi.org/
10.1136/bmj.i788.
    \34\ Leung, Caitlyn, Cheung, MC, Charbonneau, LF, Price, A, Ng, P, 
Chan, KKW. (2017). Financial impact of cancer drug wastage and 
potential cost savings from mitigation strategies. Journal of Oncology 
Practice, 13, 7, https://doi.org/10.1200/JOP.2017.022905.

Since January 2017, CMS has been requiring attachment of a ``JW 
modifier'' to Part B drug billing when an office is submitting a claim 
for waste.\35\ Such claims are limited to times where a physician is 
required to discard an unused portion of a single dose vial or 
container, and do not include a patient who does not show up for an 
appointment. While these instances do not cover the full scope of waste 
that affects patients in the Medicare program, this is an area worth 
exploring to better identify cost and sources of waste. ASCO supports 
increased use of the JW modifier, along with similar mechanisms in 
commercial plans, to document waste in Part D and private plans. Making 
these data publicly available would highlight opportunities to reduce 
waste, lower costs, and enhance care. CMS should consider extending use 
of the JW modifier to better identify sources and cost of waste related 
to chemotherapy drugs in both Part B and Part D. Such data should be 
made public. Private payers should consider similar strategies.
---------------------------------------------------------------------------
    \35\ Centers for Medicare and Medicaid Services. 2016, https://
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/Downloads/JW-Modifier-FAQs.pdf.
---------------------------------------------------------------------------
Benefit Design
ASCO members have noted a variety of ways in which PBMs use of the 
benefit design process--including network size and formulary design--
can increase cost for providers and patients. Increased costs have also 
resulted in oncology practice staff spending more time to locate copay 
assistance for patients. A recent Kaiser Family Foundation survey 
highlights the increasing role of separate prescription deductibles 
within employer plans. Fifteen percent of workers with employer-
sponsored coverage now face separate prescription drug deductibles, 
which shift 100% of the prescription cost to the patient until the 
deductible is met.\36\
---------------------------------------------------------------------------
    \36\ Kaiser Family Foundation. 2017. Employer Health Benefits 
Survey, https://www.kff.org/health-costs/report/2017-employer-health-
benefits-survey/.

There are also growing concerns about novel strategies imposed by PBMs 
on benefit design plans, including a relatively new element known as 
``copay accumulator programs.'' These programs target specialty drugs 
for which manufacturers typically provide copay assistance. With a 
copay accumulator program in place, a manufacturer's assistance no 
longer applies to a patient's copay or out-of-pocket maximum. 
Therefore, while they are described as a benefit for patients, these 
programs in effect prevent patients from reaching their deductibles 
sooner. Copay accumulator programs generate large savings for employers 
and PBMs while increasing cost-sharing for patients. There is no 
standardized naming for these programs, and formal names created by 
payers can be ambiguous and confusing.\37\ PBMs are using copay 
accumulator programs to shift more healthcare costs away from plan 
sponsors and employers, and onto patients.
---------------------------------------------------------------------------
    \37\ Drug Channels. Copay Accumulators: Costly Consequence of a New 
Cost-Shifting Pharmacy Benefit. January 3, 2018, http://
www.drugchannels.net/2018/01/copay-accumulators-costly-
conseguences.html.

At the heart of PBM administration of drug plans is formulary design, a 
process that is normally managed by Pharmacy and Therapeutics (P&T) 
Committees. Used by a range of organizations including PBMs, health 
plans, hospitals and other health systems, P&Ts develop and manage 
policies related to formulary management, including prior 
authorizations, step therapies, quantity limitations, generic 
substitutions, and other drug utilization management activities 
affecting access.\38\ P&Ts are composed of physicians and pharmacists 
from a variety of different specialties, but may also include different 
healthcare practitioners as well as individuals with legal, contract, 
administrative, and ethics expertise. P&Ts review the strength of 
scientific evidence when making formulary management decisions. Plans 
are often designed with several tiers; the highest tier (with the 
highest copays) often include specialty drugs. The American Cancer 
Society has found that PBMs regularly place cancer drugs on the highest 
tier of their formularies, requiring the largest amount of cost-sharing 
from patients.\39\ While CMS has public policy regarding the creation 
of Part D drug formularies, this same guidance is not necessarily 
followed in the private sector by all plan sponsors.\40\ A lack of 
oncology specific specialization on a P&T committee can lead to 
mistakes and omissions for cutting-edge and complex cancer medications, 
leading to inferior care for cancer patients. Pharmacy and Therapeutics 
committees should include full and meaningful participation by oncology 
specialists.
---------------------------------------------------------------------------
    \38\ International Society for Pharmacoeconomics and Outcomes. Drug 
Information Used in the Managed Care Pharmacy P&T Decision Making 
Process: Current Practice and Insights. Retrieved from: https://
www.ispor.org/meetings/baltimore0511/presentations/ISPOR-AMCP-
presentation-FINAL-5-10-11.pdf.
    \39\ American Cancer Society Cancer Action Network. ACS CAN 
Examination of Cancer Drug Coverage and Transparency in the Health 
Insurance Marketplaces. February 22, 2017, https://www.acscan.org/
sites/default/files/National%20Documents/QHP%20Formularies%20Analysis%
20-%202017%20FINAL.pdf.
    \40\ Centers for Medicare and Medicaid Services. Medicare 
Prescription Drug Manual. Chapter 6--Part D Drugs and Formulary 
Requirements (v.01.19.16), https://www.cms.gov/Medicare/Prescription-
Drug-Coverage/PrescriptionDrugCovContra/PartDManuals.html.
---------------------------------------------------------------------------

Conclusion

Promoting delivery of high value care to every patient with cancer is 
central to ASCO's mission. ASCO understands and shares concerns about 
escalating costs and their impact on patients--and we have been 
actively engaged in addressing that issue. However, strategies for 
controlling cost must not compromise oncologists' ability to provide 
the right care, at the right time, for all their cancer patients.

ASCO remains committed to principles and recommendations previously 
conveyed in policy statements addressing utilization management. The 
opaque nature of PBM practices and policies--and their uncertain impact 
on cost and quality of cancer care--warrant special attention. ASCO has 
established a focused effort to obtain greater insight on specific PBM 
practices, their impact on patients and on cost, and appropriate 
remedies. A dedicated group of ASCO volunteers will pursue an in-depth 
analysis of PBM impact on cost and waste, their role and impact on 
quality of care, and the impact of benefit design on patients' ability 
to access the care they need.

In the meantime, ASCO is deeply concerned that the practices 
highlighted within this statement have the near-term potential to erode 
quality and access to care and should be addressed immediately.

                                 ______
                                 
             American Society of Health-System Pharmacists

                   4500 East West Highway, Suite 900

                           Bethesda, MD 20814

                          Email: [email protected]

                          Phone: 301-664-8692

ASHP (American Society of Health-System Pharmacists) respectfully 
submits the following statement for the record to the Senate Committee 
on Finance hearing on ``Drug Pricing in America: A Prescription for 
Change, Part III.''

ASHP represents pharmacists who serve as patient care providers in 
acute and ambulatory settings. The organization's nearly 50,000 members 
include pharmacists, student pharmacists, and pharmacy technicians. For 
more than 75 years, ASHP has been at the forefront of efforts to 
improve medication use and enhance patient safety.

ASHP's vision is that medication use will be optimal, safe, and 
effective for all people all of the time. A primary tenet of that 
vision includes access to affordable medications needed to save or 
sustain lives. Addressing the issue of skyrocketing drug prices, 
including excessive price increases on commonly used generic 
medications, is one of ASHP's highest and longstanding public policy 
priorities.

Poor access to medications can lead to increased morbidity and 
mortality, and can cause healthcare costs to increase. According to a 
recent Kaiser Health Tracking Poll, 29% of adults report that they are 
not taking their medications as prescribed due to increased cost with 
8% of those individuals reporting that their condition has worsened as 
a result of poor medication adherence.\1\
---------------------------------------------------------------------------
    \1\ Kirzinger, A., Lopes, L., Wu, B., and Brodie, M. (2019, March 
15). KFF Health Tracking Poll--February 2019: Prescription Drugs. 
Retrieved March 8, 2019, from https://www.kff.org/health-costs/pol1-
finding/kff-health-tracking-poll-february-2019-prescription-drugs/.

ASHP has been proactively addressing challenges related to the rapid 
increase of prescription drug pricing on several fronts, including 
working with like-minded stakeholders and educating members of Congress 
about the unsustainable burdens faced by patients, healthcare 
---------------------------------------------------------------------------
providers, and the entire healthcare system.

ASHP is a lead member of the Steering Committee of the Campaign for 
Sustainable Rx Pricing (CSRxP), a coalition of prominent national 
organizations representing physicians, consumers, payers, hospitals 
health systems, and patient advocacy groups. CSRxP has developed a 
policy platform promoting market based solutions supported by three 
pillars: competition, value, and transparency.

The goal of the campaign is to identify policy options that have 
bipartisan support and, therefore, a greater likelihood of passage. To 
that end, CSRxP focuses on policies to incentivize a more competitive 
marketplace to help stimulate lower drug prices. The campaign has also 
expressed support for efforts to loosen restrictions that prevent 
generic drug companies from obtaining the samples necessary to 
manufacture a competing product.

ASHP does not collect, store, or report drug pricing information. 
However, we continually hear from pharmacy leaders in hospitals and 
health systems that sudden, inexplicable, and unpredictable price 
increases in connection with some of the most commonly used, 
longstanding generic medications are becoming more prevalent--and are 
occurring on a nationwide basis.

In January, ASHP, along with the American Hospital Association (AHA) 
and the Federation of American Hospitals (FAH), released a report on 
the impact that the cost of and access to prescription drugs are having 
on hospital budgets and operations.

Specifically, the report showed that:

      Average total drug spending per hospital admission increased by 
18.5% between fiscal year (FY) 2015 and FY 2017.

      Outpatient drug spending per admission increased by 28.7%, while 
inpatient drug spending per admission increased by 9.6% between FY 2015 
and FY 2017.

      Hospitals experienced price increases of over 80% across 
different classes of drugs, including those for anesthetics, parenteral 
solutions, and chemotherapy.

      Over 90% of surveyed hospitals reported having to identify 
alternative therapies to manage spending.

      One in 4 hospitals had to cut staff to mitigate budget 
pressures.\2\
---------------------------------------------------------------------------
    \2\ NORC at the University of Chicago. Recent Trends in Hospital 
Drug Spending and Manufacturer Shortages (2019), https://www.aha.org/
system/files/2019-01/aha-drug-pricing-study-report-01152019.pdf. 
Accessed February 25, 2019.

ASHP is committed to continuing to advance policy and other solutions 
that will improve transparency in drug pricing and promote competition 
in the market place.

NEED FOR TRANSPARENCY

Addressing the problem of high drug prices is complicated by a lack of 
transparency in the system, from drug manufacturer price-setting to 
pharmacy benefit manager (PBM) rebate s. ASHP respects the need to 
protect trade secrets, but we also believe the system can benefit from 
transparency related to costs. Thus, we encourage the Committee to 
explore options for increasing transparency within the pharmacy benefit 
managers (PBMs) rebates system. Specifically, rebates on drugs should 
be disclosed to participants in the system, including plan sponsors.

Direct and Indirect Remuneration Fees (DIR Fees), which are negotiated 
by PBMs, also make it difficult to determine the actual cost of a drug. 
DIR fees are a growing nationwide concern among pharmacies that 
dispense medications in a community pharmacy or outpatient clinic 
setting. Created under the Medicare Part D Program, DIR fees were 
originally intended as a way for the Centers for Medicare and Medicaid 
Services (CMS) to account for the true cost of the drug dispensed, 
including any manufacturer rebates.

Often DIR fees are unknown until the drug is dispensed and the claim 
adjudicated. Moreover, the fees themselves, which are often arbitrary 
in nature, have mushroomed over the past decade, to the point that 
pharmacies regularly see annual DIR totals in the tens of thousands to 
hundreds of thousands of dollars.

In addition, PBMs are now inappropriately applying their own plan 
performance measures as a way to assess fees on pharmacies. This is 
problematic for the following reasons:

      It is an arbitrary and unintended application of quality 
measures meant for total plan performance as opposed to pharmacy-level 
metrics.

      The quality measures applied tend to be based on maintenance 
medications such as blood pressure medications or medications used to 
treat diabetes. These measures were never intended to be applied to 
specialty medications or to other specialized disease states such as 
oncology, yet PBMs assess DIR fees against the gross reimbursement for 
all prescriptions received by pharmacy providers, not just maintenance 
medications.

      Pharmacy providers are essentially being penalized with backdoor 
fees without any requirement that PBMs define, justify, or explain 
these charges to providers and to CM S.

Due to the fee structure, DIR fees assessed on pharmacies providing 
specialty medications have been especially problematic. Fees range from 
a flat rate of per dollar per claim or a percentage (typically 3-9%) of 
the total reimbursement per claim. Additionally, these fees are 
assessed retroactively, sometimes months after the claim has been 
adjudicated, providing no recourse for the pharmacy impacted by the 
assessment.

The result of imposing DIR fees has led to higher cost-sharing 
responsibilities for Medicare beneficiaries. This has, in turn, caused 
more of these beneficiaries to enter the Part D donut hole where the 
patient is solely responsible for the cost of the drug. Along with the 
higher costs absorbed by patients, adherence rates tend to be lower 
among Medicare beneficiaries who are in the donut hole and may not have 
the financial resources to pay for their medications. This stands in 
stark contrast to passing on savings to patients--the very reason DIR 
fees targeting manufacturer rebates were created.

Pharmacies are not alone in their concern. In January 2017, CMS 
published a fact sheet expressing concern over DIR fees and cited those 
fees as contributing to increased drug costs, which, in turn, increased 
patients' out-of-pocket spending and Medicare spending overall.\3\ 
Additionally, questions remain as to whether Part D plan sponsors have 
the authority to assess these fees on pharmacies. There are no 
references to DIR fees collected on pharmacies in either the Part D 
statute or corresponding CMS regulations.
---------------------------------------------------------------------------
    \3\ Fact sheet. Medicare Part D--Direct and Indirect Remuneration 
(DIR). Centers for Medicare and Medicaid Services, January 19, 2017, 
https://www.cms.gov/newsroom/fact-sheets/medicare-part-d-direct-and-
indirect-remuneration-dir. Accessed February 10, 2019
---------------------------------------------------------------------------

CONCLUSION

ASHP thanks the Committee on Finance for holding this important 
hearing. ASHP remains committed to working with Congress and industry 
stakeholders to ensure that patients have affordable access to 
lifesaving and life-sustaining medications.

                                 ______
                                 
                  Campaign for Sustainable Rx Pricing
Chairman Grassley, Ranking Member Wyden, and members of the Senate 
Committee on Finance, the Campaign for Sustainable Rx Pricing (CSRxP) 
thanks you for the opportunity to submit testimony for the record on 
the critically important issue of the unsustainable and out-of-control 
growth in prescription drug prices and the essential role that pharmacy 
benefit managers (PBMs) play in lowering drug costs for U.S. consumers 
and taxpayers.

CSRxP is a nonpartisan coalition of organizations committed to 
fostering an informed discussion on sustainable drug pricing and to 
developing bipartisan, market-based solutions that promote competition, 
transparency, and value to improve affordability while maintaining 
patient access to innovative prescription drugs that can improve health 
outcomes and save lives. Our members represent organizations including 
consumers, hospitals, physicians, nurses, pharmacists, employers, 
pharmacy benefit managers and insurance providers.

Prescription drug prices are out of control and continue to grow at 
unsustainable rates. Twenty-three cents of every health care dollar 
goes toward prescription drugs.\1\ One in four Americans cannot afford 
their medications. Excessively high prices unfairly threaten the 
financial security, health and well-being of U.S. patients and their 
families every day, as well as strain Federal and state health budgets 
and the taxpayers who fund them. Too often patients are faced with the 
unfortunate and unfair choice of purchasing the medications they need 
to get well and stay healthy and paying their bills. Patients simply 
should never be presented with such a choice and deserve affordable 
access to prescription drugs.
---------------------------------------------------------------------------
    \1\ AHIP. ``Where Does Your Healthcare Dollar Go?'' May 22, 2018.

Given the critical drug pricing crisis facing U.S. consumers and 
taxpayers today, CSRxP ardently believes it is imperative to rein in 
the out-of-control drug prices that put patient access to affordable 
life-saving drugs at risk. We share and applaud the Committee's 
commitment to lowering drug prices and very much appreciate your 
leadership in tackling this serious issue that affects U.S. patients 
---------------------------------------------------------------------------
and taxpayers every day.

That said, however, as policies are considered to reduce drug costs, 
CSRxP strongly objects to the notion that PBMs are merely ``middlemen'' 
in the drug supply chain not working hard on behalf of patients to make 
prescription drugs more affordable, as the pharmaceutical industry and 
Administration suggest. Rather, just the opposite is true: PBMs 
function as the only real check on the pharmaceutical industry's 
unilateral ability to set high drug prices and raise them at 
excessively high rates. Without PBMs negotiating on behalf of patients, 
drug costs would be significantly higher and even more unaffordable for 
patients and taxpayers, In this vein, CSRxP wishes to underscore the 
following as the Committee considers how best to address this critical 
drug pricing problem:

      I.  Brand drug companies--and brand drug companies alone--set and 
increase drug prices at unsustainably high rates.

     II.  PBMs effectively deploy commercial tools in negotiations with 
drug companies on behalf of patients to lower drug costs--saving 
patients and payers an average of $941 per person per year and 40 to 50 
percent annually on their prescription drug and medical costs.\2\
---------------------------------------------------------------------------
    \2\ Visante. ``The Return on Investment (ROI) on PBM Services.'' 
Prepared for PCMA. November 2016.

    III.  Purported changes to the current rebate system under 
consideration by the U.S. Department of Health and Human Services (HHS) 
will serve only to raise, not lower, drug costs while at the same time 
perversely increase the profitability of the brand drug industry--the 
---------------------------------------------------------------------------
very industry entirely responsible for the drug pricing problem.

CSRxP firmly believes that without major actions by this Committee and 
others, the pharmaceutical industry will continue to excessively profit 
from the anti-competitive and unsustainable pricing practices that make 
prescription drugs unaffordable and jeopardize access for the patients 
who need them. We look forward to continuing our work with the 
Committee to implement bipartisan, market-based solutions that 
effectively leverage private sector negotiating power to curb unfair 
price gouging practices by drug companies and blunt the unsustainable 
growth in prescription drug costs.

I. Brand Drug Companies Are Responsible for Setting Needlessly High 
Drug Prices

Despite efforts from the brand drug industry to suggest otherwise, the 
drug industry is the driver of the high prescription drug prices that 
American consumers and taxpayers face today. Brand manufacturers set 
high launch prices for their products and typically increase those 
prices at rates that far exceed inflation. As healthcare expert Avik 
Roy recently said: ``[I]n the absence of competition, manufacturers 
frequently charge the highest prices they believe they can justify in 
the court of public opinion.'' \3\
---------------------------------------------------------------------------
    \3\ Roy Avik. ``Drug Companies, `Not Middlemen,' Are Responsible 
for High Drug Prices.'' The Apothecary. October 22, 2018.

Demonstrating this point, one recent analysis concluded that the 
increasing costs of prescription drugs were due largely to price 
increases imposed by manufacturers of drugs already on the market. From 
2008 to 2016, the analysis found costs of oral and injectable drugs 
increased by 9.2 percent and 15.1 percent, respectively, on an annual 
basis with existing drugs contributing to much of the 
growth.\4\, \5\ Costs increased for specialty oral and 
injectable drugs by 20.6 percent and 12.5 percent, respectively, with 
71.1 percent and 52.4 percent of these increases attributable to new 
drugs.\6\ A separate recent study from AARP found that retail prices 
for 87 percent of the most widely used brand name drugs by older 
Americans increased from 2016 to 2017, with 30 percent having price 
increases of 10 percent or higher.\7\ Overall, prices for prescription 
drugs in the AARP study increased by an average of 8.4 percent from 
2016 to 2017--or four times the 2.1 percent rate of general inflation 
for the period.\8\ These 2017 price increases followed average double-
digit annual price increases every year from 2012 to 2016.\9\
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    \4\ Hernandez et al. ``The Contribution of New Product Entry Versus 
Existing Product Inflation in the Rising Cost of Drugs.'' Health 
Affairs. Vol. 38, No. 1. January 2019.
    \5\ Kodjak, Alison. ``Prescription Drug Costs Driven By 
Manufacturer Price Hikes, Not Innovation.'' National Public Radio. 
January 7, 2019.
    \6\ Hernandez et al. ``The Contribution of New Product Entry Versus 
Existing Product Inflation in the Rising Cost of Drugs.'' Health 
Affairs. Vol. 38, No. 1. January 2019.
    \7\ AARP Public Policy Institute. ``Trends in Retail Prices of 
Brand Name Prescription Drugs Widely Used by Older Americans: 2017 
Year-End Update,'' page 8. September 2018.
    \8\ Ibid., page 5.
    \9\ Ibid., page 6.

High-cost specialty medications in particular are driving much of this 
unsustainable growth in prescription drug prices and spending. Pharmacy 
benefit manager Express Scripts reported, for example, that even with 
strategies in place to lower costs for consumers on specialty 
medications, growth in commercial spending on high-cost specialty 
products far outpaced growth in overall prescription drug spending in 
2017: 11.3 percent versus 1.5 percent.\10\ Similarly, a separate AARP 
analysis found that retail prices for 101 widely used specialty drugs 
increased by 9.6 percent in 2015, continuing the increasing trend of 
specialty product price increases seen since 2006.\11\ In 2015, the 
average annual cost of a single specialty medication used on a chronic 
basis exceeded $52,000, with the annual cost of these therapies growing 
by almost $35,000 from 2006 to 2015.\12\
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    \10\ Express Scripts. ``2017 Drug Trend Report,'' page 4.
    \11\ AARP. ``Trends in Retail Prices of Specialty Prescription 
Drugs Widely Used by Older Americans, 2006 to 2015,'' page 1. September 
2017.
    \12\ Ibid.

Simply put, data clearly demonstrate pharmaceutical companies 
unilaterally set high drug prices and impose high price increases that 
needlessly increase costs for consumers and taxpayers. The unfair 
pricing practices of the drug industry make prescription drugs 
unaffordable for patients, putting them at risk for not being able to 
obtain the medications they need to get well and stay healthy.

II. PBMs Lower Drug Costs for Patients and Taxpayers

Rather than merely serving as ``middlemen'' in the drug supply chain as 
the Administration and brand drug industry claim, PBMs play a critical 
role in lowering the prices that brand drug makers impose on patients. 
The rebates, price concessions, and other discounts negotiated by PBMs 
on behalf of more than 266 Americans significantly reduce prescription 
drugs costs for consumers and taxpayers--between 31 and 36 percent in 
savings through rebates and discounts and an additional 11 to 15 
percent in savings through encouraging increased utilization generics 
and preferred brands.\13\ Such reductions have translated into 
substantial overall cost savings, lowering costs for patients and 
payers by an average of $941 per person per year and 40 to SO percent 
annually on drug and medical costs.\14\
---------------------------------------------------------------------------
    \13\ Visante. ``The Return on Investment (ROI) on PBM Services.'' 
Prepared for PCMA. November 2016.
    \14\ Visante. ``The Return on Investment (ROI) on PBM Services.'' 
Prepared for PCMA. November 2016.

Importantly, Medicare Part D, its enrollees, and the taxpayers who fund 
it have benefitted significantly from PBM negotiations with drug 
manufacturers, as well. PBMs have produced nearly $90 billion in 
savings since the inception of Part D in 2006 to 2016 and are projected 
to generate $300 billion in savings from 2017 to 2026, according to one 
recent analysis.\15\ The Medicare Trustees generally confirmed this 
analysis in their most recent report, estimating significantly slower 
growth in Part D spending in part due to higher manufacturer rebates 
negotiated by PBMs.\16\
---------------------------------------------------------------------------
    \15\ Milliman. ``Value of Direct and Indirect Remuneration: Impact 
on Part D Prescription Drug Plan (PDP) Stakeholders.'' July 2017.
    \16\ The Board of Trustees, Federal Hospital Insurance and Federal 
Supplementary Insurance Trust Funds. ``2018 Annual Report of the Board 
of Trustees of the Federal Hospital Insurance and Federal Supplementary 
Insurance Trust Funds,'' page 112.

Indeed, HHS Secretary Azar and Centers for Medicare and Medicaid 
Services (CMS) Administrator Verma both have touted the essential role 
PBMs play in lowering prescription drug costs for consumers and 
taxpayers. Secretary Azar told Congress: ``The President has generally 
spoken about the desire to ensure that Medicare is negotiating and 
getting the best deal possible for drugs. Part D actually has 
negotiation through the 3 or 4 biggest pharmacy benefit managers that 
negotiate and actually secure the best net pricing of any players in 
the commercial system. I sat on the other side of that. I can assure 
you of this.''\17\ Likewise, Administrator Verma said to Congress: ``I 
think that we need to do everything that we can to make drugs more 
affordable for seniors. . . . I'm thankful that we have the PBMs in the 
Part D program that are performing that negotiation on behalf of 
seniors.''\18\
---------------------------------------------------------------------------
    \17\ Azar, Alex. U.S. Senate Committee on Health, Education, Labor, 
and Pensions. Hearing. November 29, 2017.
    \18\ Verma, Seema. U.S. Senate Committee on Finance. Hearing. 
February 16, 2017.

In fact, even drug companies themselves acting as large employers 
contract with PBMs to negotiate lower drug prices for their own 
employees.\19\ Eli Lilly Chief Executive Officer (CEO) Dave Ricks 
explained: ``We hire a PBM by the way for our employee benefits. I 
provide insurance for 70,000 Americans who work for [Eli] Lilly or 
their beneficiaries and retirees to negotiate lower drug prices. . . . 
That's how the system work; it's a marketplace and we're for 
that.''\20\
---------------------------------------------------------------------------
    \19\ Herman, Bob. Axios. ``Phama Companies Hire Drug Pricing 
Middlemen, Too.'' March 7, 2019.
    \20\ CBS. May 8, 2017.

In other words, those claiming that PBMs merely function as 
``middlemen'' in the drug supply chain have stated just the opposite: 
Secretary Azar, CMS Administrator Verma and a CEO of a major 
pharmaceutical company all have touted the value of PBMs bring in 
reducing prescription drug costs for consumers and taxpayers. CSRxP 
therefore strongly objects to the notion that PBMs are just 
``middlemen'' and instead urges the pursuit of bipartisan, market-based 
policies that strongly support and foster the ability of PBMs to 
---------------------------------------------------------------------------
negotiate lower prescription drug costs on behalf of patients.

III. HHS's Rebate Rule Substantially Increases Costs for Consumers and 
Taxpayers While Perversely Raises the Profitability of the 
Pharmaceutical Industry

CSRxP agrees that the current rebate system can be significantly 
improved as, in many cases, the system has not adequately addressed the 
high prices set and controlled entirely by the brand pharmaceutical 
industry. That said, however, we strongly oppose the HHS Office of 
Inspector General's proposed rule (OIG-0936-P) that the Administration 
purports would reform the system. Rather than reform the system, the 
proposed rule will lead to the drug industry's imposition of higher--
not lower--prices on patients and, perversely, will result in raising 
the profitability of the brand drug industry--the very industry that is 
solely responsible for this dire drug pricing problem.\21\ In 
particular, CSRxP wishes to emphasize the following highly problematic 
issues with HHS's rebate rule:
---------------------------------------------------------------------------
    \21\ 84 FR 2356.

      Drug companies increase prices regardless of rebate levels and 
the rebate rule does nothing to stop drug companies from continuing to 
unilaterally set high drug prices. The Administration contends that 
rebate reform is necessary to encourage drug makers to lower their list 
prices; without the pressure to provide substantial rebates, 
manufacturers will not set list prices so high, the argument goes. 
Research, however, definitively demonstrates that rebate levels are not 
tied to price. Specifically, one recent analysis concluded that there 
is no correlation between the prices drug companies set and the rebates 
they negotiate with PBMs and, importantly, that drug companies increase 
prices regardless of rebate levels.\22\ The study found prominent cases 
of higher-than-average price increases in drug categories where 
manufacturers negotiated relatively low rebates and, conversely, 
prominent cases of lower-than-average price increases in drug 
categories where manufacturers negotiate relatively high rebates.\23\ 
In other words, rebates negotiated by PBMs do not correlate with or 
necessarily lead to higher list prices--rather drug makers entirely set 
and control high list prices imposed on consumers and taxpayers. For 
further evidence that the rebate rule will not result in lower list 
prices, seven pharmaceutical executives testified to the Senate Finance 
Committee and said that their respective companies will not reduce list 
prices unless rebates are no longer used in the commercial market.\24\
---------------------------------------------------------------------------
    \22\ Visante. ``No Correlation between Increasing Drug Prices and 
Manufacturer Rebates in Major Drug Categories.'' April 2017.
    \23\ Ibid.
    \24\ Rowland, Christopher. ``Drug executives grilled in Senate over 
high prices.'' The Washington Post. February 26, 2019, https://
www.washingtonpost.com/business/economy/drug-executives-grilled-in-
senate-over-high-prices/2019/02/25/abc89c04-393f-11e9-aaae-
69364b2ed137_story.htm
l?utm_term=.e57d10e05667.

      The rebate rule does not combat the drug industry's abusive 
price gouging practices for high priced drugs without competition. 
Everyone agrees that prescription drugs without competition--often 
high-cost specialty biologic products--pose especially significant cost 
challenges for federal health programs and the U.S. healthcare system 
as a whole. The HHS Assistant Secretary for Planning and Evaluation 
(ASPE) found, for example, that Medicare Part B spending on 
prescription drugs increased at a rapid average annual rate of 7.7 
percent from 2005 to 2014; during that period, specialty biologic 
medicines (often without significant competition) grew at a 
particularly fast rate, climbing from 39 percent to 62 percent of total 
spending, with a substantial share of the growth due to price increases 
rather than number of patients using the medications.\25\ Separately, a 
large PBM recently found that its clients' spending on specialty 
medications increased 9.4 percent while spending on traditional, non-
specialty medications decreased 5.8 percent in 2017.\26\
---------------------------------------------------------------------------
    \25\ HHS Assistant Secretary for Planning and Evaluation. 
``Medicare Part B Drugs: Pricing and Incentives,'' page 6. March 8, 
2016.
    \26\ Express Scripts. ``2018 Drug Trend Report.''

     Humira, the best-selling pharmaceutical product in the world today 
with nearly $20 billion in sales in 2018, illustrates the critical 
problem posed by high-priced medications without competition. Humira 
has over 100 patents that potentially could extend its market 
protection as far as 2034 in the U.S., but likely at least through 
2022.\27\, \28\, \29\, \30\ As a 
result of the anti-competitive and unfair patent ``thicket'' and ``pay-
for-delay'' deals reached between the manufacturers of Humira and its 
biosimilars, U.S. patients taking Humira will continue paying a high 
price for this drug for at least the next three years and likely will 
face significant price increases throughout this time.
---------------------------------------------------------------------------
    \27\ Gonzalez, Richard. ``Abbvie Long-Term Strategy.'' October 30, 
2015. Slides 14-16.
    \28\ Pollack, Andrew. ``Makers of Humira and Enbrel Using New Drug 
Patents to Delay Generic Versions.'' The New York Times. July 15, 2016.
    \29\ Slide presentation by Michael Carrier at FTC November 8, 2017 
workshop. Slide 48.
    \30\ AbbVie. ``AbbVie Reports Full-Year and Fourth-Quarter 2018 
Financial Results.'' January 25, 2019.

     It is of critical concern, therefore, that pricing reforms tackle 
drugs with limited or no competition. Unfortunately, the changes to the 
system in HHS's rebate rule do nothing to address this serious problem. 
Rather, under the proposed rule, manufacturers retain complete control 
in price setting and have increased leverage over PBMs that no longer 
can use commercial negotiating tools to lower costs for patients and 
taxpayers. Instead of weakening the bargaining power of PBMs on behalf 
of patients, CSRxP urges the Committee to discourage HHS from adopting 
this rule and instead take steps to enhance the ability of PBMs to 
employ even stronger bargaining tools with drug makers so that drug 
makers actually feel more pressure to lower prescription drug prices 
---------------------------------------------------------------------------
for patients.

      Medicare Part D premiums will increase for all enrollees if HHS 
adopts the rebate rule--making prescription drug coverage more costly 
for all Part D beneficiaries. CSRxP lauds the Department's overarching 
goal to reduce prescription drug costs for patients. Hence, we do not 
understand why HHS seeks to implement policies in the rebate rule that 
will raise--not lower--Part D premiums for patients. Indeed, all 
Medicare Part D enrollees will face substantial premium increases of 
roughly 19 percent per month in 2020 and 25 percent overall as a result 
of this proposed rule, according to the Department's Office of the 
Actuary.\31\ Clearly, significantly raising premiums for all Part D 
beneficiaries will not make prescription drug coverage more affordable 
and will be particularly problematic for the many Medicare 
beneficiaries who live on fixed incomes and simply cannot afford 
unnecessary increases to their monthly Part D premiums.
---------------------------------------------------------------------------
    \31\ 84 FR 2358.

     In fact, since the inception of the Part D program, rebates and 
other discounts negotiated by PBMs and health insurers have saved Part 
D beneficiaries an estimated 21.5 percent on their premiums--or more 
than $12 billion savings.\32\ Assuming HHS does not implement this 
proposed rule, health insurer and PBM bargaining tools are projected to 
save beneficiaries 33.2 percent on premiums--or nearly $50 billion--
from 2017 through 2026.\33\ CSRxP firmly believes that patients should 
continue to benefit from the significant premium savings that PBMs and 
health insurers have negotiated on their behalf. Clearly raising Part D 
premiums through implementation of the rebate rule would not advance 
this very important goal and we strongly urge the Committee to 
discourage HHS from adopting the rule.
---------------------------------------------------------------------------
    \32\ Milliman. ``Value of Direct and Indirect Remuneration: Impact 
on Part D Prescription Drug Plan (PDP) Stakeholders.'' July 2017.
    \33\ Ibid.

      The profitability of the brand drug industry--the industry 
solely responsible for this critical drug pricing problem--will 
increase if HHS implements the rebate rule, all unfairly at the expense 
of taxpayers, Medicare beneficiaries, and Medicare. CSRxP is extremely 
concerned that brand drug makers' profitability will significantly 
improve at the substantial expense of taxpayers and federal health 
programs if HHS adopts the rebate rule. One estimate projects brand 
drug makers will pay out nearly $40 billion less in price discounts in 
the Part D coverage gap over 2020-2029 as a result of the proposed 
rule.\34\ In other words, brand drug makers that alone caused this dire 
drug pricing problem will profit from the very changes the 
Administration purports will solve it. At the same time, the HHS Office 
of the Actuary projects that Medicare Part D spending will increase by 
$196 billion over 10 years if this rule is implemented.\35\ This 
enormous increase in Medicare Part D spending hurts beneficiaries and 
taxpayers, making the program substantially less financially stable for 
its enrollees and the taxpayers who fund it.
---------------------------------------------------------------------------
    \34\ 84 FR 2362.
    \35\ 84 FR 2359.

     Put another way, taxpayers and Medicare beneficiaries perversely 
will pay out nearly $200 billion to subsidize the profitability of the 
brand drug industry--the very industry solely and entirely responsible 
for the drug pricing problem--if HHS implements this rule. To be very 
clear, implementation of this proposed rule wrongly and inappropriately 
will: (1) put Medicare on less sound financial footing for current and 
future beneficiaries, which is particularly problematic for those 
seniors on limited, fixed incomes who depend on the program to provide 
them health security as they age; and (2) require taxpayers and 
Medicare beneficiaries to pad the bottom lines of the brand 
pharmaceutical industry--a perverse and adverse outcome that will 
financially benefit the very industry that has caused the drug pricing 
problem that this proposed rule ostensibly seeks to address. CSRxP 
therefore urges on behalf of Medicare beneficiaries and taxpayers that 
the Committee dissuade HHS from adopting this proposed rule and instead 
consider bipartisan, market-based alternatives that will increase 
competition and lower prescription drug prices for consumers.

IV. Conclusion

In conclusion, CSRxP again wishes to express appreciation for your 
leadership and the Committee's clear commitment to lowering 
prescription drug prices for all Americans. We wish to underscore that 
PBMs play a critically important role in lowering drug costs for 
patients and taxpayers by serving as the only true check on drug 
companies' unilateral ability to set high prices and raise them at 
unsustainably high rates. The Administration's reforms to the current 
rebate system will not stop drug makers from engaging in these unfair 
pricing practices. Rather than improving prescription drug 
affordability, these proposed changes will take away the very important 
tools that PBMs leverage in negotiations with drug makers to lower 
costs for patients. As a result, this rule will further jeopardize 
patient access to affordable prescription drugs--all at the expense of 
taxpayers who perversely would have to fund higher profits for the drug 
industry. Most importantly, these ostensible reforms do nothing to 
address the root cause of the problem: brand drug companies--and brand 
drug companies alone--set list prices way too high and raise those 
prices at unsustainably high rates.

CSRxP firmly believes that without major actions by this Committee and 
others, the brand pharmaceutical industry will continue to excessively 
profit from their unfair and unsustainable pricing practices that 
increase drugs costs and risk access for the patients who need them. 
CSRxP looks forward to continue working with the Committee to develop 
alternative bipartisan, market-based policies that promote 
transparency, foster competition, and incentivize value to improve 
affordability for consumers while at the same time maintaining access 
to the treatments that can improve health outcomes and save lives.

                                 ______
                                 
              Coalition for Affordable Prescription Drugs

                  www.affordableprescriptiondrugs.org

                Top Reasons Employers Partner With PBMs

Healthy employees are critical to American businesses. More than half 
of all Americans get health insurance through their job, putting 
employers on the frontlines of managing health care costs. That is why 
the majority of employers across the country partner with PBMs to help 
their employees get the medications they need at a price they can 
afford.

(1) Help manage overall health care costs

PBMs design personalized drug benefit programs to help each employer 
provide coverage that is suited for their employees' needs. PBMs drive 
savings to lower premiums and out-of-pocket costs, so employees can get 
the prescriptions they need to get and stay healthy.

(2) Help make the complicated simple

With over 4 billion prescriptions filled each year, PBMs help employers 
ensure their employees get the medicines they need at a price they can 
afford.

(3) Negotiate lower prices from drug companies

PBMs leverage the combined purchasing power of all the employers they 
work with to negotiate deep discounts from drug makers to drive savings 
for employers and consumers. PBMs are expected to save employer-
sponsored plans $349.6 billion over the next decade.

(4) Save patients money at the pharmacy counter by reducing out-of-
pocket costs

PBMs offer discounts available to patients at the pharmacy counter, 
saving up to $130 per eligible medication.

(5) Provide patients and their doctors with real-time Rx information

PBMs provide physicians with coverage information at the point of 
prescribing and provide consumers with convenient access to drug prices 
so they are aware of their out-of-pocket costs. Using these tools, 
consumers save $80 on average per prescription fill.

(6) Help make it easier for patients to access and adhere to their 
prescriptions

PBMs build national networks of pharmacies and offer prescriptions by 
mail to ensure that employees have easy, convenient access to the 
medications they need no matter where they live.

(7) Use generic drugs to help lower costs

PBMs identify when there is a lower-cost clinically-equivalent drug. 
PBM tools to encourage generic utilization can help reduce drug 
spending by up to 19%.

(8) Improve patient safety

PBMs help prevent 100 million medication errors each year by checking 
for potentially dangerous drug interactions and sharing this 
information with doctors, pharmacists and patients.

(9) Help patients manage chronic conditions

Chronic and mental health conditions drive 90% of health care spending 
in the U.S. PBMs have developed disease-specific programs to help 
manage and treat chronic conditions, helping doctors and pharmacists 
deliver a more seamless patient care experience and improve outcomes. 
For example, research has shown that PBMs improve adherence in diabetes 
patients, helping to prevent some 480,000 heart failures and 230,000 
incidents of kidney disease each year.

                                 ______
                                 
             Statement Submitted by Christine Kasisky, RPh

                        Eaglescripts Apothecary

    Thank you, Chairman Grassley, Ranking Member Wyden, and Finance 
Committee members, for having this hearing. My husband and I are 
pharmacists and own a small independent pharmacy in Pennsylvania. Being 
practicing pharmacists for over 25 years, we have seen many changes in 
healthcare. Sadly, it's not for the best. We fully agree with ALL of 
Chairman Grassley's opening remarks. We have filled out paperwork 
online a long time ago to the Federal Trade Commission on insurances 
and agencies working for insurances becoming providers. This is clearly 
a conflict of interest for the patient. As you can see, how can Derica 
Rice be the Executive Vice President of CVS Health and President of CVS 
Caremark? Our personal example: Why is it when CVS Caremark billing is 
not working for our independent pharmacy, the CVS helpline says to send 
our patients to a CVS pharmacy; CVS is able to process prescriptions. 
We also agree with ALL the comments by Ranking Member Wyden. In our 
case, we can no longer afford health insurance for us and our 3 
children. We are healthy individuals whose monthly premium went up to 
$1,700.00 per month with a $7,000.00 deductible on each of us so our 
family no longer has health insurance coverage. Rebates did not lower 
insurance premiums and do not help patients. I will give some examples 
of PBM practices in this letter based on personal experiences with PBMs 
and evidence used in articles to state facts. If there are any further 
questions, please do not hesitate to call me.

    These issues are not new; they have gotten worse. Many bills have 
been proposed, but due to payouts and threats nothing is done. See 
Forbes, April 9, 2019, ``These Senators Received the Biggest Checks 
from CVS, Humana and Other Drug Middlemen Testifying Tuesday,'' by 
Michela Tindera. Also, PBMs have groups such as Drug Benefit Solutions 
to stop new laws. Jonah Houts, the head of government affairs at 
Express Scripts said, ``We were designed to create tension. We're 
successful at what we do, and that's why we want to make sure the 
lawmakers who are considering legislation that affects us understand 
that.'' Another article: ``Was the HHS Drug Pricing Czar Daniel Best's 
Death Ruled a Suicide Despite Evidence of Foul Play?'' by David Emery. 
Was the 49-year-old PBM insider a victim of foul play? Recently, my 
husband and I have been very vocal about PBM practices and January 29, 
2019 he received a phoned death threat at closing time in our pharmacy 
stating, if he doesn't shut his mouth, they were going to kill him. Who 
do you report the wrongful PBM practices to? They need transparency, 
regulation and oversight.

    Pharmacies have tried taking PBMs to court for their many unfair 
practices, but we cannot provide enough information of proof. 
``Pharmacy Loses a Patient Poaching Lawsuit to ESI,'' by Natalia 
Mazina, March 19, 2019, lists these practices but with unreasonable 
contracts and lack of transparency, there is nothing we can do. ``The 
Court dismissed the claim holding that pharmacies failed to plead 
enough facts to establish this claim.'' We need fair contracts and laws 
to support fair business practices.

    We keep hearing how PBMs are a BENEFIT manager. There are a huge 
amount of social media sites showing examples of the opposite. I just 
got off the phone with Robin Agar a CVS patient who I was able to 
listen to her calls and frustration with CVS Caremark. Calls and story 
can be heard at Tarbell.org, April 8, 2019, ``Sorry, Wrong Number: 
Patient Fights Back After CVS Caremark Denies Her the Drug She Needs 
and Records Her Calls,'' by Michael Corcoran. It tells a sad story of 
how Robin was dispensed the wrong frequency of a drug, and she couldn't 
talk to anyone except the help desk who was not a pharmacist or 
healthcare professional. It is the same with our independent pharmacy 
when we have questions about a prescription. We can only talk to a 
``help desk'' who is not a healthcare professional--how is this being a 
good middleman? In another instance, she was denied a medication 
because CVS Caremark wanted her on a newer more expensive drug. She 
went through multiple appeals. In the second appeal, CVS stated her 
doctor was unreachable but if you dialed the number they called, it was 
for Playtex Corporation. They had called the wrong number despite 
having the correct number on her prescription and denied the claim. 
Couldn't CVS Caremark realize it was not a doctor's office? This is a 
BENEFIT manager? According to Pennsylvania Law, a generic must be 
substituted for a brand name unless the doctor or patient wants the 
brand. Why is it the PBMs insist on CERTAIN brands? The much cheaper 
generic drug is denied; the brand is on formulary, but the pharmacies 
get reimbursed for the generic drug price. Who wins in this scenario? 
Only the PBM.

    At the hearing, every PBM wanted more competition. This is so 
untrue. For example, I know of a patient complaining that CVS Pharmacy 
wouldn't get a different manufacturer of a generic drug in for them. 
The patient had an allergy to the red dye in the generic drug CVS 
Pharmacy had in stock so the patient went to a chain competitor. Then, 
the patient receives a ``nasty-gram'' from CVS Caremark to use CVS 
Pharmacy. The patient had to waste their time and call to explain their 
allergy to the stocked CVS medication and how CVS wouldn't order in 
another manufacturer that was safe. This is a BENEFIT to the patient?

    I recently spoke to Richard Stevens of West Virginia Pharmacists 
Association who has many great articles including ``Update on PBMs,'' 
December 26, 2017. He states, ``It is a fact based on the following 
evidence in this summary that PBMs drive up the cost of prescription 
benefits which in turn drive up healthcare costs.'' ``PBMs are for-
profit middlemen working to increase their profits at the expense of 
payers.'' He writes, ``mandate PBM transparency will give payers across 
the public and private spectrum access to more information such as, the 
PBM actual reimbursement paid to their pharmacy network. . . .'' ``PBMs 
generate profits by hiding spreads on generic and branded drugs by 
using different reimbursement methodologies for `reimbursing' 
pharmacies versus what they `bill' payers, and multiple contracts allow 
PBMs to protect information they consider proprietary.'' Do you 
realize, as an independent pharmacy, we don't negotiate any drug 
prices? Another middle man called a PSAO (Pharmacy Services 
Administration Organization) negotiates our reimbursement rates. When 
we asked our PSAO why we are getting below cost on our medicines we 
dispense they replied, the PBMs only deal with a few PSAOs so if they 
want to remain in business, they just accept the contract from the PBM. 
It's a take it or leave it contract. PBMs do not reimburse us correctly 
even though we submit our cost for the drug. Where is our proprietary 
information? Please have laws for transparency. The article explains 
``tricks'' by PBMs. ``Pay the pharmacy according to the PBMs MAC list 
yet bill payer according to an AWP Reference Price which allows for 
hidden `spreads' on generic drugs which mean profit for the PBM.'' 
``PBMs exploit a loophole in the federal law to inflate the AWP value 
by 25% or more (false AWP.) PBMs use `false' AWPs when they bill 
payers.'' ``Numerous court cases have revealed that as a rule PBMs 
retain some rebate revenues by re-naming them as `administrative fees.' 
For example, the New York State Attorney General's lawsuit against 
Express Scripts on behalf of the state employees' Empire Plan.'' West 
Virginia looked into their state program and decided to save taxpayer 
money and have better patient care by eliminating PBMs in their state 
programs. See ``West Virginia Medicaid saves $54.4 million with 
prescription drug carve-out,'' by NCPA, March 13, 2019. Despite West 
Virginia paying the pharmacies at CORRECT COST of the drug AND a $10.49 
dispensing fee, the state saved $54,400,000.00 in one year! In PA we 
don't even get reimbursed correctly due to spread pricing and claw 
backs. How much are PBMs taking in? Ohio is following West Virginia and 
I'm reading other states are investigating PBMs: Arkansas, Kentucky, 
Louisiana etc. Please help out all states and create laws of 
transparency and oversite. It is estimated a pharmacy needs between $10 
and $11 for liabilities, utilities, staffing, rent supplies etc. in 
addition to the cost of the drug. If West Virginia can do this and 
still save why can't a PBM? We don't even get enough reimbursement for 
the drug we dispense and if there is a fee its well below the $10 to 
$11 needed. Sometimes there is no dispensing fee or its pennies.

    Our Pennsylvania Pharmacist Association in December of 2018 showed 
how ``CVS Caremark uses federal tax money to pay itself and others more 
than independent pharmacies.'' See ``PPA Capsule Why haven't the chains 
been joining us in complaining to the world about reimbursement 
pricing?'' A thirty-day supply of the same drug was billed across the 
state of PA. CVS Caremark reimbursed CVS Pharmacy the highest $63.05. 
Independent pharmacies all over the state got reimbursed $14.24. How is 
this fair? Should an insurance or PBM be a provider? How is this fair 
to all the other pharmacies? CVS Caremark lies and keeps saying they 
reimburse independents more than CVS pharmacies. This isn't even 
counting the claw backs. Help! They lied to U.S. Senators under oath!

    Our PA Auditor General had hearings about PBMs in which we 
testified. I am hoping our state follows Ohio. Their auditor general 
became attorney general, Dave Yost. He stated, ``Our review of PBM 
practices throughout state government is still ongoing. These are the 
first raindrops, but there's a storm coming.'' You can read the full 
article ``Ohio Attorney General Takes Pharmacy Benefit Manager to 
Court,'' by Catherine Candisky, March 18, 2019. Do you realize in one 
year the Ohio Department of Medicaid found OptumRx and CVS Caremark 
charged the state $224,000,000.00 more a YEAR for drugs than they were 
reimbursing pharmacies? They are a BENEFIT manager who BENEFITED 
themselves--not the patient, not the pharmacy, not the taxpayer!

    Patients need their correct medicine based on their doctor. We need 
paid fairly as pharmacies and need to worry about counseling our 
patients not how much we lose on filling a prescription. Healthcare is 
getting worse, but let's start now and make it better. Patients deserve 
better healthcare than what is in place now. I think we all agree on 
that!

                                 ______
                                 
                            Morning Consult

     Retired Teachers on the Front Lines of the Drug Pricing Debate

                            By Jane Gilbert

More than two-thirds of Americans report that they are very concerned 
about the high cost of prescription drugs. So, as eyes turn to this 
week's State of the Union and the 116th Congress focuses on its work in 
Washington, drug pricing undoubtedly will be a top priority for 
lawmakers who are looking to create meaningful change for patients.

As steward of retiree health care for the Teachers' Retirement System 
of the State of Kentucky, I help ensure the integrity of the retirement 
benefits for more than 48,000 of our state's former teachers. Our 
voice--and that of other purchasers who provide health care and drug 
benefits to millions of other Americans--sometimes is lost in the noise 
around the drug pricing debate in Washington.

The teachers I work on behalf of paid into this retirement system 
throughout their careers, and it's my job to do everything possible to 
see that these benefits are there for them in their retirement years. 
This includes their access to affordable, quality health care, 
including their prescription drugs.

However, my job has become increasingly difficult as drug prices 
continue to rise with no end in sight. Recent studies show that over 
the last five years, the price of the 20 most prescribed drugs to 
seniors increased by an average of 12 percent each year--outpacing the 
average annual rate of inflation by 10 times. These rising drug prices 
have dire effects not just for retired teachers in Kentucky, but for 
retired Medicare beneficiaries across the country with fixed incomes.

To help manage retirees' costs in the face of ever-rising drug prices, 
TRS relies on pharmacy benefit managers to negotiate with drug 
manufacturers and drive down the prices of prescription drugs through 
both discounts and rebates. The PBM that TRS partners with helps TRS 
keep prescription drug costs in check by ensuring our retirees have 
access to lower-cost generic alternatives and by providing patient-
focused programs and tools, such as medication management tools for 
chronic conditions of diabetes and heart disease. Eliminating rebates 
in Medicare Part D is a distraction from the real problem. The real 
problem is the drug list price that is not established by PBMs.

These programs and tools are critical to keeping TRS' health care costs 
from increasing at an unsustainable rate while also improving health 
outcomes and avoiding unnecessary, significant medical costs such as 
hospital admissions due to adverse drug events. TRS' PBM works hard to 
keep health care and drug costs affordable for Kentucky's retired 
teachers. In fact, PBMs are expected to save Kentucky patients and 
health care purchasers $9.4 billion over the next 10 years.

As policy makers in Washington look for ways to ease the burden of high 
drug prices on patients and their families, solutions should be found 
that expand and enhance the tools PBMs use on behalf of purchasers and 
patients and increase timely competition to improve access. Congress 
should focus on public/private partnerships, other market-based or 
federal solutions that will put downward pressure on the rising 
prescription drug prices set by drug companies and preserve affordable 
options for patients.

Retired Kentucky teachers, who dedicated their lives to educating 
future generations, shouldn't have to choose between paying for the 
prescription drugs they need to get to stay healthy and putting food on 
their tables. The stakes are too high to get this wrong.

Jane Gilbert is the director for retiree health care for the Teachers' 
Retirement System of the State of Kentucky, which represents more than 
120,000 active and retired teachers in the State of Kentucky.

                                 ______
                                 
               National Association of Chain Drug Stores

                      1776 Wilson Blvd., Suite 200

                          Arlington, VA 22209

                              703-549-3001

                             www.nacds.org

(1) Introduction

The National Association of Chain Drug Stores (NACDS) thanks Chairman 
Grassley, Ranking Member Wyden, and the Members of the United States 
Committee on Finance for the opportunity to submit a statement on 
``Drug Pricing in America: A Prescription for Change, Part III.''

NACDS and the chain pharmacy industry are committed to partnering with 
Congress, HHS, patients, and other healthcare providers to find 
solutions to lower the cost of prescription drugs and improve access to 
quality, affordable healthcare services. NACDS represents traditional 
drug stores, supermarkets and mass merchants with pharmacies. Chains 
operate over 40,000 pharmacies, and NACDS' over 80 chain member 
companies include regional chains, with a minimum of four stores, and 
national companies. Chains employ nearly 3 million individuals, 
including 157,000 pharmacists. They fill over 3 billion prescriptions 
yearly, and help patients use medicines correctly and safely, while 
offering innovative services that improve patient health and healthcare 
affordability. NACDS members also include more than 900 supplier 
partners and over 70 international members representing 21 countries. 
Please visit nacds.org.

As this Committee examines the rising costs of prescription drugs, we 
offer the following for your consideration.

(2) Lowering Costs Through Pharmacy DIR Reform

  (a)  CMS Proposed Rule

On November 30, 2018, the Centers for Medicare and Medicaid Services 
(CMS) issued a proposed rule, ``Modernizing Part D and Medicare 
Advantage to Lower Prices and Reduce Out-of-Pocket Expenses'' that 
included policy reforms that would increase competition in the Medicare 
Part D program and lower beneficiary out-of-pocket costs by reforming 
pharmacy direct and indirect remuneration (DIR) fees.\1\ Specifically, 
these reforms would lower beneficiary costs by:
---------------------------------------------------------------------------
    \1\ 83 Fed. Reg. 62152, 62190-92 (November 30, 2018).

      Redefining the ``negotiated price'' to include all pharmacy 
price concessions. Including all pharmacy price concessions in the 
negotiated price would reduce its amount and result in lower 
---------------------------------------------------------------------------
beneficiary cost sharing;

      Developing a broad definition of ``price concession'' to include 
all forms of discounts, direct or indirect subsidies, or rebates that 
serve to reduce costs incurred by Part D sponsors. Again, this would 
help ensure the lowest negotiated price and thus) lower beneficiary 
cost-sharing; and

      Developing standardized pharmacy performance metrics for 2020. 
NACDS believes such metrics would be a good first step toward the 
development of Medicare Part D pharmacy quality incentive program. HHS 
needs to develop a pharmacy quality incentive program to align 
incentives between plans, pharmacies and beneficiaries. Pharmacy 
incentive payments would support higher quality health outcomes. 
Examples are medication optimization and improved medication adherence, 
which would improve patient outcomes and reduce healthcare costs.

CMS has recognized the harms caused by pharmacy DIR fees for years.\2\ 
The use of pharmacy DIR fees grew an 45,000 percent between 2010 and 
2017.\3\ Because of this, Medicare beneficiaries are paying more in 
out-of-pocket costs, the federal government is not fully understanding 
what it is paying for prescription drugs, and retail pharmacies are 
conducting business in an environment where they are unsure whether a 
payment will be clawed back at some later date as ``DIR.''
---------------------------------------------------------------------------
    \2\ See, e.g., 82 Fed. Reg. 56336, 56420-21 (November 28, 2017) 
(explaining how pharmacy DIR fees increase beneficiary costs and 
decrease drug price transparency necessary for competition among 
plans); CMS, Medicare Part D--Direct and Indirect Remuneration (DIR) 
(January 19, 2017) (noting the negative impact of pharmacy DIR fees on 
beneficiary drug costs, taxpayer subsidies and plan cost-avoidance); 
CMS, ``Fact Sheet--Medicare Part D--Direct and Indirect Remuneration 
(DIR)'' (January 19, 2017), available at https://www.cms.gov/newsroom/
fact-sheets/medicare-part-d-direct-and-indirect-remuneration-dir.
    \3\ Id. at 62l47.

CMS also recognizes that pharmacy DIR fees harm pharmacies by reducing 
transparency and predictability of reimbursement.\4\ More broadly, 
pharmacy DIR fees undermine drug price transparency, which is necessary 
for efficient market competition that would reduce prescription drug 
costs.\5\ Pharmacy DIR fees undermine the transparency needed to allow 
all stakeholders, notably patients and providers, to make informed 
decisions about how to best meet healthcare needs. As CMS also points 
out, ``consumers cannot efficiently minimize both their costs and costs 
to the taxpayers by seeking and finding the lowest-cost drug or a plan 
that offers them the lowest-cost drug and pharmacy combinations.''\6\
---------------------------------------------------------------------------
    \4\ Id. at 62191.
    \5\ Id. at 62176.
    \6\ Id. at 62176.

Beneficiaries are likely unaware that the increasing use of pharmacy 
DIR fees has led to inflated drug costs, and thus higher cost-sharing. 
The impact of higher cost-sharing for beneficiaries also negatively 
impacts medication adherence, leading to increased total cost of care 
---------------------------------------------------------------------------
and poorer health outcomes.

Moreover, finalizing pharmacy DIR reform needs to be coupled with the 
development of standardized pharmacy quality metrics and a pharmacy 
quality incentive program. Without a standard set of metrics, 
beneficiaries, pharmacies and plans are unable to make comparisons of 
pharmacy quality. As a result, there is not an effective means for 
consumers to compare plans and pharmacies within the Part D program, 
undercutting market competition, which can contribute to higher costs.

    (b)  Better Medication Adherence and Medication Optimization Reduce 
                    Healthcare Costs

Pharmacy DIR fee reform and the development of a standardized pharmacy 
quality incentive program will save taxpayers billions of dollars by 
aligning incentives for the entire Medicare program, which will 
encourage a more systematic investment in pharmacy quality programs 
designed to facilitate care coordination, reduce medical errors, 
advance population health, and empower and motivate beneficiaries to 
achieve better health outcomes through medication optimization services 
and improved medication adherence.

Medication optimization services encompass patient-centered activities 
that improve health outcomes by addressing medication appropriateness, 
effectiveness, safety, adherence, and access. Medication optimization 
services delivered by community pharmacies are central to the care of 
beneficiaries. Nearly all Americans (91.7 percent) live within 5 miles 
of a community retail pharmacy and in 2017 nearly 73 percent of 
prescriptions dispensed in the U.S. were filled at retail pharmacies. 
Face-to-face interactions with beneficiaries at the point-of-dispensing 
allow the pharmacist to counsel and educate the patient and are 
critical to achieving national-scale improvements in health outcomes 
and lowered costs.\7\
---------------------------------------------------------------------------
    \7\ Patients who participated in brief face-to-face counseling 
sessions with a community pharmacist at the beginning of statin therapy 
demonstrated greater medication adherence and persistency than a 
comparison group who did not receive face-to-face counseling. The 
intervention group had statistically greater Medication Possession 
Ratio (MPR) than the control group every month measured. Taitel M, 
Jiang J, Rudkin K, Ewing S, Duncan I; ``The impact of pharmacist face-
to-face counseling to improve medication adherence among patients 
initiating statin therapy;'' Patient Prefer Adherence; 2012;6:323-9, 
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3340117/. Likewise, a 
systematic review was conducted using 51 studies determining the 
optimal modes of delivery for interventions to improve adherence to 
cardiovascular medications. Among person-dependent interventions 
(nonautomated phone calls, in-person interventions), phone calls showed 
low success rates (38%). In-person pharmacist interventions were 
effective when held in a pharmacy (83% successful) but were less 
effective in clinics (38%). Cutrona SL, Chaudhry NK, et al.; ``Modes of 
Delivery for Interventions to Improve Cardiovascular Medication 
Adherence;'' AJMC; December 2010, https://www.ajmc.com/journais/issue/
2010/2010-12-vol16-n12/ajmc_10dec_cutrona929to942?p=l

The better use of medicines will also reduce medication non-adherence--
that is, patients not taking their medications as prescribed by their 
healthcare provider. Medication non-adherence contributes to $100-290 
billion in unnecessary healthcare expenditures every year as a result 
of increased hospitalizations and other avoidable, expensive medical 
services.\8\, \9\, \10\ Numerous studies have 
shown that reducing patient drug costs increases medication adherence, 
which, in turn, reduces overall healthcare costs. For example, a recent 
study found that medication nonadherence for diabetes, heart failure, 
hyperlipidemia, and hypertension resulted in billions of dollars in 
Medicare fee-for-service expenditures, millions of hospital days, and 
thousands of emergency department visits that could have been 
avoided.\11\ Specifically, the study estimated that avoidable costs 
from medication nonadherence of four chronic conditions is $28.9 
billion, representing 8 percent of the total expenditures. A 2017 white 
paper found that the direct medical costs and consequences related to 
not taking medication as prescribed is estimated to be 7 to 13 percent 
of national health spending annually--approximately $250 billion to 
$460 billion in 2017, translated to a potential cost to taxpayers of $6 
trillion over 10 years.\12\ And a 2016 cost-benefit analysis concluded 
that between one and two thirds of medicine related hospitalizations 
are caused by poor adherence. Improving adherence could result in 
annual per-person savings ranging from $1,000 to $7,000, depending on 
the disease state.\13\ Multiple, credible sources have drawn the same 
conclusion: medication non-adherence is a costly, preventable problem 
that dramatically affects total cost of care.
---------------------------------------------------------------------------
    \8\ Rosenbaum L, Shrank WH; ``Taking Our Medicine--Improving 
Adherence in the Accountability Era;'' New England Journal of Medicine; 
August 22, 2013.
    \9\ Network for Excellence in Health Innovation; ``Bend the Curve: 
A Health Care Leader's Guide to High Value Health Care;'' 2011.
    \10\ The NCPIE Coalition; ``Enhancing Prescription Medicine 
Adherence: A National Action Plan;'' 2007.
    \11\ Lloyd, Jennifer T, Maresh, Sha, Powers, Christopher, Shrank, 
WH, Alley, Dawn E; ``How Much Does Medication Nonadherence Cost the 
Medicare Fee-for-Service Program?''; Medical Care, January 2019.
    \12\ ``A Treatable Problem: Addressing Medication Nonadherence by 
Reforming Government Barriers to Care Coordination;'' Prescriptions for 
a Healthy America; October 2017.
    \13\ Patterson JA, et al.; ``Cost-Benefit of Appointment-based 
Medication Synchronization in Community Pharmacies;'' American Journal 
of Managed Care; 2016.
---------------------------------------------------------------------------

    (c)  Committee Support

As detailed above, pharmacy DIR reform as proposed by CMS would lead to 
lower prescription drug costs for both Medicare Part D beneficiaries 
and federal taxpayers. In addition, pharmacy DIR reform would lead to 
better medication adherence among Part D beneficiaries, which would 
lead to further healthcare cost savings. With these cost saving 
benefits in mind, we urge the Committee to communicate support to CMS 
in favor of finalizing pharmacy DIR reform, including the development 
of standardized pharmacy quality metrics that would lead to a pharmacy 
quality incentive program.

(3)  Reform to Manufacturer Rebates

    (a)  NACDS Supports Goals of Proposed Rule but Changes and 
                    Clarifications are Needed

The Department of Health and Human Services (HHS) and the Office of 
Inspector General (OIG) recently released a proposed rule with the goal 
of lowering the cost of prescription drugs by requiring that 
manufacturer reductions in prescription drug prices to health plans/
PBMs be passed on to the patient at the pharmacy counter. We support 
the goals of the proposed rule and believe the changes could lead to 
reduced patient out-of-pocket costs and could lower government program 
costs by improving medication adherence. However, we believe HHS and 
OIG must include specific revisions to the final version, as well as 
issue other regulatory or sub regulatory guidance to maximize the 
impacts of passing manufacturer reductions in price to patients at the 
point-of-sale, reduce costs for all stakeholders, and increase 
efficiencies by utilizing and leveraging current capabilities and 
technologies. Below we summarize the changes and clarifications that 
are needed in the final rule or in concurrent guidance:

      Timeliness of payments--Payment of discounts to pharmacies under 
the HHS/OIG proposal must follow current prompt payment requirements. 
Without prompt pay requirements applying to all elements of pharmacy 
claims, pharmacies would face devastating cash flow challenges 
resulting from having to wait months after dispensing medications 
before receiving payment of manufacturer reductions in price.

      Transparency--The total reimbursement due to the pharmacy, 
including the amount of any payment related to manufacturer reductions 
in price, must be known by the pharmacy at the point-of-sale at the 
time of dispensing. Failure to account for the manufacturer reductions 
in price at the point-of-sale claim adjudication would make it nearly 
impossible for pharmacies to track the collection of open receivables 
and could put pharmacies at substantial financial risk.

      Protection from Unnecessary Fees--Pharmacies should not be 
responsible for fees or other costs associated with administering 
manufacturer reductions in price. Specifically, pharmacies should not 
pay additional transaction, administrative, or other fees either 
directly, or indirectly through reduced reimbursements. The total and 
final reimbursement to the pharmacy must consist of the full contracted 
reimbursement from the plan/PBM, the reduction in price negotiated 
between the manufacturer and the plan/PBM, and the cost-sharing payment 
from the beneficiary and shall not be affected by the reduction in 
price negotiated between the PBM and the manufacturer.

      Maximize Efficiency and Minimize Additional Costs--The final 
rule should maximize the use of existing technology, standards, 
systems, and business relationships. A new system potentially requiring 
the development of new capacities and technologies for data sharing, 
processing and auditing of payments to pharmacies, as well as new 
financial relationships, will only add unnecessary cost and complexity 
into the healthcare system.

    (b)  HHS Must Address Pharmacy DIR First

HHS must finalize reforms in the use of pharmacy DIR fees in the 
Medicare Part D program (as discussed in detail above) before moving 
forward with finalizing changes to the treatment of manufacturer 
rebates. Moving forward with reforms to manufacturer rebates without 
reforming the use of pharmacy DIR fees could incentivize even more 
aggressive use of pharmacy DIR fees, which would increase beneficiary 
and taxpayer costs, and lead to poorer medication adherence and 
worsening overall beneficiary health. We ask the Committee to 
communicate with HHS the importance of finalizing the proposed CMS rule 
that reforms pharmacy DIR before finalizing manufacturer rebate reform.

(4)  Electronic Prescribing and the Part D Prescription Drug Plan

NACDS supports the efforts of HHS and CMS in integrating a patient-
specific real-time benefit tool (RTBT) into the Part D benefit to drive 
lower prescription drug spending and minimize beneficiary out-of-pocket 
costs. Beneficiaries often arrive at the pharmacy counter with little 
or no insight as to what a medication will cost them, which can lead to 
overuse of unnecessarily expensive medications and the underuse of 
essential medications. We strongly agree with CMS that ``reducing 
medication cost also yields benefits in patients' medication 
adherence'' and that ``increasing patient cost-share for a medication 
[is] associated with a significant decrease in medication 
adherence.''\14\ The integration of a RTBT into the Part D benefit will 
give providers and beneficiaries the information needed to make better 
informed choices on their healthcare treatment.
---------------------------------------------------------------------------
    \14\ 83 Fed. Reg. 62152, 62165 (November 30, 2018).

NACDS cautions that policies utilizing RTBTs must be designed in a 
manner that allows the prescriber to make a determination about whether 
a prescribed drug is covered by the beneficiary's insurance plan 
without fear of ``steering'' a beneficiary to certain pharmacies or to 
mail order. This could be accomplished by requiring the beneficiary to 
select his or her pharmacy of choice prior to the prescriber utilizing 
the RTBT to access the enrollee cost-sharing information. Moreover, we 
believe that the RTBT must provide sufficient information to the 
prescriber and pharmacy to facilitate clinical decision making and 
---------------------------------------------------------------------------
assist in determining optimal patient medication regimens.

RTBTs must also be able to take into consideration pharmacy-level cost-
containment programs, such as $4.00 generic programs, or patient 
assistance programs. Moreover, absent system safeguards, RTBTs can 
inadvertently drive physician prescribing of expensive, therapeutically 
alternatives that are subject to high rebate arrangements between PBMs 
and manufacturers. Such results would negate the goal of using a RTBT 
and needlessly drive up overall spending in the Part D program. 
Policies utilizing RTBTs must:

        1.  Preserve patient's right to pharmacy selection at the 
        outset;
        2.  Ensure accurate and complete patient's out-of-pocket costs 
        at formulary and pharmacy levels;
        3.  Avoid unintended economic costs to taxpayers and 
        beneficiaries associated with steering patients to therapeutic 
        alternatives that are subject to ``spread pricing'' due to 
        excessive list prices and rebates;
        4.  No commercial messaging within RTBT transmissions; and
        5.  Ensure information integrity, fairness and accuracy.

We ask members of the Committee to communicate to HHS the need for 
RTBTs to be implemented in a way that serves its goals of providing 
timely information that would lower prescription drug costs.

(5)  Prohibition Against Gag Clauses in Pharmacy Contracts

NACDS applauds Congress for passing the ``Know the Lowest Price Act of 
2018'' (Pub. L. 115-262) that prohibits plans from restricting their 
network pharmacies from informing their plan enrollees of the 
availability of prescription drugs at a cash price that is below what 
that the enrollee would be charged (either the cost sharing amount or 
the negotiated price when it is less than the enrollee's cost sharing 
amount) for the same drug under the enrollee's plan. We are encouraged 
that CMS states that the measure will become effective with the plan 
year starting January 1, 2020. The prohibition of gag clauses in 
contracts among plans, Medicare Advantage plans, PBMs, and pharmacies 
will enhance patient access to medications, enable pharmacists to have 
improved relationships with patients, and keep prescription drug costs 
for patients to a minimum.

(6)  Conclusion

NACDS thanks the Committee for your consideration of our comments. We 
urge members of the Committee to ask HHS to use their authority to 
include pharmacy DIR fee reform, the development of standardized 
pharmacy quality metrics, and movement toward the implementation of a 
pharmacy quality incentive program in the Final Part D Rule for FY2020. 
We also urge the Committee to communicate to HHS support for moving 
forward with requiring manufacturer reduction in prices be passed on to 
patients at the pharmacy counter in a manner that does not 
unnecessarily burden the prescription drug supply chain or jeopardize 
patient access to their medications, and that doing so should occur 
following efforts to finalize pharmacy DIR reform. Finally, we ask 
members of the Committee to communicate to HHS the benefit of 
incorporating a RTBT into the Medicare Part D program in a manner that 
will drive lower spending on prescription drugs while protecting 
patient choice.

                                 ______
                                 
               National Association of Specialty Pharmacy

                     300 New Jersey Ave., Suite 900

                          Washington, DC 20001

                            www.naspnet.org

The National Association of Specialty Pharmacy (NASP) thanks Chairman 
Grassley, Ran king Member Wyden, and the members of the United States 
Committee on Finance for the opportunity to submit a statement for the 
hearing record for ``Drug Pricing in America: A Prescription for 
Change, Part III.'' NASP strongly shares the Committee's goals of 
lowering out of-pocket costs for Medicare beneficiaries, improving 
price transparency, and ensuring patients have continued and affordable 
access to needed medications. We thank the Committee for its ongoing 
focus and dialogue on these and other key issues that affect specialty 
patients and the specialty pharmacies that work to address their 
complex health care needs.

NASP and its members are committed to the practice of specialty 
pharmacy with a focus on the patients served to ensure better clinical 
outcomes while reducing overall healthcare costs. NASP defines a 
specialty pharmacy as a state licensed and registered pharmacy that is 
accredited by, or in the process of specialty pharmacy accreditation by 
an independent, third-party accreditor and solely or largely provides 
medications and patient medication management services to patients with 
serious health conditions requiring treatment with complex medication 
therapies. NASP represents the entire spectrum of the specialty 
pharmacy industry from the nation's leading independent specialty 
pharmacies and practicing pharmacists to small and mid-size pharmacy 
benefit managers (PBMs), pharmaceutical and biotechnology manufacturers 
of specialty drugs; group purchasing organizations; wholesalers and 
distributors; integrated delivery systems and health plans; and 
technology and data management companies. With over 100 corporate 
members and 1,500 individual members, NASP is the unified voice of 
specialty pharmacy in the United States.

As this Committee seeks to consider changes to the ways patients access 
prescription medications in the United States, we offer the following 
comments for your consideration, with a specific focus on the need to 
reduce patient costs by ensuring a competitive market of specialty 
pharmacies and allowing patients with complex medical conditions to 
have transparent and affordable access to specialty medications.

  Lowering Medicare Part D Beneficiary Out-of-Pocket Costs--DIR Reform

Amending the Definition of Negotiated Price and Providing Pharmacy 
Price Concessions at the Point-of-Sale

Specialty pharmacies have seen dramatic growth in the collection of 
non-transparent pharmacy direct and indirect remuneration fees (DIR 
fees) by Pharmacy Benefit Managers (PBMs) since 2012. The Centers for 
Medicare and Medicaid Services (CMS) has determined that DIR fees 
issued as pharmacy price concessions grew more than 45,000 percent 
between 2010 and 2017,\1\ with much of that growth occurring after Part 
D plan sponsors or their PBMs stood up so-called ``performance-based'' 
pharmacy payment arrangements that served to institute sizeable 
reductions in pharmacy reimbursement and zero savings for 
beneficiaries. In fact, plan sponsors sometimes opt for higher 
negotiated drug prices in exchange for higher DIR and, in some cases, 
even prefer a higher net cost drug over a cheaper alternative because 
any DIR received on the back end that exceeds the projections factored 
into the plan's bid contributes primarily to plan profits--not lower 
premiums for beneficiaries.\2\
---------------------------------------------------------------------------
    \1\ 83 Fed. Reg. 62174.
    \2\ 82 Fed. Reg. 56420.

In its review of this concern, CMS has also highlighted the growing 
disparity between gross Part D drug costs calculated based on costs of 
drugs at the point-of-sale, and net Part D drug costs that account for 
all DIR.\3\ This disparity is in large part due to the post sale 
adjudication of so called ``performance-related'' DIR fees that many 
PBMs collect from pharmacies months after claims are submitted and 
reimbursed. As pharmacy price concessions increase on gross drug costs 
and are applied after the point-of-sale, specialty patients are paying 
higher and higher cost-sharing (copays and coinsurance). As a result, 
specialty beneficiaries are forced into the catastrophic phase of Part 
D much sooner than if pharmacy price concessions were accounted for at 
the point-of-sale. Specialty pharmacies know first-hand how this higher 
cost-sharing impedes beneficiary access to medications. For specialty 
patients, missing doses or stopping therapy altogether often results in 
serious setbacks in treatment, and may increase visits to emergency 
departments or necessitate more costly therapeutic interventions.
---------------------------------------------------------------------------
    \3\ 82 Fed. Reg. 56419-56428.

NASP agrees with the administration's position that DIR fees ultimately 
increase costs across the Part D program shifting financial liability 
away from the Part D Plan sponsor to the beneficiary, to the Medicare 
program and ultimately, to taxpayers. In late 2018, CMS issue d a 
proposed regulation, ``Modernizing Part D and Medicare Advantage to 
Lower Drug Prices and Reduce Out-of-Pocket Expenses,''\4\ which 
included a proposal to amend the definition of negotiated price and 
move all pharmacy price concessions, including direct and indirect 
remuneration (DIR) fees to the point-of-sale as soon as calendar year 
2020. NASP strongly supports the administration's proposal and has 
valued the opportunity to work with the Department of Health as well as 
the broad pharmacy stakeholder community to encourage these efforts and 
offer recommendations on how to successfully implement pharmacy 
reimbursement reforms in a way that is most beneficial to the specialty 
patients served by the Part D program. Addressing this needed reform 
can be done via regulation or by passing legislation. NASP has endorsed 
bipartisan and companion legislation, S. 640 and H.R. 1034, the PHAIR 
Pricing Act of 2019 that would seek to eliminate DIR fees and implement 
a system of fairly assessing pharmacy quality. NASP specifically 
recommends the following legislative or regulatory actions be taken:
---------------------------------------------------------------------------
    \4\ 83 Fed. Reg. No. 231, November 30, 2018; CMS-4180-P; RIN 0938-
AT92.

      Redefine ``negotiated price'' at 42 CFR Sec. 423.100 to include 
all pharmacy price concessions and to reflect the ``lowest possible 
price'' at the point-of-sale. Making this change will reduce 
beneficiary cost sharing and eliminate retroactive pharmacy price 
concessions, providing increased price transparency for patients and 
pharmacies.
      Develop a broad definition of ``price concession'' to include 
all forms of discounts, direct or indirect subsidies, or rebates that 
serve to reduce costs incurred by Part D sponsors. NASP believes 
codifying a definition is necessary to support consistent accounting of 
amounts that are pharmacy price concessions by Part D sponsors.
      Ensure reasonable reimbursement to pharmacies participating in 
the Medicare Part D program so that the payment received is not less 
than a pharmacy's cost to dispense. Reimbursement below cost can force 
pharmacies out of networks and even out of business, limiting 
beneficiary access to the pharmacy of their choice and needed for their 
specialty conditions.

Establishing Standardized Pharmacy Quality Metrics and Defining 
Specialty Pharmacy

Specialty medications are more clinically complex than most other 
prescription medications and are used to treat patients with serious 
and often life threatening conditions including cancer, hepatitis C, 
rheumatoid arthritis, HIV/AIDS, multiple sclerosis, cystic fibrosis, 
organ transplantation, human growth hormone deficiencies, and 
hemophilia. Current statute and regulations do not define specialty 
drugs, but regulations instead classify specialty drugs as those 
exceeding a threshold of $670. The cost of a drug should NOT be the 
basis on which a medication therapy is classified as ``specialty.'' In 
fact, there are many low-cost medications that are considered by 
clinicians to be specialty medications because of the complexity of the 
patient and diseases the medications are used to treat and the unique 
and labor-intensive services required to assure proper utilization and 
maximize a patient's clinical outcome.

A specialty pharmacy is needed to support the dispensing of specialty 
drugs, particularly for drugs that are not routinely available, as well 
as the extensive patient engagement needed to support clinical 
management of a patient on specialty therapies. Current statute and 
regulations do not define specialty pharmacy, which contributes to 
problems in ensuring network adequacy for patients to access specialty 
drugs and the specialty pharmacy of their clinician's and personal 
choice. It also creates unnecessary but fixable challenges in the 
effort to establish a quality-based payment system for specialty 
pharmacies. Specialty pharmacies provide:

      High-touch patient education. Specialty pharmacies serve as an 
extension of a physician's office, educating the patient on both the 
disease and the prescribed therapy. Many specialty pharmacists have 
specialized areas of clinical expertise, which the prescribing 
physician relies upon to help manage the patient and their disease.

      Patient-centric medication management. Many specialty therapies 
require in-depth patient/caregiver therapy education, assistance with 
medication administration, counseling regarding side effects, and 
continuous monitoring.

      Navigating coverage and payment issues. Plan sponsors and PBMs 
typically utilize significant formulary management tools to ensure 
medically necessary utilization of specialty drugs, including prior 
authorization, step therapy, quantity limits and therapeutic switching. 
In response, specialty pharmacies work with prescribing physicians and 
payers to facilitate the coverage process, and as needed, determine 
options for patients to afford their medications.

Specialty pharmacies are severely impacted by ``performance based'' DIR 
fees as these fees are assessed using wholly inapplicable performance 
or quality metrics for drugs that are NOT dispensed by specialty 
pharmacies and disease states not being managed by specialty 
pharmacies. Often times, such broader pharmacy measures created by plan 
sponsors and PBMs are not even appropriate for specialty pharmacy 
evaluation, as the specialty pharmacy cannot influence the measure 
(e.g., generic pricing performance). When a specialty pharmacy receives 
retroactive financial penalties for not meeting PBM-applied DIR 
performance metrics that are unrelated to the drugs the pharmacy 
dispenses and the disease states these pharmacies are helping to 
manage, the pharmacy faces significant financial uncertainty, as their 
actual reimbursement rate cannot be determined until well after they 
have dispensed the medication. Oftentimes when the reimbursement is 
reconciled, it is far less than the actual cost of the drug, which is 
further complicated by the cost of the requisite services provided by 
specialty pharmacies to support the patient's journey on the drug. This 
situation threatens the ability for specialty pharmacies--particularly 
independent specialty pharmacies that simply do not have the ability to 
offset lost revenues or costs with other portions of their businesses--
to remain network providers, risking access and satisfaction for 
beneficiaries.

NASP specifically recommends the following regulatory or legislative 
actions be taken to address concerns with the current DIR performance 
metrics:

      Have the Department of Health and Human Services work with 
stakeholders to establish and have HHS oversee the creation of 
standardized pharmacy performance metrics that are calculated and 
reimbursed separate and apart from the negotiated drug price at the 
point of sale to ensure any incentive payments tied to metrics: (1) do 
not increase costs for beneficiaries; and (2) appropriately assess the 
actual quality performance of a pharmacy in a manner that is specific 
to the pharmacy type, drugs dispensed, and disease states being 
managed.
      Establish a definition of specialty pharmacy to ensure that 
performance metrics are appropriate by pharmacy type--with specialty 
pharmacy defined as a type, similar to how retail is defined in 
regulation.

These recommendations are both included in the pending Proposed 
Medicare Part D regulation and included in the bipartisan companion 
bills S. 640 and H.R. 1034, the Phair Pricing Act of 2019.
Protecting Access to Specialty Drugs and Services and Market 
        Competition
The Medicare Part D Program requires plan sponsors to offer any willing 
pharmacy (AWP) an in network pharmacy contract with standard terms and 
conditions that are reasonable and relevant.\5\ Congress created the 
AWP requirements to ensure a competitive marketplace in order to lower 
costs and improve beneficiary access to all types of pharmacies. NASP 
has serious concerns that Part D plans and their PBMs that own their 
own specialty pharmacies continue to find opportunities to circumvent 
statute and exclude other specialty pharmacies from network 
participation. They look at regulatory definition of ``pharmacy type'' 
referenced by the AWP statute and see that specialty pharmacy is not 
defined in statute or regulation, and they use that to circumvent AWP 
requirements in place today. Efforts to exclude network access for 
specialty pharmacies include: offering contracts to specialty 
pharmacies with unreasonably low and non-negotiable reimbursement rates 
and requiring PBM accreditation (w/fees) for already accredited 
specialty pharmacies.
---------------------------------------------------------------------------
    \5\ Social Security Act (SSA) Sec. 1860D-4(b)(1)(A).

By excluding other specialty pharmacies from its network, the PBM 
therefore drives more distribution revenue to its own subsidiary 
specialty pharmacy such that PBM is using its status as a 
``gatekeeper'' in one line of business to drive business to another 
line of business that it owns, which is a specialty pharmacy. The PBM 
that owns its own specialty pharmacy is therefore incentivized to 
exclude other competitor specialty pharmacies. In doing so, the PBM 
that owns a specialty pharmacy achieves two important financial goals. 
First, to drive greater revenue and profit to its own specialty 
pharmacy given that the PBM-owned specialty pharmacy is obviously in 
network with its parent corporate entity. Second, to create greater 
leverage in its purchasing power against manufacturers and wholesalers 
---------------------------------------------------------------------------
as a result of its greater influence in the network.

NASP urges protections to ensure that plan sponsors and PBMs that own 
their own specialty pharmacy business cannot provide more advantageous 
pricing to their own entities in an effort to limit a pharmacy network 
and gain greater market share. The exclusion of qualified specialty 
pharmacies from payer networks has negative effects on specialty 
pharmacy care for patients. Due to a smaller number of choices, 
patients with complex and rare disorders may lack access to beneficial 
clinical programs specific to their disease state. Networks that 
include a limited number of pharmacies create confusion for 
beneficiaries and medical providers and routinely result in significant 
delays in treatment, may worsen health conditions and increase 
hospitalizations and patient health care costs.

As the administration and Congress contemplate regulatory and statutory 
changes that would require that rebates between manufacturers and PBMs 
be moved to the point of sale, NASP urges careful consideration over 
loopholes that could serve to the advantage of PBMs. for example, some 
large specialty pharmacies are under common ownership and control by 
PBMs and/or plan sponsors. NASP is concerned that a PBM/plan sponsor 
could potentially offer a manufacturer favorable formularies or other 
coverage support for its products in exchange for a purchase discount, 
instead of a rebate. There must be protections to ensure that 
arrangements for manufacturer price concessions are not more favorable 
for PBM/plan affiliated specialty pharmacies than they would be when 
the same drug is dispensed by a network specialty pharmacy. Reforms to 
the system must not result in a deliberate pricing disadvantage for 
network specialty pharmacies that are unable to influence formulary 
placement, allowing PBM/plan-owned specialty pharmacies to gain a 
market advantage. Providing statutory or regulatory protections against 
such practices is all the more important when addressing pricing for 
drugs where there are limited drug alternatives for patients, such as 
those with rare and other specialized conditions. Specialty pharmacies 
provide medication and services that are tailored to managing these 
unique populations. Network adequacy and ensuring that the contracting 
negotiations and practices that result from reforms to the system do 
not violate any willing pharmacy requirements is essential to ensuring 
access to these medications for patients.

NASP specifically recommends the following regulatory or legislative 
act ions be taken to protect market competition for specialty 
pharmacies:

      Establish a definition of specialty pharmacy to eliminate 
loopholes in current AWP statutory requirements and ensure that plan 
sponsors do not limit network opportunities for non-PBM owned specialty 
pharmacies.
      Require regulatory protections against anticompetitive market 
efforts to ensure that plan sponsors and PBMs that own their own 
specialty pharmacy business cannot provide more advantageous pricing to 
their own entities in an effort to limit a pharmacy network and gain 
greater market share.
      Require regulatory protections by codifying provisions in 
existing CMS guidance and manuals to protect pharmacies against 
reimbursement that is below a pharmacy's drug acquisition cost.
      Establish a pharmacy appeal process during the plan sponsor bid 
process that allow pharmacies to appeal when reimbursement is below a 
pharmacy's drug acquisition cost.

                               Conclusion

NASP thanks the Committee for consideration of our comments. The 
recommendations provided can help meet the Committee's goals of 
decreasing out-of-pocket beneficiary costs for prescribed medications, 
improving transparency in the drug pricing channel, and ensuring a 
competitive specialty pharmacy marketplace. NASP looks forward to 
working with the Committee as it continues to address drug pricing 
policy reforms.

                                 ______
                                 
             Pharmacists United for Truth and Transparency

                           326 S. Main Street

                        Winston-Salem, NC 27101

                        https://www.truthrx.org/

April 19, 2019

U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Honorable Members of the Senate Finance Committee,

On Tuesday April 9th and Wednesday April 10th the Senate Finance 
Committee and House Energy and Commerce Committee respectively convened 
hearings to question pharmacy benefit managers (PBMs) about their role 
in the high cost of prescription drugs. Despite attempts by both the 
Senate and House to obtain straight answers to straightforward 
questions, the PBMs responses were limited to a handful of tired 
talking points about ``saving clients' money'' and ``passing 100% of 
rebates through to their clients.''

While neither hearing resulted in transparency or even a clear 
definition of ``client,'' we applaud Rep. Buddy Carter for calling 
attention to the relationship between PBM-negotiated rebates and 
insurance companies--notably the ones that own PBMs and those that are 
PBM-owned. That is to say, PBMs with financial ties to insurance 
companies are very often negotiating and keeping rebates and fees 
extracted from those rebates for their parent company. This is another 
way for them to use the rebate to benefit their own bottom line and 
continue to cut the public out of these ``savings.''

America's prescription drug system is irreparably broken and the 
``fixes'' that have been proposed and implemented so far have only made 
the situation worse. These fixes include turning state- and federally-
funded Medicaid and Medicare programs over to private contractors in 
the name of saving beneficiaries (patients) money. But thanks to recent 
state investigations, we now know PBMs can game the system to drive 
small pharmacies out of business while bilking taxpayers out of 
hundreds of millions of dollars.

Only full regulatory oversight of PBMs and complete transparency among 
members of the prescription drug supply chain will enable us to fix our 
broken system. Independent pharmacists know this includes but is not 
limited to:

      Ending the practice of manufacturer rebates to PBMs, which 
increases drug list price and ultimately drives prices up for the 
patient.
      Eliminating the practice of spread pricing.
      Eliminating Direct and Indirect Remuneration (DIR) fees that are 
charged back to pharmacies months after the patient's initial 
transaction and which increased an average per store in the U.S. from 
$74,711 in 2017 to $129,614 per store in 2018. There is no evidence 
these DIR fees have lowered costs or premiums for Medicare Part D 
beneficiaries.
      Eliminating the use of multiple reimbursement reference points 
for the same drug including maximum allowable cost (MAC) lists, generic 
effective rate (GER) and brand effective rate (BER), which vary by 
pharmacy and financial affiliation to the PBM. It ultimately prevents 
pharmacies from being able to recoup the costs to purchase the drug. 
Pharmacies losing money will close, thereby threatening patients' 
access to their medications especially in the rural and underserved 
communities.
      Standardizing drug acquisition costs for pharmacies via Centers 
for Medicaid and Medicare National Average Drug Acquisition Cost 
(NADAC) database plus a professional dispensing fee indexed to state 
Medicaid and/or NACDS/NCPA survey for state and federally-funded plans. 
This would allow for price predictability for patients and their 
pharmacies and end the stressful and embarrassing ``how much does this 
cost'' guessing game.
      Eliminating per-prescription commissions and other per-
prescription, per-month fees paid to insurance plan brokers who shuttle 
the largest PBMs to the largest plan sponsors ensuring competition at 
the top is limited to a few multi-billion dollar players. Per-
prescription per-month broker commissions add hundreds of millions of 
extra costs to patient and end-payer premiums.
      Prohibiting PBMs from owning pharmacies and steering patients to 
those pharmacies through fear tactics, misleading propaganda and/or 
financial incentives not also available to other pharmacies in the PBM 
network.
      Eliminating the practice of ``self-dealing'' to PBM-owned 
pharmacies in order to pay those pharmacies a higher reimbursement than 
non-PBM owned pharmacies.
      Eliminating restrictive practices that result in a 
``distribution monopoly'' that includes, but is not limited to, 
mandatory mail order, specialty drugs, biosimilars and restricting the 
right of other pharmacies to provide patients with a 90-day supply. 
These practices create conditions for rampant price gouging as well as 
limit patient accessibility and choice and are blatantly anti-
competitive.
      Further eliminating monopolization by protecting pharmacies from 
excessive PBM-imposed credentialing requirements to hamper their 
ability to mail medications or dispense certain drugs.
      Eliminating transactions fees charged to pharmacies for everyday 
business tasks including submitting patient claims for reimbursement, 
which can amount to as much as $1,500 per month in service of patients.

PBMs are fighting VERY hard to protect their privacy, defaulting to 
tired claims of ``proprietary information'' and ``trade secrets'' when 
asked the most basic questions about their pricing practices. They use 
a tired scare tactic by making ominous and nonsensical threats about 
``drug prices going up'' if transparency is mandated.

America's high drug price crisis can be fixed, and Americans should be 
the ones to fix it. We call on our country's legislators, healthcare 
providers and healthcare business leaders to work together to resolve 
the problem together to make American prescription drugs affordable 
again.

Respectfully,

M. Scott Newman, PharmD
President, Pharmacists United for Truth and Transparency
Independent Pharmacy Owner
[email protected]

                                 ______
                                 
        Pharmacists United for Truth and Transparency--Illinois
April 19, 2019

U.S. Senate
Committee on Finance
Dirksen Senate Office Bldg.
Washington, DC 20510-6200

Honorable Members of the Senate Finance Committee,

I am writing to you on behalf of the community and independent 
pharmacies in Illinois to express our collective frustration and 
concern at the lack of accountability in the answers the pharmacy 
benefit manager (PBMs) representatives provided during the April 9th 
hearing.

It is disconcerting to hear the spokespersons of these Fortune 100 
corporations, who themselves represent an industry grossing more than 
$300 billion annually, make claims of transparency, fair payment 
practices, and passing on rebates to their clients. We know from 
direct, everyday experience that many of the statements they made were 
misleading at best.

Between the various hearings, Congress has spoken to patients, drug 
manufacturers, pharmacy benefit managers and insurers. To the best of 
our knowledge, Congress has never asked a pharmacist to share their 
view--how we handle situations in which patients discover they can't 
afford their medication; or what we must deal with when PBMs refuse to 
reimburse the acquisition cost of a medication but justifying charging 
us exorbitant Direct and Indirect Remuneration (DIR) fees. In Illinois, 
community pharmacies were charged an average of $61,300 per store in 
2017. In 2018, community pharmacies were charged an average of $104,658 
per store at the same time reimbursements back to pharmacies for 
dispensed prescriptions were cut.

In the words of a pharmacy owner in southeastern Illinois, whose 
pharmacy also serves a town with a population of less than 650:

        ``We have been open for 25 years and very established. We 
        average 200-225 rxs/day. I also own a telepharmacy. . . . My 
        reimbursements are so poor that the cost of the vial, label, 
        drug, electricity, tech time, and registered pharmacist's time 
        puts me in the negative for most generic drugs. Our local state 
        senator told some other local independents that we should find 
        other sources to buy cheaper. But when we get paid cents on the 
        dollar . . . that doesn't even cover basic expenses. My relief 
        pharmacist (who only works 1 day per week average) made more 
        than I took home last year. . . . I have been cutting back on 
        extra expenses. . . . I just wish the Execs from PBMs would 
        answer as to why they are taking premiums from the patients, 
        rebates from the manufacturers and DIR fees from the pharmacy. 
        And how they can sleep at night knowing they are killing small 
        independent pharmacies like myself. This is just not right! 
        They say they are for transparency . . . explain why they have 
        to have DIR fees. I would also like to be paid the same as any 
        chain is, that way the patient not the PBM can decide which 
        pharmacy they go to.''

For non-PBM owned pharmacies, DIR fees, transaction fees, network 
certification fees--even fees for calling the PBM help desk--are the 
reality. Excessive fees result in an unsustainable system that 
ultimately limits choice and access to medications for patients by 
forcing the closure of small business pharmacies. Last year, 90 
pharmacies were forced to close their doors in Illinois.

PBMs, on the other hand, are a growing business. Their ``volume power'' 
is enormous, never more so since acquiring or being acquired by larger 
insurers (CVS/Aetna; Cigna/Express Scripts). PBMs are money makers--
there's no other reason an insurer would seek to acquire a PBM other 
than to gain more of an already almost closed market. Some 80% of all 
prescriptions processed in the United States go through CVS Caremark, 
Express Scripts or OptumRx.

In the words of a pharmacy owner in central Illinois:

        The PBM execs kept focusing on specialty meds, which of course 
        are the highest priced items. They probably do help to some 
        extent to keep those prices in check (while most of the time 
        shutting out the independents from filling these 
        prescriptions). However, if I had had an opportunity to ask 
        them one question, it would have been: ``Do you think 
        reimbursing a pharmacy under a dollar (total reimbursement) for 
        a 30 day supply of ANY medication is considered egregious and 
        predatory pricing?'' We have examples day in and day out of 
        these predatory claims (priced by our main competitor, CVS 
        Caremark). Here are a few: #30 Lisinopril 10mg Tab--$0.57; #30 
        Amlodipine 5mg Tab--$0.42; #30 Lisinopril 40mg Tab--$1.07; #60 
        Lorazepam 0.5mg Tab--$1.25; #30 Citalopram 40mg Tab--$0.57; #30 
        Amlodipine 10mg Tab--$0.33. My concern, along with all of the 
        independents, is with this type of predatory pricing, patients 
        will lose access to care once the independents are gone. I am 
        unaware of any other retail business ill which the business' 
        main competitor is allowed to set their competitor's retail 
        price. The highest percent of the drug spend is brand and 
        specialty, but the highest percent of prescriptions filled is 
        in generic drugs, for which their pricing is predatory.

The PBM system is rigged in favor of the real client--the insurance 
company that owns the PBM. These are the ``clients'' who benefit from 
receipt of manufacturer rebates. The constant comment that drug prices 
will go up if rebates disappear is just another way of saying, ``We 
will raise our prices to account for the loss of the rebate revenue 
stream.''

This letter addresses only a few anti-competitive practices PBMs use in 
their daily interface with pharmacies. There are many more you don't 
hear about, and wouldn't because pharmacies are subject to 
confidentiality agreements beyond the ability to disclose cheaper-
priced drug options to patients. Some of these other practices involve 
the use of multiple Maximum Allowable Cost (MAC) lists, which allows 
the PBM to reimburse a pharmacy for the same drug at a variety of 
different reimbursement levels; audit abuses, in which PBMs can 
withhold reimbursement and penalize a pharmacy literally hundreds or 
thousands of dollars for simple mistakes such as a typo on a submission 
claim; and avoiding responsibility for paying local sales or other tax, 
forcing pharmacies to pick up those charges instead.

It would be difficult to know these practices are taking place if you 
didn't know what questions to ask. A former pharmacy owner from 
Illinois asked that we include his list of questions and commentary, in 
hopes these questions might be helpful in the future. The questions are 
attached for your reference.

Pharmacists who speak up about PBM abuse are often called ``self-
serving'' and ``greedy'' by PBMs. Nothing could be further from the 
truth. An attack on pharmacy is an attack on the patient. Patients 
depend on their pharmacies for access to their medication but also look 
to their pharmacists for help and guidance in medication therapy. The 
relationship between pharmacists and patients is truly a sacred trust, 
especially in communities where there are few available options for 
filling a prescription.

Senators, no one goes into pharmacy because it's a good business idea 
or to get rich--it's too complex, too tipped in favor of giant 
corporations to be a typical small business startup. Pharmacies are 
here because pharmacists are called to be here, because they are 
carrying on generations of family tradition taking care of neighbors 
and doing right by the people in their community.

America's community pharmacies are the ``canary in the coalmine'' of 
the prescription drug system. Pharmacies and patients have a special 
relationship built on trust and communication. They may be the only 
part of the health care team that stays with the patient for 
generations, not just years, so they have a very good perspective on 
issues facing patients today.

We ask you to protect patients and their pharmacies by implementing 
legislation that mandates full regulatory oversight of PBMs, similar to 
how insurance companies are regulated.

We applaud the work you're doing to investigate the high drug pricing 
crisis and protect patients, because to us, they aren't just customers, 
they are our reason for being here.

Respectfully,

Monique M. Whitney
Executive Director
Pharmacists United for Truth and Transparency
[email protected]

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