[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
THE ROLE OF PHARMACY BENEFIT
MANAGERS IN PRESCRIPTION
DRUG MARKETS
PART II:.
NOT WHAT THE DOCTOR ORDERED
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
OVERSIGHT AND ACCOUNTABILITY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 19, 2023
__________
Serial No. 118-66
__________
Printed for the use of the Committee on Oversight and Accountability
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
53-520 PDF WASHINGTON : 2023
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COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY
JAMES COMER, Kentucky, Chairman
Jim Jordan, Ohio Jamie Raskin, Maryland, Ranking
Mike Turner, Ohio Minority Member
Paul Gosar, Arizona Eleanor Holmes Norton, District of
Virginia Foxx, North Carolina Columbia
Glenn Grothman, Wisconsin Stephen F. Lynch, Massachusetts
Gary Palmer, Alabama Gerald E. Connolly, Virginia
Clay Higgins, Louisiana Raja Krishnamoorthi, Illinois
Pete Sessions, Texas Ro Khanna, California
Andy Biggs, Arizona Kweisi Mfume, Maryland
Nancy Mace, South Carolina Alexandria Ocasio-Cortez, New York
Jake LaTurner, Kansas Katie Porter, California
Pat Fallon, Texas Cori Bush, Missouri
Byron Donalds, Florida Jimmy Gomez, California
Kelly Armstrong, North Dakota Shontel Brown, Ohio
Scott Perry, Pennsylvania Melanie Stansbury, New Mexico
William Timmons, South Carolina Robert Garcia, California
Tim Burchett, Tennessee Maxwell Frost, Florida
Marjorie Taylor Greene, Georgia Summer Lee, Pennsylvania
Lisa McClain, Michigan Greg Casar, Texas
Lauren Boebert, Colorado Jasmine Crockett, Texas
Russell Fry, South Carolina Dan Goldman, New York
Anna Paulina Luna, Florida Jared Moskowitz, Florida
Chuck Edwards, North Carolina Vacancy
Nick Langworthy, New York
Eric Burlison, Missouri
------
Mark Marin, Staff Director
Jessica Donlon, Deputy Staff Director and General Counsel
Dan Ashworth, Deputy Chief Counsel for Oversight
Catherine Potter, Counsel
Kelsey Donohue, Counsel
Sarah Feeney, Professional Staff Member
Mallory Cogar, Deputy Director of Operations and Chief Clerk
Contact Number: 202-225-5074
Julie Tagen, Minority Staff Director
Contact Number: 202-225-5051
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C O N T E N T S
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Page
Hearing held on September 19, 2023............................... 1
WITNESSES
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Mr. Juan Carlos ``JC'' Scott, President and CEO, Pharmaceutical
Care Management Association (PCMA)
Oral Statement............................................... 4
Ms. Lori Reilly, Chief Operating Officer, PhRMA
Oral Statement............................................... 6
Mr. Craig Burton, Executive Director, BioSimilars Council, Senior
Vice President, Association for Accessible Medicines
Oral Statement............................................... 7
Mr. Hugh Chancy, RPh, President, National Community Pharmacists
Association (NCPA)
Oral Statement............................................... 9
Ms. Rena M. Conti Ph.D. (Minority Witness), Associate Professor,
Department of Markets, Public Policy, and Law Questrom School
of Business
Oral Statement............................................... 10
Opening statements and the prepared statements for the witnesses
are available in the U.S. House of Representatives Repository
at: docs.house.gov.
INDEX OF DOCUMENTS
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* Statement for the Record; submitted by Rep. Connolly.
* Statement for the Record, Employers' Prescription for
Affordable Drugs; submitted by Chairman Comer.
* Statement for the Record, National Association of Chain Drug
Stores; submitted by Chairman Comer.
* Statement for the Record, Kentucky Independent Pharmacist
Alliance; submitted by Chairman Comer.
* Statement for the Record, TransparencyRx/APCI; submitted by
Rep. McClain.
* Report, McKinsey & Company, ``Improving Patient Adherence
Through Data-Driven Insights''; submitted by Rep. Sessions.
* Letters, 11 letters from the FTC; submitted by Rep.
Krishnamoorthi.
* Article, ``Pharma spent over $9 million on anti-PBM
advertising''; submitted by Rep. Burlison.
* Article, Wall Street Journal, ``Why Insurers are charging
thousands for generic drugs''; submitted by Rep. Garcia.
* Report, Oversight Committee Democratic Staff Report on
Pharmaceutical Industry; submitted by Rep. Frost.
* Report, Maryland Rx Drug Affordability Board, Operation of
Drug Market; submitted by Rep. Mfume.
* Statement for the Record, TransparencyRx - APCI; submitted by
Rep. Raskin.
* Article, ``Big Insurance Earnings Report 2022'', by Wendell
Potter ; submitted by Rep. Mfume.
* Questions for the Record: to Mr. Scott; submitted by Chairman
Comer.
* Questions for the Record: to Mr. Scott; submitted by Rep.
Carter.
* Questions for the Record: to Ms. Reilly; submitted by
Chairman Comer.
* Questions for the Record: to Ms. Reilly; submitted by Rep.
Connolly.
* Questions for the Record: to Mr. Burton; submitted by
Chairman Comer.
* Questions for the Record: to Mr. Burton; submitted by Rep.
Carter.
* Questions for the Record: to Mr. Chancy; submitted by
Chairman Comer.
* Questions for the Record: to Mr. Chancy; submitted by Rep.
Carter.
The documents listed above are available at: docs.house.gov.
THE ROLE OF PHARMACY BENEFIT
MANAGERS IN PRESCRIPTION
DRUG MARKETS
PART II:
NOT WHAT THE DOCTOR ORDERED
----------
Tuesday, September 19, 2023
House of Representatives,
Committee on Oversight and Accountability
Washington, D.C.
The Committee met, pursuant to notice, at 10 a.m., in room
2154, Rayburn House Office Building, Hon. James Comer, Chairman
of the Committee, presiding.
Present: Representatives Comer, Jordan, Foxx, Grothman,
Palmer, Higgins, Sessions, Biggs, Mace, LaTurner, Fallon,
Perry, Timmons, Burchett, McClain, Edwards, Burlison, Raskin,
Norton, Lynch, Connolly, Krishnamoorthi, Khanna, Mfume, Ocasio-
Cortez, Porter, Bush, Brown, Stansbury, Garcia, Frost, Lee,
Casar, and Goldman.
Also present: Representatives Carter, Harshbarger, and
Auchincloss.
Chairman Comer. The Committee on Oversight and
Accountability will come to order. I want to welcome everyone.
Without objection, the Chair may declare a recess at any
time.
I now recognize myself for the purpose of making an opening
statement.
I want to welcome everyone to today's hearing on the role
of pharmacy benefit managers in pharmaceutical markets. This is
the second hearing in our series discussing pharmacy benefit
managers, or PBMs, and their role in the pharmaceutical market.
Last Congress, Oversight Republicans conducted a review of
PBMs. What we found was deeply concerning and raised many
questions about PBMs' role in the healthcare industry.
PBMs started out as beneficial additions to the healthcare
system because they were competing with others to provide
clarity to pharmacies, payers, and patients about drug costs,
but that environment of competition and transparency is no
longer true today. Instead of fierce competition, now just
three PBMs control 80 percent of the market, and each of the
three major PBMs--CVS Caremark, Express Scripts, and Optum Rx
is owned by a major health insurer and is owned by a pharmacy.
This means that when PBMs negotiate with a pharmacy or a health
insurer, they are either negotiating with themselves or one of
their direct competitors. This can create incentives to do
things that have negative impacts on patients. That is why the
Committee's examination of PBMs is a priority of this Congress.
Our concerns were compounded by what we learned in our
first PBM hearing held earlier this year in the spring. We
heard from Greg Baker, a pharmacist in Jacksonville, Florida,
who discussed how he is unable to serve TRICARE beneficiaries
in his community. This is because Express Scripts is forcing
TRICARE beneficiaries to use specific pharmacies on military
bases. We heard from Dr. Miriam Atkins, an oncologist in
Georgia, who discussed how PBMs, not doctors, can dictate which
drugs the patients can use. They do this through tactics that
require a patient to fail on a certain drug before trying
another drug and by requiring the use of mail order pharmacies,
which can be unreliable and wasteful.
We also heard from Greg Baker, the CEO of AffirmedRx, a
transparent PBM that works to provide clear pharmacy benefit
services to employers. He discussed how typical PBM practices
could be considered price gouging, and gave examples of a
cancer drug and the difference in price for a 30-day supply of
the cancer drug, Imatinib, at Cost Plus Drugs versus CVS. That
difference is astounding. A 30-day supply at Cost Plus Drugs
costs $72. That very same 30-day supply at CVS costs more than
$17,000. Those two prices are for the exact same prescription.
It begs the question, why is one prescription so much more
expensive, and what is happening with that extra money?
We know that PBMs regularly engage in spread pricing where
PBMs overcharge payers and underpay pharmacies and pocket the
extra money. We also know that drug manufacturers pay rebates
to PBMs in order to be placed in a favorable tier on a
formulary, which can make it difficult for competing
prescriptions, often generics, to get on formularies. These
practices have real-world consequences and impact constituents
in all of our districts. I hope today's hearing provides more
clarity into the pharmaceutical market so that Congress can
determine what actions are necessary. I want to thank the
witnesses, and now I yield 5 minutes to Ranking Member Raskin
for an opening statement.
Mr. Raskin. Chairman Comer, thank you very much for calling
the hearing and for your great leadership on this issue. Thanks
to the witnesses for coming, and I want to thank the Members on
my side of the aisle who have arrived already, and Mr.
Auchincloss from Massachusetts who joins us today, who is an
expert in the field. It is the second time we have come
together to talk about this issue that affects everybody in
America: access to affordable medication. And here is the
bottom-line value that we are seeking in the wealthiest nation
on Earth at the wealthiest time in our history: everybody
should be able to afford the medical care and attention and
prescription drugs that they need.
In 2021, we spent $4.3 trillion on healthcare in our
country, nearly twice as much per capita as the next closest
country. Most of our healthcare system is for profit with many
big corporations involved making billions of dollars in profits
annually. During a multiyear investigation conducted by
Committee Democrats, we found that some major pharmaceuticals
employed profit-maximizing pricing practices at the direct
expense of the people who rely on their medications to survive.
Today, we are investigating the role of pharmacy benefit
managers, PBMs, which are supposed to negotiate lower drug
costs and improve the delivery of medication to patients. That
is the theory. What we have actually heard is that certain PBM
business practices may be favoring more expensive drugs and
making it more difficult for patients to get timely and
affordable access to the medication prescribed by their doctors
at the pharmacy of their choice. In our last hearing, we heard
from witnesses who suggested that PBMs and other big health
companies are using their enormous market power to maximize
their profits at the expense of patients and community
pharmacies. As of today, three companies control 80 percent of
the PBM market. The same parent companies that own these PBMs
also own health insurers and pharmacies, so the parent company
can profit at multiple points of access through the healthcare
system.
PBMs profit from rebates and fees from pharmaceuticals that
want PBMs to include their drugs on insurance plans. PBMs also
profit from health insurers directly, which reimburse PBMs when
medications are dispensed to patients at the pharmacy. Because
of the integrated market, PBM parent companies can also profit
from directing patients toward the retail and specialty
pharmacies that they own.
In the question of PBM profits versus patients, we need to
make sure that patients are coming out on top every single
time. The first step is understanding the problem. The
Committee's drug pricing investigation shone a light on the way
that drug companies have spent years exploiting patients. In
the Inflation Reduction Act, Democrats worked to lower drug
costs for seniors by allowing Medicare to negotiate prices
directly with manufacturers, capping out-of-pocket costs for
patients covered by Medicare and limiting the price, for
example, of insulin to $35 per vial for seniors.
Today, we have got an opportunity to build on that success.
This hearing will help us understand the ways that PBMs add
value and improve patients experience, as well as the ways they
may not be living up to the hype and contributing to our crisis
of drug affordability and accessibility. Given their central
role, we need more transparency into how PBMs operate and how
their practices might be working alongside others in the supply
chain, including Big Pharma, to increase the price of drugs
that we all pay. I hope together we can buildupon our drug
pricing reduction work so far and move toward the moral North
Star here, which is that every person in America should be able
to access the affordable medication they need in order to
survive and thrive with their families. Thank you very much,
Mr. Chairman. I yield back.
Chairman Comer. The gentleman yields back. Without
objection, Representative Carter from Georgia, Representative
Harshbarger from Tennessee, and Representative Auchincloss from
Massachusetts is waived on to the Committee for the purpose of
questioning the witnesses at today's Subcommittee hearing.
I am pleased to welcome an expert panel of witnesses, who
each bring experience and expertise that will be valuable to
today's discussion. I would first like to welcome Mr. JC Scott,
who is the President and CEO of Pharmaceutical Care Management
Association. Next, we have Lori Reilly, who is the Chief
Operating Officer of the Pharmaceutical Research and
Manufacturers of America. Next, we have Mr. Craig Burton, who
is the Executive Director of Biosimilars Council and Senior
Vice President of the Association for Accessible Medicine.
Next, we have Mr. Hugh Chancy, who is the President of the
National Community Pharmacists Association. Last, we have Rena
Conti, who is an Associate Professor for markets, public
policy, and law at Boston University.
Pursuant to Rule 9(g), the witnesses will please stand and
raise their right hand.
Do you solemnly swear or affirm that the testimony you are
about to give is the truth, the whole truth, and nothing but
the truth, so help you God?
[A chorus of ayes.]
Chairman Comer. Let the record show the witnesses all
answered in the affirmative, and thank you. You may be seated.
We appreciate all of you being here today and look forward
to your testimony. Let me remind the witnesses that we have
read your written statements, and they will appear in full in
the hearing record. Please limit your oral statements to 5
minutes. As a reminder, please press the button on the
microphone in front of you so that it is on, and Members can
hear you. When you begin to speak, the light in front of you
will turn green. After 4 minutes, the light will turn yellow.
When the red light comes on, your 5 minutes has expired, and we
ask that you please wrap up.
I now recognize Mr. Scott to please begin his opening
statement.
STATEMENT OF ``JC'' SCOTT
PRESIDENT AND CEO
PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION (PCMA)
Mr. Scott. Good morning, Chairman Comer, Ranking Member
Raskin, and Members of the Committee. Thank you for the
opportunity to join today's hearing on behalf of PCMA. We
represent the Nation's pharmacy benefit companies which
negotiate and administer prescription drug benefits for 275
million insured Americans. For most of this year, there has
been a heavy congressional focus on our industry with the
expressed goal to reduce high drug prices.
[Chart]
Mr. Scott. Yet, as the chart shows, PBMs represent only 6
percent of the drug dollar, and proposed PBM reform bills do
not actually address drug prices or lower costs. I am grateful
for today's opportunity to talk about why, and we will share
that chart if it does not appear on the screen.
Efforts to lower drug costs must start with an
understanding that prices are set by drug companies. When a
drug company sets its initial price, that dictates costs
throughout the supply chain, from the wholesalers' negotiation
for discounts, to its markups to pharmacies, to pharmacy
acquisition costs, to the amount that the insurance plans
sponsor, and patients ultimately pay. PBMs negotiate with drug
companies to deliver savings on prescription drugs to patients
and health plan sponsors, including employers, unions and
government programs like Medicare and Medicaid. These discounts
take the form of rebates, and many are surprised to learn that
most prescription drugs do not have a rebate.
Ninety percent of prescriptions are filled with generics,
and most newly launched brand drugs and specialty drugs do not
have a rebate. What is more, study after study has shown that
rebates are not correlated with pricing decisions. Government
data illustrates this very important point. Prices continue to
go up on drugs regardless of how big, small, or nonexistent a
rebate is. The idea that PBMs force drug companies to set
prices higher is simply incorrect. PBMs pass these savings back
to plan sponsors and employers, who have full decisionmaking
authority on how best to use rebate savings to benefit the
patients enrolled in their plans, whether it be through lower
premiums, lower out-of-pocket costs, or more comprehensive
benefits.
Our company's mission is to lower costs. We support lower
drug company list prices. We promote use of generics. We want a
robust biosimilars market. We cheered when several insulin
companies lowered list prices for some of their products
earlier this year, and we have called on other drug makers to
lower their own list prices for needed medications. PBMs also
work with over 60,000 pharmacies on behalf of employers and
plan sponsors, and our companies rely heavily on this
relationship with retail pharmacies to be access points for the
patients they serve. That is why at PCMA, we have been
advocating to look toward the future state of retail pharmacy,
empowering pharmacists to do more to provide care to patients.
No employer, union, or other plan sponsor is under any
obligation to hire a pharmacy benefit company. They choose to
do so, and you will hear me talk about the importance of choice
as a foundational principle. Employers and plan sponsors have
unique needs and represent unique patient populations. They
choose whether to contract with a PBM and what they want out of
that service. They choose how to set up their contract and how
to pay for the services, whether it is through fees, shared
savings, incentives, or otherwise, and they choose how best to
use the savings delivered by their PBM.
For the system to work, employers and plan sponsors have to
be empowered not only with choice but with the information they
need to make informed choices. At the beginning of the
contracting process with the PBM, employers determine what
information, disclosures, and audit rights they need. Our
industry supports open, transparent exchange of useful
information. Our companies comply with the many transparency
and disclosure requirements in place at the state and Federal
levels, but we do not believe the government should dictate
private contract terms between two businesses. Employers should
make the call on what information they want to receive, and
they should receive it. Mandating public disclosure of
confidential information will only invite drug companies to
collude and raise drug costs.
In almost every industry, and especially healthcare, the
most effective way to lower costs is through increased
competition. That is why we must ensure that any misuse of the
patent protections meant to balance rewarding innovation and
ensuring affordable access for patients is not blocking
competition and keeping prices high. So, I would encourage you
to keep two key questions in mind today, would legislation
limit choice, competition, and innovation in the markets, and
would it actually help lower drug prices? We ask the Committee
to take a look at the practices of not just PBMs, but drug
companies, pharmacies, wholesalers, plan sponsors, and other
stakeholders. High drug prices will not be solved in a vacuum
or by singling out one sector, especially not the sector
charged with lowering costs, and PCMA is committed to being a
positive partner in the policy discussion about how to bring
down drug prices and improve patient access.
Thank you for including me today. I look forward to your
questions.
Chairman Comer. Thank you. Ms. Reilly?
STATEMENT OF LORI REILLY
CHIEF OPERATING OFFICER
PhRMA
Ms. Reilly. Chairman Comer, Ranking Member Raskin, Members
of the Committee, my name is Lori Reilly, and I am here
representing PhRMA.
Over the past 23 years, biopharmaceutical companies have
brought 750 new medicines to market, including medicines like
cell and gene therapies and Alzheimer's treatments. These
medicines are helping slow the progression of disease and
improving patients' lives, all for 7 cents out of every
healthcare dollar, which is what is attributed to brand name
medicines. How is that possible? Well, first, insurers do
negotiate very significantly with pharmaceutical manufacturers.
Typically, rebates exceed 50 percent or more, on average, for
prescription medicines. Medicines also face significant
competition from other brand drugs. Take, for example,
hepatitis C medicines. When they were introduced, within a year
there were multiple hepatitis C medicines on the market, which
dropped the price by 80 percent.
And last, generic medicines comprise 90 percent of every
prescription written today. These medicines typically launch at
90 percent less than brand medicines. All of these things
combine to make our system based on one of competition and
negotiation. Unfortunately, however, there are aspects of the
market that today are not working as intended.
Today, as was mentioned earlier, just three pharmacy
benefit managers control 80 percent of the market. They own or
are owned by insurers, they have pharmacies, and they also
increasingly have physician practices, and they use their
leverage to enrich themselves often to the detriment of the
patients that they are intending to be serving. There are three
different ways that they do this. No. 1, they limit patients'
ability to access lower-priced medicines. They make their money
on rebates and fees that are tied to the list price of a
medicine. The higher the list price, the more money that goes
in their pockets. They often deny or limit access to biosimilar
and generic medicines. And when branded medicines offered lower
priced insulins and lower priced hepatitis C medicines, while
they may have cheered, they were reluctant to actually cover
them on their formularies. As a result, patients are paying
more.
Second, they refuse to pass negotiated discounts on to
patients. Negotiated rebates often exceed 50 percent or more,
but they insist on making patients pay the full price when they
go to the pharmacy counter. In fact, recently, the GAO looked
at the top 100 most rebated drugs in Part D and found that in
79 of those medicines, patients paid more than their insurance
company did for the very same medicine, in fact, 4 times more
than their insurance company did, and that is not an anomaly.
In two-thirds of all commercial claims and 92 percent of all
Medicare Part D claims, patients are being asked to pay a price
tied to the list price of the medicine. This happens nowhere
else in the healthcare system. If you go to the hospital or the
doctor's office, you pay the negotiated rate, not the high list
price.
And last, large consolidated PBMs use their leverage to
extract additional profits throughout the supply chain, which
means higher costs for everyone else. In addition to rebates,
PBMs also get additional revenue by new fees and markups on
medicines at specialty pharmacies. A Wall Street Journal
article just last week found that PBMs are marking up generic
drugs by thousands of dollars. They have also created PBM GPOs
to generate new sources of profit through opaque fees that
provide no direct benefit to patients.
A study released just yesterday by Nephron Research found
that fees that are paid to PBMs have more than doubled in the
last 5 years, and these, again, are predominantly tied to list
prices. That same study found that 42 cents out of every
healthcare dollar goes to PBM, not 6 cents as was just stated
by JC. The 6 cents that was quoted by Mr. Scott actually
neglects to include the profits that they receive from
specialty pharmacies, which is one of the largest drivers of
profit that they receive.
So how do we fix this problem? Congress has an
unprecedented opportunity to hold PBMs accountable, restore
competition, and lower costs, and they can do so in three ways.
No. 1, delink PBM compensation from the price of medicine so
that PBMs are not incentivized to prefer high list price
medicines over lower price medicines; two, require that rebates
and discounts be passed on to patients so that patients are not
left in the position of having to pay more than their insurer
for a medicine; and last, increase PBM transparency so that
everyone has a better understanding of how PBMs make their
money and where that monies go. Thank you very much.
Chairman Comer. Thank you. Mr. Burton?
STATEMENT OF CRAIG BURTON
EXECUTIVE DIRECTOR
BIOSIMILARS COUNCIL
SENIOR VICE PRESIDENT
ASSOCIATION FOR ACCESSIBLE MEDICINES
Mr. Burton. Thank you, Chairman Comer, Ranking Member
Raskin, and other Members of the Committee. My name is Craig
Burton. I am speaking on behalf of the BioSimilars Council and
Association for Accessible Medicines. AAM and its Biosimilars
Council represent the manufacturers of generic and biosimilar
medicines, and we work to expand patient access to safe,
quality, and effective generics and biosimilars.
Generics are the backbone of U.S. healthcare. As folks have
mentioned, they represent 9 out of every 10 prescriptions
filled in the U.S. but less than 18 percent of all drug
spending. These are lower-cost FDA-approved versions of brand
drugs, and their development cost can range from $5 million to
$10 million for a relatively simple product to upwards of
several hundred millions of dollars for a complex generic or a
biosimilar. And biosimilars, in particular, are critical to
future savings. Today, they cost less than half the price of
the brand at the time of a biosimilar launch, and, importantly,
they are also driving brand prices down.
One of the most important things about generics and
biosimilars, though, is that they expand patient access. Since
2015, biosimilar competition has resulted in more than 344
million additional patient days of therapy. It is no
overstatement to say that patients depend on generics and
biosimilars, but these savings and this access is at risk
because of Medicare policy incentives that delay patient access
to and savings from new generics and biosimilars.
First, I should note a foundational difference between
generic and brand pricing. Brand manufacturers operate in a
monopoly environment. They can set high list prices, and they
often will negotiate PBM formulary coverage through opaque
backend rebates and fees, but generics do not price with the
PBM in mind. Rather, generics are pricing as competition for
wholesaler and pharmacy stocking, and they price based on
discounts and ability to meet desired volume. In fact, generics
rarely, if ever, negotiate rebates with PBMs and health plans.
Now, new generics have historically achieved rapid
adoption, but that trend is no longer the case. Patients are
increasingly blocked from new generics and biosimilars for a
period of years, 3 years, in fact, in the Medicare program for
new generics to be covered on as many as half of Part D
formularies. This delays patient savings, and it is a direct
result of Medicare incentives that encourage PBM preferences
for high priced brands with high rebates and fees.
Biosimilars also face similar challenges. Humira
biosimilars are launching at discounts of up to 85 percent, but
the adoption so far has been less than desired. As biosimilars
seek to achieve coverage, some are pricing based on a high list
price, high rebate strategy. Others are trying to get coverage
with a lower list price and a larger discount. And these PBM
preferences can be seen in the biosimilar insulin market, where
a biosimilar insulin launched with two prices, one high price
with backend rebates and one with a 65 percent discount in list
price, but PBMs did not cover the lower-priced biosimilar
insulin. PBMs stuck with the brand. And if you look at adoption
in the insulin market, even though two-thirds of prescriptions
written for this product were for the biosimilar, only about a
third of those prescriptions were actually filled with the
biosimilar. This is because of PBM preferences that blocked
adoption of the biosimilar.
To be clear, as we look at biosimilar and generic
competition, it is great that everyone is supportive of it, but
it cannot simply be a ploy for PBMs to leverage bigger rebates
and fees from brand drugs. This is not sustainable. And even
when formularies do cover generics, we are seeing those
generics increasingly placed on brand formulary tiers with
higher co-pays. Today, fewer than half of generics and Medicare
are on a generic tier. This dramatically increases patient
costs, more than double the cost the patient out of pocket is
spending on generics covered in 2011 and 2019, even though the
price of those generics declined by 40 percent over the same
time period.
Representatives Kuster, Miller-Meeks, Dunn, and Matsui have
introduced legislation to ensure that patients have access to
new generics and biosimilars, and that patients do not spend
more than necessary for low-cost generics. We encourage
Congress to take up this legislation and improve patient access
to lower cost treatments. I would be happy to take any
questions.
Chairman Comer. Thank you. Mr. Chancy?
STATEMENT OF HUGH CHANCY, RPH
PRESIDENT
NATIONAL COMMUNITY PHARMACISTS ASSOCIATION (NCPA)
Mr. Chancy. Chairman Comer, Ranking Raskin, and other
Members of the Committee, I am Hugh Chancy. I am a pharmacist
and co-owner of Chancy Drugs. I currently serve as the
President of the National Pharmacists Association. I greatly
appreciate the opportunity to speak to you today regarding my
experience as a pharmacist and pharmacy owner and how current
PBM practices negatively impact my family business and my
community.
My family has three generations of pharmacists. My parents,
Hubert and Sue, opened Chancy Drugs in 1966 in Hahira, Georgia.
Chancy Drugs has since expanded under me and my brother's
leadership, and more recently, my son, Patrick, has also taken
a leadership role. Chancy Drugs has seven locations and
currently employs approximately a hundred people across South
Georgia. I am proud of the work that Chancy Drugs has done over
the decades providing healthcare to patients in my community.
But PBMs put this important work at jeopardy, dictating who has
access to our pharmacy, the prices patients pay, what
reimbursements pharmacies receives, and what medications are on
formulary.
As you know, the top three PBMs control 80 percent of the
market. They use the monopoly power to steer patients to PBM-
affiliated pharmacies. In fact, a recent report from MedPAC
found that vertically integrated PBMs and Medicare Part D
appear to pay the affiliated pharmacies more than they do
pharmacies like mine. Imagine that. This is leading to higher
cost to the Medicare program. Many of my patients who are
forced to get their drugs through mail order receive their
medications damaged or do not get them on time.
Chancy Drugs has three stores near Moody Air Force Base,
which means that we have a lot of veterans as customers. When
Express Scripts implemented the changes to the TRICARE pharmacy
network last year, many of our patients were negatively
impacted. We had one patient in particular who called in tears.
She is blind, and we hand deliver her medications to her home
in specialty packaging. With TRICARE's changes, she was forced
to go to mail order without the specialty packaging, or her
elderly husband must drive 40 miles round trip to the pharmacy
in Valdosta. Our service members and veterans deserve better.
PBMs employee harmful anti-competitive tactics such as
spread pricing and DIR fees. Spread pricing is the difference
between how much the PBM pays me for a drug and the higher
price that they charge the payer for the same prescription. For
years, community pharmacists have said PBMs play spread pricing
games, contributing to higher drug costs. Studies of state
Medicaid-managed care programs have found that PBMs overcharge
taxpayers while pocketing the spread for themselves. In fact,
over the last 2 1/2 years, Centene has entered into settlements
for up to $900 million for at least 17 states for overcharges
to the Medicaid program.
Another tactic PBMs use are direct and indirect
remuneration fees. DIR fees have allowed PBMs to pay pharmacies
for prescriptions and later clawback thousands of dollars at
random. A MedPAC March 2023 report found DIR fees reached $12.6
billion in 2021. That is 33 percent increase in just 2 years.
The unpredictability wreaks havoc on my pharmacy's financial
health, threatening my ability to keep the lights on. On top of
this, our contracts with PBMs are take it or leave it. Some of
the most life-sustaining medications are often underpaid by
PBMs. Georgia's cost to dispense for Medicaid patients is
$10.63, but it is not unusual for PBMs to pay me a nickel. And
oftentimes, we have zero dollar dispensing fee on Part D
prescriptions.
Because of PBMs, thousands of pharmacies represented by
NCPA have gone out of business over the last decade, and it is
not only independent pharmacies that PBMs impact. Large chain
pharmacies are also closing. In fact, two large grocery stores
are closing in my community now. If these large national chains
and grocers are having difficulty maintaining pharmacy
operations, it is no surprise that small businesses are
struggling. Pharmacies are going under while PBMs are getting
fatter. CVS, UnitedHealthcare, and Cigna are all part of the
Fortune 500 top 20. If the PBM industry continues to go
unchecked, there is a severe risk of putting thousands of
pharmacies like Chancy Drugs out of business.
In sum, community pharmacies supports commonsense
legislative reform to PBMs' harmful practices, which I would be
glad to discuss further. I applaud the Committee's bipartisan
efforts to shine light on the PBMs through this investigation,
and I am happy to answer any questions. Thank you.
Chairman Comer. Thank you. Dr. Conti?
STATEMENT OF RENA M. CONTI PH.D.
ASSOCIATE PROFESSOR
DEPARTMENT OF MARKETS
PUBLIC POLICY, AND LAW
QUESTROM SCHOOL OF BUSINESS
Ms. Conti. Good morning. I am Professor Rena Conti. I am a
Professor of Economics applied to prescription drugs at
Questrom School of Business at Boston University. Today, I am
honored to address Representative Comer and Raskin and all
distinguished Committee Members to discuss the pivotal roles
played by pharmacy benefit managers in the U.S. healthcare
system.
PBMs are often regarded as enigmatic intermediaries despite
the central role PBMs play in the healthcare system. The
primary function of PBMs is to create a competitive arena for
drug makers. This arena is built upon PBMs' strategic use of
formularies, among other tools, to guide patients toward
specific medications. These strategies are intended to foster
competition among drug makers. PBMs wield the potential to
enhance the efficiency of prescription drug markets, which can
ultimately benefit both consumers and payers. Notably, PBMs,
through their formulary strategies, incentivize utilization of
generic and biosimilar drugs when clinically appropriate.
Generic drugs, in turn, offer substantial cost savings for both
patients and payers. Use of these strategies do not disturb the
incentives for innovation.
Nonetheless, I have some concerns about the potential for
PBMs in their current organizational structure to burden our
system with additional costs. Branded drug makers may respond
to the strategies of PBMs in ways that undermine patient
benefit. Branded drug makers offer rebates off of list price to
compete within the arena constructed by PBMs. PBMs, in pursuit
of their own self-interest, may favor placing branded drugs
with higher list prices in preferred formulary tiers.
When drug makers exclusively retain the power to set list
prices and engage in formulary competition, as in our system,
it can trigger shadow pricing behavior. In the race for
superior placement, list prices may skyrocket without
commiserate benefit to patients, as confirmed by the House
Oversights Committee's recent reports. Such behavior directly
burdens all Americans with higher out-of-pocket costs and
undermines access, especially for people who are underinsured,
including those with high-deductible health plans, and
uninsured individuals. It also undermines transparency within
the system, essentially disconnecting reimbursement from the
acquisition costs of these drugs.
The consolidation of PBMs presents challenges. While mega
PBMs may extract deeper rebates from branded drug makers, the
benefits of such arrangements often remain with the PBMs
themselves and are not shared with consumers or payers. The
consolidation of PBMs with health plans does not appear to
lower premiums for consumers, nor enhance their medical
benefits. Similarly, the consolidation of PBMs with pharmacies
does not appear to render generic drugs even more accessible,
nor render such services more convenient to access. Moreover,
PBM consolidation erodes competition, contributing to increased
costs for PBM services and greater opacity in our system. These
effects hinder smaller health plans and employers to select
services that actually align with their unique health needs.
Developing evidence suggests that some PBMs design
formularies primarily to maximize revenues, potentially
neglecting the promotion of individual and population health as
well as cost reduction. Thus, while PBMs offer efficiencies in
our healthcare system, PBMs also pose emergent tasks. Increased
transparency in the PBM market would empower consumers and
employers to make informed decisions in selecting PBMs, plans,
and pharmacies that align with their requirements. Banning
spread pricing and requiring rebate pass-through may offer
solutions to these intricate challenges. However, I urge
policymakers to exercise due diligence as these and related
reforms may also yield unintended consequences.
I welcome the opportunity to engage in a meaningful
discussion with the esteemed Members of this Committee. Thank
you.
Chairman Comer. Thank you very much. We will now proceed
with 5 minutes worth of questioning per Member. The Chair
recognizes Dr. Foxx from North Carolina for 5 minutes.
Ms. Foxx. Thank you, Mr. Chairman, and thanks to our
witnesses for being here. Mr. Scott, in the employer-sponsored
market, plan sponsors have a fiduciary responsibility to their
employees to provide the highest quality plan for the lowest
cost. How do large PBMs help employers fulfill their fiduciary
duties?
Mr. Scott. Good morning, Congresswoman. It is nice to see
you again. Thank you for your time recently to visit on these
questions. So, I appreciate your question because it is sort of
foundational to what I was getting at in my opening comments,
that this is a marketplace where employers and plan sponsors
have full choice in how to leverage the value of the PBM. And
most of the time, the value that they are looking to derive on
behalf of the patients they represent is to bring down the cost
of the benefits.
And that can be derived through the negotiation with the
drug company to bring down the net cost of the drug, to promote
networks of lower-cost, higher-quality pharmacies. All of that
generates savings that the employer can then use to expand the
benefit, lower the premium, lower out-of-pocket costs, whatever
is going to be best for their unique patient population.
Ms. Foxx. Thank you. Mr. Scott, again, Congress has been
exploring proposals to reduce the cost of prescription drugs,
some of which are included in H.R. 5378, the Lower Costs, More
Transparency Act that we hope the House is going to consider
this week. What impact would requiring PBMs to pass through all
rebates to patients at the point of sale have on overall drug
costs, and what would the impact be on premiums?
Mr. Scott. Thank you for the question. That is sort of the
key consideration here, right? There is an amount of savings
that is negotiated. And as long as the price of the drug, the
price of the good continues to be high, whether you shift that
fully to offset all out-of-pocket cost or you shift that fully
to offset premium, then you are just squeezing the balloon and
causing cost to rise on the other side of that equation. So, if
you moved it all to the point of sale, then you are risking
that the premium and the cost of the benefit is going to have
to go up.
We saw that effect measured by CBO and OACT at HHS and
others around the Trump Administration's rebate rule, all of
which is to say this is why it is so important to have
flexibility so that there can be a balance struck between
keeping the benefit affordable and trying to address out-of-
pocket cost at the counter.
Ms. Foxx. Another question, 25 words or less, what is
spread pricing, and why should PBMs be allowed to charge
insurers more for a drug than what they paid the pharmacy?
Mr. Scott. Spread pricing is a form of contracting that the
employer can choose for mitigating their financial risk. If I
could just use an analogy, so if you are an employer, for
example, running a cafeteria, you may say to the vendor, I just
want to pay a per person fee. You tell me how much it is going
to be per person, and then the vendor has to deal with the cost
of the lettuce and the ketchup and everything that goes into
it, or they may say, I will pay you a small flat fee, and I
want an exposure to paying for the variability of the things
that go into the meal. It is really a financial risk tolerance
choice that is being made by the employer.
Ms. Foxx. OK. So why should PBMs be allowed to charge
insurers more for a drug than what they paid the pharmacy?
Mr. Scott. Well, in that instance, if you pull the analogy
through to the pharmacy marketplace, then the PBM can be
compensated if it is able to negotiate a better deal with the
pharmacy on the cost of a given drug, but the PBM also owns the
risk and takes the loss if they are unable to negotiate a
better rate with the pharmacy.
Ms. Foxx. Mr. Chancy, what impact does spread pricing have
on independent pharmacies?
Mr. Chancy. The spread pricing is a big problem for us
because we are getting underpaid, and then the spread is going
to them.
Ms. Foxx. OK. Well, what would the impact of additional
transparency regarding spread pricing be for independent
pharmacies?
Mr. Chancy. Well, I think, first of all, clear and
transparent reimbursement would be helpful to us because many
times we are being underpaid. We are actually being paid below
our cost of purchasing the product, so I think that spread
pricing has taken away from our reimbursement and making it
more difficult for us to serve our patients.
Ms. Foxx. I am going back to Mr. Scott, and I have a short
period of time. CVS Caremark, Express Scripts, and Optum Rx, or
the big three, own 80 percent of the U.S. PBM market, as the
Chairman said in his opening remarks. What impact does this
consolidation have on prescription drug prices?
Mr. Scott. Congresswoman, it is important to have a variety
of different PBM models, whether a large integrated company or
a small standalone PBM, which is why it has been good to see
the number of competitors in the PBM market expand by 10
percent in just the last 2 years. That provides choice for
employers and plan sponsors.
Ms. Foxx. Thank you, Mr. Chairman. I yield back.
Chairman Comer. I now recognize Mr. Lynch for 5 minutes.
Mr. Lynch. Thank you, Mr. Chairman, and thank you for
holding this hearing. In a previous Congress, I was actually
the Chair of the Subcommittee on the Federal Workforce, where
we conducted an extensive investigation into the role of
pharmacy benefit managers with respect to the prescription drug
pricing under the Federal Employees Health Benefit Plan.
The FEHBP is the largest employer-sponsored group health
insurance program in the world. We have got about 8 million
Federal employees, retirees, former employees, and their family
members, so it is often considered sort of the gold standard
when it comes to affordable health insurance. Importantly, our
investigation found that the FEHBP employee members, retirees,
and active employees were paying up to about 45 percent more
for its prescription drugs. Even with that collective power of
8 million people in a healthcare plan, they were paying 45
percent more for prescription drugs than any other agency, and
it was because we relied on PBMs to negotiate the prices.
When we tried to figure out what the rebate system was that
was leading to this unfairness, the PBMs fought us on the issue
of transparency. We were trying to find out, OK, how do the
PBMs actually work this rebate system. Why is it not
transparent? They fought us tooth and nail in court, and one
claiming that it was a proprietary advantage that they had, and
so we cannot get full transparency on that. Ms. Reilly, you
talked about that in one of your points. How do we get at that?
I know some states have individually brought lawsuits. I know
Maine has, Texas has, Ohio has. There are states all over the
country that are trying to find out the same thing, like, what
does a PBM pay for their drug, and why are they charging so
much more to employees or to insured parties? Can you talk
about that a little bit?
Ms. Reilly. Absolutely. Thank you for the question, and
there are a number of pieces of legislation that Congress is
considering: one, the PBM Sunshine and Accountability Act,
which is a bipartisan bill that Members of this Committee are
sponsors of. I think that would go a long way to providing some
sunshine into the various fees that PBMs collect and where that
money goes.
As you rightly pointed out, there are a number of fees, not
just rebates that PBMs collect. The report that I referenced
just released yesterday from Nephron showed that what is
happening now, I would argue, is shape-shifting in the PBM
market. As Congress and state legislators have begun to shine a
light on rebates and the significant dollars associated with
rebates, more plan sponsors are demanding that those rebates
get passed through to them. So PBMs have set up PBM GPOs, often
located offshore, and they collect a number of opaque fees. It
is hard to find any direct patient benefit to these fees, and I
think it would be enlightening for folks to know just how large
and significant these fees are today and how much they have
grown in just the last 5 years.
Mr. Lynch. Great. I just want to illustrate one of the
absurdities that we found here. So here we have 8 million
people in an insurance plan, that collective bargaining power,
the weight of that plan. We found that the PBMs were operating
individually with CVS and the drug companies, offering another
program to the general public. So, somebody off the street
could come in and pay $10, and there was a whole formulary of
drugs that were available for $9.99.
Our members that are paying all this money for insurance, 8
million of them paying into this plan went in and they paid
more than someone coming in off the street. So, we were telling
our members do not tell them you have insurance. Just tell them
you are a stranger. You do not have insurance. You will get a
better price from the PBMs than you would with Federal employee
health insurance. Ridiculous, and it is because of the scam
that is being perpetrated by the PBMs. In some cases, the
Federal employee with insurance was paying $200 more for the
same drug that the PBM was offering to the general public
walking off the street for $9.99. It is just absolutely
maddening.
And I think we have an area here, Mr. Chairman, where we
can actually work together and have some bipartisanship, I dare
say, on this. I think the sponsors of this legislation from
your side and ours are on the side of the angels, and I
heartily support their effort, and I yield back. Thank you.
Chairman Comer. Thank you, Mr. Lynch. And I agree 100
percent on bipartisan agreement and cooperation moving forward.
The Chair now recognizes Mr. Sessions from Texas for 5 minutes.
Mr. Sessions. Mr. Chairman, thank you very much. Mr.
Chairman, I would like to, if I could, at the beginning of this
put in the record a report from McKinsey & Company called,
``Improving Patient Adherence through Data-Driven Insights.'' I
would like to ask that that is in the record.
Chairman Comer. Without objection, so ordered.
Mr. Sessions. Mr. Chairman, thank you very much. Our
witnesses today have provided, as well as the Members, a lot of
interesting information. And, Mr. Scott, I know that a lot of
it is aimed at the business model that you and your companies
have established. But it is very apparent to me that
competition is one of those factors that is not part of your
equation for the marketplace, and the marketplace would be
consumers, and consumers in the United States of America need
to be able to count on the U.S. Congress, the laws of this
country. But I think across the board, the marketplace
represents an agreement by large companies and small companies
to offer a competitive model where it would be available and
best for the consumer.
We have people who showed up today with a small pharmacy.
We have Ms. Reilly who is here with large pharma companies, and
they both see the same anti-competitive model that is employed
in this marketplace. Dr. Conti, please tell me what you think
would happen if there were full marketplace access? Would
prices and the competitive model be better?
Ms. Conti. So, by definition, the market that we have set
up is pro-competitive. PBMs clearly are producing savings for
Americans and pushing Americans to use generics and biosimilars
when they are available. That is a good thing. We all win from
that. However, the competitive pressure that is potentially
eroding patient access and affordability is related to vertical
integration between PBMs and pharmacies or PBMs and plans. It
is in those arrangements where we think premiums are not going
down, and potentially patients are paying more at the pharmacy
counter.
Mr. Sessions. Would it be your testimony today because I
heard Ms. Reilly allude to this, I believe directly land on it,
that it is the PBMs' model that they want to control the
marketplace? That I would consider this to be anti-competitive.
What would you say, Dr. Conti?
Ms. Conti. I would say, again, these vertically integrated
plan and PBM models are complicated and may create perversity,
harming us, individual patients. At the end of the day,
however, drug makers do set the prices of their drugs, and the
list prices are what patients pay out of pocket. So, I would
say both the drug makers, especially branded drug makers, and
the PBMs here are both at fault for imposing costs on us.
Mr. Sessions. Well, we just heard from several Members of
Congress about an investigation a few years ago where actually
it was determined that the PBMs controlled far greater than I
believe what you are giving reference to, the actual price,
giving preference in a marketplace through their market
advantage, and that is what I would like to focus on for a
minute. Ms. Reilly, I believe that you see this clearer than
most of us here on this Committee. We are not new to this
issue, but I think you have landed on really the equation. And
that is that I believe that these PBMs, the largest ones that
control 80 percent of the marketplace, can use their size as an
anti-competitive behavior against the marketplace. Could you
amplify that?
Ms. Reilly. Absolutely. And I would agree with you
wholeheartedly that there is significant evidence from the OIG,
from the Federal Trade Commission, from GAO, and a number of
others of a number of different practices that PBMs utilize,
No. 1, to make it harder for companies to reduce the list price
of their medicines. So, while it is true our companies set the
list price of the medicine, PBMs are responsible for setting
the terms of coverage and access and cost sharing that patients
have, and their preferences do matter.
And when companies have attempted to lower their list
price, as they did with insulin and hepatitis C medicines, that
was not met with cheers, as JC testified, but rather oftentimes
exclusions from formularies as a result of doing that. They
often also do not prefer biosimilars and lower price generics,
as I referenced in my testimony. The Wall Street Journal just
this past week noted that they often overcharge by thousands of
dollars generic medicines at their specialty pharmacies. So, I
believe there is a pattern of behavior that has been well
documented by economists and government agencies to demonstrate
the large challenges that today exist with PBMs that are
working not for the benefit of patients, but to the detriment
of patients.
Mr. Sessions. And I would add too--Mr. Chairman, I know I
am almost over my time, if not over--and that is I believe that
PBMs use their competitive market advantage to hold others out
of the marketplace, notwithstanding their own gift that they
have provided themselves. So, Mr. Chairman, I intend to be a
part of trying to bring some sanity to this, and that would be
through transparency, but I really do appreciate Mr. Scott
coming here. I think that the model with PBMs could work, but
you cannot use your competitive size against other companies
coming to the marketplace as our private pharmacies.
Even somebody as big as Albertsons, I think, they find
themselves on the back side of these three largest companies
who use, in my opinion, anti-competitive behavior, which should
be against the Federal law. Mr. Chairman, I yield back my time.
Chairman Comer. Thank you, Chair. I now recognize Mr.
Krishnamoorthi from Illinois for 5 minutes.
Mr. Krishnamoorthi. Thank you, Mr. Chair. Mr. Scott, you
said in a PCMA website post from February 14, 2023, ``We can
once again state unequivocally the independent pharmacy market
is stable,'' correct? That is what you said in that post,
correct?
Mr. Scott. That sounds correct. Yes, sir.
Mr. Krishnamoorthi. Sir, according to the FTC as well as
Fortune magazine, the number of independent pharmacies has gone
down from 23,000 in 2010 to about 19,000 right before the
pandemic, and it has not done that much better since. Mr.
Chancy, I see in your testimony you say PBMs wreak havoc on
independent pharmacy's financial health. Isn't that right?
Mr. Chancy. That is correct.
Mr. Krishnamoorthi. And one of the main reasons are what
are called DIR fees, direct and indirect remuneration fees,
correct?
Mr. Chancy. Yes, sir.
Mr. Krishnamoorthi. And those often amount to fees that
basically claw back any amounts of money that were paid to the
pharmacies to dispense drugs in the first place, right?
Mr. Chancy. Yes, sir.
Mr. Krishnamoorthi. According to the Centers for Medicare
and Medicaid, CMS estimates that DIR fees have gone up by
91,500 percent between 2010 and 2019. You do not disagree with
that, right?
Mr. Chancy. I do not.
Mr. Krishnamoorthi. And, Ms. Reilly, that does not
contribute to stability in the independent pharmacy market,
does it?
Ms. Reilly. It does not.
Mr. Krishnamoorthi. So let me talk about patients for 1
second. The FTC is conducting a major study of PBMs currently.
They have initially released some of their findings in a recent
statement from the summer. Here is what they said. They said
the following. ``One patient told us she was required by her
health insurance carrier to go through PBMs' specialty
pharmacy, which significantly delayed medication she vitally
needed to ensure she could have her baby.'' She says, ``I may
have lost the pregnancy because of the delays.'' Now, Mr.
Chancy, that is consistent with your experience with specialty
pharmacies, isn't it?
Mr. Chancy. Yes, sir.
Mr. Krishnamoorthi. Another finding from the FTC. This is
dated again July 20, 2023. This is from an owner of an
independent pharmacy: ``To keep up with the costs of PBM
practices and the ever-increasing cost of prescription drugs
while keeping the pharmacy doors open, my mom, a pharmacist,
was not able to pay her own wage for 4 months in 2019.'' Now,
Mr. Chancy, is that consistent with your own experience?
Mr. Chancy. Yes, sir, it is.
Mr. Krishnamoorthi. And that obviously is not a sign of
stability among independent pharmacies, is it?
Mr. Chancy. No, sir.
Mr. Krishnamoorthi. Now, the FTC at one time actually sent
out letters that stated that at the state and local level, any
efforts to increase transparency and disclosure for PBMs was
somehow against the best interests of consumers. Now, they sent
11 letters out in the last 20 years. On July 20, they
officially withdrew support for those various letters.
Let me just tell you about some of those letters very
briefly. They said, ``Freedom of choice provisions at the New
York state level actually increased pharmaceutical costs for
patients.'' They withdrew support from that letter. Another
letter that they wrote on September 7, 2004, again from the
Federal Trade Commission to California State Legislature, said
that, ``These particular bills that you are pursuing with
regard to disclosure requirements hurts patients.'' The FTC has
withdrawn support from that letter, and the list goes on and on
and on. I have all nine--I am sorry--all 11 letters here. This
is garbage. The FTC has now officially withdrawn support from
all of this guidance.
Mr. Chair, I request permission to enter remnants of these
letters into the record.
Chairman Comer. Without objection, so ordered.
Mr. Krishnamoorthi. That is what we have from the FTC. The
FTC is conducting a wide-ranging study into what PBMs are doing
in wreaking havoc on independent pharmacies and hurting
consumers, and I can not wait to see that study. Thank you so
much, and I yield back.
Chairman Comer. Thank you. The gentleman yields back. The
Chair now recognizes Ms. Mace from South Carolina for 5
minutes.
Ms. Mace. Thank you, Mr. Chairman, and I applaud my
colleague across the aisle. We want consumers to have choices,
competition, and lower prescription drug prices. I am going to
dive in here. I have several questions, and I would just
appreciate just primarily yes or no answers from our witnesses
today. We do not have a lot of time this morning.
My first question goes to Mr. Scott. You say in your
written testimony that PBMs lower prescription costs by
encouraging the use of more affordable alternatives to brand
drugs such as generics? Is that correct?
Mr. Scott. Yes.
Ms. Mace. Can you also confirm that PBMs negotiate rebates
with drug manufacturers in an effort to reduce the cost of
those drugs?
Mr. Scott. Yes.
Ms. Mace. In March 2019, the Journal of American Medical
Association expressed concern that your member businesses often
exclude low price generics from coverage. Are you aware of
those claims?
Mr. Scott. I am aware of the claims but not the specific
study.
Ms. Mace. Interesting. In a purely competitive environment,
I would usually say the market would take care of such anti-
competitive practices. Is it true that Caremark, Express
Scripts, and OptumRx make up about 80 percent of the industry?
Yes or no.
Mr. Scott. No.
Ms. Mace. These are ``yes'' or ``no'' questions. So, they
are not 80 percent of the industry. What percentage then would
it be?
Mr. Scott. I believe there are three companies that make up
80 percent of the industry, Congresswoman.
Ms. Mace. And they are which ones?
Mr. Scott. Express Scripts and the two that you mentioned.
Ms. Mace. OK. That was the question.
Mr. Scott. I am sorry. I misheard you.
Ms. Mace. OK. Thank you. If you have three companies making
up the vast majority, that is not really competitive at all of
an industry. All right. Ms. Reilly, when does the patents for
branded drug expire?
Ms. Reilly. Patents for medicines are just like patents for
any other product. It is 20 years.
Ms. Mace. OK. People generally assume that a drug becoming
generic will result in a price decrease. Our witness
representing the PBMs alleges that they help reduce cost for
consumers. In your experience, do PBMs often exclude low price
generics from the list of covered drugs?
Ms. Reilly. Yes.
Ms. Mace. Do PBMs often exclude lower-cost generics in
favor of high-cost branded drugs, effectively eliminating the
benefit of the short patent on drugs?
Ms. Reilly. Yes.
Ms. Mace. Do you believe they do this to cash in on drug
rebates at the expense of patients?
Ms. Reilly. Yes.
Ms. Mace. All right. Mr. Chancy, this past session in my
home state of South Carolina, they passed legislation that I
worked on a number of years ago, which banned PBMs from
permitting pharmacists from discussing more affordable
alternatives. Have you or any pharmacists you know experienced
these types of restrictions?
[No response.]
Ms. Mace. What was that?
Mr. Chancy. Yes.
Ms. Mace. OK. You also expressed concerns that PBMs, which
are often vertically integrated with their own pharmacies, are
using their pricing power to harm independent pharmacies. Is
that correct?
Mr. Chancy. Yes.
Ms. Mace. And are you aware of a whistleblower lawsuit
against CVS Caremark alleging that they sought to block generic
competition?
Mr. Chancy. Yes.
Ms. Mace. Do you believe these practices are commonplace
across the PBM market?
Mr. Chancy. Yes.
Ms. Mace. Do you believe that restrictions on pricing and
rebates would result in more generics being prescribed at your
pharmacies and a reduction in prescription drug costs?
Mr. Chancy. Yes, I do.
Ms. Mace. Yes, I would agree. More competition in the
market is better for every consumer. Less overreach from
government, more competition in the private marketplace is
better for everybody. Thank you, Mr. Chairman, and God bless
you. I yield back.
Chairman Comer. Thank you. The Chair now recognize Ms. Lee
from Pennsylvania.
Ms. Lee. Thank you, Mr. Chairman. Our Nation is facing an
inequality crisis not seen since the Gilded Age. At its core is
the unprecedented corporate greed that has inflated prices,
giving massive bonuses to C-suite executives and left the
American people struggling. The harm, of course, falls
disproportionately on black, brown, marginalized, and poor
folks who are already struggling the most. Our healthcare
system is one of the worst offenders with some of the deadliest
caused from big pharma, to pharmacy benefit managers to big
insurance companies and ``nonprofit hospital monopolies'' that
abandon communities like mine. Every level of our healthcare
system is being exploited to drive money straight into
stockholders' pockets. For example, it appears that PBMs are
leveraging their role at the center of the healthcare system to
extract profits from players at multiple points. Reporting even
suggests that the fees PBMs charge to drug manufacturers
increased by 51 percent over a 2-year period.
Ms. Reilly, what types of fees do PBMs charge your members,
the Nation's biggest pharmaceutical companies, and how do those
fees get passed on to customers?
Ms. Reilly. They charge a number of fees. I would argue
most of those fees are quite opaque, meaning that they are not
known necessarily to many folks, including the plan sponsors,
their data fees, and all sorts of fees that oftentimes pop up
out of nowhere, and, as you mentioned, have increased
significantly. And I would argue, they provide no direct
benefit to the patients.
Ms. Lee. Thank you. In your members' experience, are the
fees charged by PBMs tied in any way to the list price of a
drug, and how does this affect the price the consumer pays?
Ms. Reilly. Yes. I would say in virtually every instance,
these fees are tied to the list price of the drug, which, as
you suggest, the higher the list price, the larger the fee, the
larger the rebate, the more money that goes into the pocket of
the PBM.
Ms. Lee. Thank you. Your organization, which represents Big
Pharma giants from Bayer to Pfizer, and, until recently,
represented opioid pushing Purdue Pharma, is running an
aggressive ad campaign blaming PBM rebate practices for high
drug prices. What motivated that campaign, and how much did you
all spend on that campaign?
Ms. Reilly. Well, what motivated the campaign is to shed
light on the practices that have been pervasive over the past
many years, which is PBMs overcharging patients at the pharmacy
counter, not passing, you know, the significant rebates, over
$200 billion a year, back to the patients to lower the drug
prices they have.
Ms. Lee. How much did you spend on it?
Ms. Reilly. I would have to get back to you. I do not know
the total amount spent on that ad campaign.
Ms. Lee. OK. Thank you. The United States pays by far the
highest prices for prescription drugs in the world. Pharma
member Novo Nordisk is charging Americans with diabetes $12,000
for Ozempic, while the exact same drug can be purchased for
$2,000 in Canada. Pharma member, Eli Lilly, is charging
Americans nearly $200,000 for Cyramza to treat stomach cancer,
a drug that can be purchased in Germany for $54,000. Pharma
member, Sanofi, is charging America over $200,000 for Caprelsa
to treat thyroid cancer, a drug that can be purchased in France
for $30,000. Pharma member, Gilead, is charging Americans with
non-Hodgkins lymphoma $424,000 for Yescarta, a therapy that can
be purchased in Japan for $212,000. Ms. Reilly, do you really
expect this Committee to believe that the blame lies entirely
with PBMs and not also with your members?
Ms. Reilly. I would say all of the prices that you quoted
are list prices for the medicines.
Ms. Lee. Was rhetorical, but I do have another question.
Why are several of your member companies suing to stop the
Federal Government from negotiating drug prices through the
Inflation Reduction Act?
Ms. Reilly. I would be happy to answer that question. We
have strong concerns about the constitutionality of the IRA
provisions that were passed. No. 1, they violate the separation
of powers because Congress delegated too much authority to an
outside----
Ms. Lee. What are your concerns about negotiating drug
prices does your company have about allowing the Federal
Government to negotiate drug prices?
Ms. Reilly. Was not negotiation, and let me be clear. It is
a misnomer to call it negotiation. These are the choices our
companies face. The government sets the price of a medicine. It
is a take-it-or-leave-it-price. If we choose not to pay the
price that the government offers us, we face two options: one,
a 1,900 percent tax on the sale of every single medicine sold,
or we can----
Ms. Lee. Well, it seems that the American people are
receiving that tax right now on prices that are incredibly over
expensive, so thank you so much for cost. Mr. Scott, I would
also like to hear your take on this, your claim that PBMs use
the fees they charge drug manufacturers and pharmacies to
create cost savings in the system. Can you give me some
concrete examples because it sounds to me like they are using
these fees to churn an additional profit.
Mr. Scott. Yes. I think we could look specifically at the
Medicare Part D Program where it has been documented that
virtually 100 percent of the rebates that are negotiated are
passed back to the Part D plan sponsors, and we have seen that
deliver a steady low premium for Part D beneficiaries over a
number of years.
Ms. Lee. Thank you. I am taking my time back up, but I want
to end by saying these profits for big corporations grow, the
American people suffer. It is despicable that more than 500,000
households go bankrupt each year because of medically related
debts. Healthcare is a human right. It is about time we started
treating it that way. I yield back.
Chairman Comer. Thank you. The Chair now recognizes Mr.
LaTurner from Kansas for 5 minutes.
Mr. LaTurner. Thank you, Mr. Chairman, and welcome to all
of you joining us here today.
Mr. Chancy, we have seen examples in the past of PBMs
engaging in spread pricing where the PBM charges payers more
than what they reimburse the pharmacy and then pocket the
difference. In my home state of Kansas, accusations of this
practice were recently settled for $26.7 million. How difficult
is it for pharmacies to tell that they are being reimbursed
less than what the payer is paying to the PBM?
Mr. Chancy. We are not always aware of how much they are
charging the payer, but I will give you an example. I worked
with a self-insured company in my area, and we had a specialty
drug that we filled for that company and the next field they
mandated to go to the PBM. The PBMs wanted to approve the rate
for me. They ended up charging the company $300 more when it
went to their mail order. So, we see instances like that that
happen, so we know it is there.
Mr. LaTurner. But you would assume that it is happening,
and you do not know it a lot of the time.
Mr. Chancy. That is correct.
Mr. LaTurner. Yes, I assume that happens quite a bit. Mr.
Scott, do you believe that additional transparency in the price
setting of prescription drugs is important?
Mr. Scott. Yes, transparency can be beneficial.
Mr. LaTurner. Just last week in the Wall Street Journal,
Mr. Scott, they ran an article on the price of Imatinib, the
generic form of the cancer drug, Gleevec. According to the
report, this drug went generic in 2016 and can be bought today
for as little as $55 a month. But if you happen to have CVS or
Cigna, the same drug can cost as much as $6,600 a month. The
article makes the claim that this in large part is due to the
role of PBMs and PBM-owned pharmacies. How would you respond to
the claims laid out in this article, Mr. Scott?
Mr. Scott. Thank you for the question, Congressman. I saw
the article as well, and I would start by level setting that
the PBM's goal is always to manage to the lowest net costs for
the drugs that they are offering to patients in any particular
plan. I know there were some survey data as a part of that Wall
Street Journal article that conflated what is listed in the
Medicare Plan Finder, which is the maximum possible highest
contracted rates, which does not really show what the average
patient pays out-of-pocket. Our goal is lowest net cost.
Mr. LaTurner. I understand your goal. If you will just
address the contents, what I just said, that when the generic
can be bought today for as little as $55 a month, but if you
have CVS or Cigna, it can cost as much as $6,600 a month. How
can you explain that to the American people?
Mr. Scott. Without having the specifics on a particular
drug, if you look----
Mr. LaTurner. Let us stipulate that it is true. How is that
fair? Would you agree that it is----
Mr. Scott. There may be multiple versions of the same
generic drug at different price points and also different
issues about supply availability which have to be taken into
account.
Mr. LaTurner. So, you would say there is a scenario by
which that it would make sense and be fair and reasonable that
it could cost $55 a month for generic, but if you have CVS or
Cigna, it is $6,600 a month. There is a scenario in your mind
where that makes sense and that is fair.
Mr. Scott. There are scenarios where other factors beyond
cost come into consideration, and in those outliers----
Mr. LaTurner. Granted, but that big of a delta?
Mr. Scott. Well, in those outliers, I think the plan
sponsor has to be very thoughtful about benefit design and out-
of-pocket exposure for patients on that drug.
Mr. LaTurner. You said in your testimony that choice and
flexibility in the market are a foundational principle for
effective prescription drug coverage and delivery. Does the
fact that the three largest PBMs currently make up 80 percent
of the market not run counter to that foundational principle of
choice and flexibility?
Mr. Scott. Actually, the trends that we are seeing are more
and more entrants in competition in the PBM marketplace. And
that choice and flexibility has benefited by having large
companies that can provide certain services as well as smaller
individualized companies that provide more tailored services.
That is the definition of having different models to choose
from for any given employer.
Mr. LaTurner. Eighty percent, three PBMs?
Mr. Scott. Oftentimes you will see some larger PBMs be able
to use that scale, which is really important in negotiating
with large drug companies to be able to have broader
populations of patients and beneficiaries that they represent
in order to help bring down the net cost of the drug. So, scale
can matter as a value proposition for many employers when they
are choosing their PBM.
Mr. LaTurner. Lori Reilly, are new generic drug suffering
as a result of PBM coverage decisions to prefer higher price
drugs with high rebates over lower list price drugs? Can you
give an example of this?
Ms. Reilly. Yes, I think there is evidence of that. We saw
it with not just new generics, but lower-price brand medicines
that have entered the insulin example, the hepatitis C example,
where our manufacturers have issued lower price products in the
hopes that those would get picked up by the PBMs because they
would be lower cost to the consumer because everyone says they
want pharma to lower their list prices. When we actually do
lower their list prices, they do not get covered by the PBM.
Mr. LaTurner. Really quick, just answer the question
quickly. Has market consolidation enabled and incentivized them
to negotiate higher rebates?
Ms. Reilly. Yes, I think actually negotiation works in the
system. The challenge is how does those rebates get passed on
to the patient that needs them, and I think that is what is
broken in the system.
Mr. LaTurner. Thank you. I yield back, Mr. Chairman.
Chairman Comer. The gentleman yields back. The Chair now
recognizes Ms. Norton from Washington, DC.
Ms. Norton. Thank you, Mr. Chairman. Professor Conti, as
Americans, we are the global exception when it comes to drug
prices because we face exorbitant prices for lifesaving
prescription drugs. During the Committee's first hearing on
pharmacy benefit managers in May, Dr. Miriam Atkins, an
oncologist, described a situation in which one of her patients
was sent a $1,000 bill for a drug as part of cancer treatment.
Dr. Atkins explained that patients are unable to afford this
cost, ``just will not take the medication,'' and then ``that
will affect their life expectancy.'' Professor Conti, how do
high drug prices harm patients that seek lifesaving care from
their providers?
Ms. Conti. Thank you so much for the question. Financial
toxicity is real. It is real among Americans who are facing a
dry diagnosis and treatment of cancer and other conditions. Our
evidence suggests that more than 40 percent of people with some
types of blood cancer are facing financial toxicity that makes
them choose between filling their medications and paying their
rent. This is a real concern and one that is affecting
patient's health and their ability to take care of themselves
and their families.
Ms. Norton. Thank you, Professor Conti. I have another
question for you. According to one outside group, and here are
some astounding statistics, one-half of U.S. adults say they
have difficulties affording healthcare. It is half the people
who live in this country --and 1 in 3 adults ages 60 to 64, and
1 in 5 adults aged 65 and older--paid more. And here is another
astounding number: more than $2,000 annually and out-of-pocket
costs for the healthcare. I do not know how they do it.
High prescription costs can have a devastating effect on
patients and families. Last Congress, President Biden signed
into law the Democratic-led Inflation Reduction Act. Under this
law, out-of-pocket costs for patients covered by Medicare Part
D will be capped at $2,000 per year starting in 2025. This will
improve the lives of 1.4 million Americans covered by Medicare.
It will lead to substantial savings for patients who need
expensive medications. Professor Conti, in addition to saving
patients money, how will the Inflation Reduction Act's drug
pricing reforms improve long-term health outcomes for Americans
seeking care?
Ms. Conti. Thank you so much. The IRA provisions are a
substantial evolution in access to prescription drugs for
Americans. Right now, seniors have greater access to insulin
based on IRA provisions. Seniors also have better access to
vaccines that prevent serious illness. And finally, Part D
redesign will extend access to patients for 49 million
Americans, starting in the next year. This is a major, major
step forward for population health and individual health as
well.
Ms. Norton. Thank you, Dr. Conti. I yield back.
Chairman Comer. The gentlelady yields back. The Chair now
recognizes Mr. Burlison from Missouri for 5 minutes.
Mr. Burlison. Thank you, Mr. Chairman. We have heard a lot
about the 80 percent number, and while it sounds extremely
disturbing, I just looked up, in the short time that I have
had, various marketplaces. Are you aware, Mr. Scott, that
Lowe's, Home Depot, and Menards compose 87 percent of the home
improvement market?
Mr. Scott. That sounds right.
Mr. Burlison. That is terrifying. Terrifying. Can you
imagine the impact on consumers? Oh my goodness. Can you
imagine how much that they are putting the squeeze on Black &
Decker and DeWalt, right, because if DeWalt and Black & Decker
want to sell their products, they have got to deal with Lowe's
and Home Depot, right? Maybe what we should be doing, Congress,
is studying the spread or the pricing that Lowe's or Home Depot
have on some of the products that they are selling, like Black
& Decker and DeWalt, because we want to make sure that we, the
consumers, are taken care of, right? That is what this place is
all about: the government stepping in to take care of the
consumers. Wouldn't it be interesting if Black & Decker and
DeWalt decided to enter into a campaign? That is really what
they need to do.
Ms. Reilly, let me ask you this. How much has your industry
spent in television advertisements demonizing PBMs?
Ms. Reilly. I do not know the exact amount. Happy to report
back.
Mr. Burlison. Well, I have an article that I will submit to
the record that pharma spent over $9 million on anti-PBM
advertising. Mr. Chairman, if I could submit that to the
record.
Chairman Comer. Without objection, so ordered.
Mr. Burlison. Thank you. Mr. Scott, I am actually
interested in what we can actually do to reduce cost. In my
opinion, and I might be the only one on this Committee who has
actually been in the position of negotiating with PBMs of
deciding what PBM that we are going to use and purchase or
enter a contract with over 100,000 lives, and I can tell you,
if you are in that situation, you know there is choice. There
are a lot of PBMs to choose from, and not a single one is
coming to the table saying we are going to increase your cost
for your patients. Every one of them is bringing down those
costs, so as the employer, I am telling you that eliminating
the opportunities of PBM will only increase the premiums for
those insured.
So, the question that I have within the 2 minutes, Mr.
Scott, what can we actually do that would reduce the costs of
pharmaceuticals?
Mr. Scott. Thank you, Congressman, for the question, and I
would say a couple of things. I think you are exactly
identifying one of the primary value propositions that
employers measure a PBM on, which is are they going to be able
to bring down my net cost and help me to provide affordable
benefits. And the PBMs, as has been recognized, I think, have a
very strong track record of delivering about $145 billion in
value for the system every year through that work of
negotiating discounts.
Where we sometimes get caught up is when we see that the
balances I referenced in the use of patent system is being
leveraged in inappropriate ways to keep new competitor drugs
off the market. Where there is no competition, it is a lot
harder to leverage that to negotiate savings on behalf of plan
sponsors. Looking at some of those patent practices, we think,
would be an important step to really making that a competitive
marketplace.
Mr. Burlison. What about the dynamics with the biosimilar
drugs? Is there a lot of opportunity with that?
Mr. Scott. Absolutely. And I think we have seen that in the
few instances where biosimilars have already come into the
marketplace. Humira is a great example of where the competition
is only coming online this year, and we can analyze what
happened in the competitive marketplace so that it was not on
the market sooner. But as those have come into the market, they
are having a positive effect on bringing down the cost of the
originator products and providing more affordable options
dedicated to plan.
Mr. Burlison. Thank you. The way I see it, Mr. Scott and
others, is that this is similar to what Netflix has done to the
entertainment industry. Netflix was a great disruptor. It
negotiated with the entertainment industry en masse because of
their large subscriber pool. What is ridiculous to me is that
if Blockbuster came here, they would probably be screaming in
front of Congress that they are having to close to the huge
membership pool of Netflix and that Netflix drives everyone to
their product. Thank you, Mr. Chairman.
Chairman Comer. Thank you. The Chair now recognize Ms.
Brown from Ohio for 5 minutes.
Ms. Brown. Thank you, Mr. Chairman. In this country, far
too many people are forced to choose between paying for their
medications and keeping the lights on. This impossible choice
is a crisis largely manufactured by Big Pharma and pharmacy
benefit managers. In 2021, Oversight Committee Democrats
published a result of a 3-year-long investigation into
pharmaceutical companies' drug pricing and found pharma giants
target the United States' market, exploiting taxpayers with
higher prescription drug prices than anywhere else in the
world. Our investigation found in the past, Big Pharma has
taken advantage of Medicare's inability to negotiate and hike
prices on patients to the tune of $25 billion over a 5-year
period. That was just for the seven drugs we investigated.
As a result of Democrats passing the historic Inflation
Reduction Act, which was signed into law by President Biden,
Medicare is now finally able to negotiate directly with drug
manufacturers to bring down the price of lifesaving
prescription drugs. President Biden is putting dollars back
into the pockets of American families and Big Pharma on notice
for decades of unchecked price gouging. So, Dr. Conti, I want
to ask you, how will Medicare's negotiation of drug prices lead
to lower out-of-pocket costs for seniors?
Ms. Conti. Thank you so much for the question. IRA passage
is a major evolution in access to prescription drugs for
Americans, and especially for seniors. We expect that insulin-
dependent diabetics will receive immediate savings at the
pharmacy counter and improved access, so will adults seeking
vaccines and their children seeking new vaccinations to prevent
serious illness. And seniors who are covered under Medicare
Part D will directly benefit from Part D redesign, improving
access and improving both their individual health, but also
population health.
Ms. Brown. Thank you. And Dr. Conti, how will Medicare's
ability to negotiate lead to better health outcomes for
millions of seniors and patients with disabilities?
Ms. Conti. Sure. We expect that approximately, what, $3.4
billion in out-of-pocket costs were imposed upon American
seniors with the 10 drugs that are slated for negotiation first
this year. Lowering those costs even 20 percent at the pharmacy
counter will expand access and hopefully lead to better
individual outcomes and population health.
Ms. Brown. Thank you, and you kind of led into my next
question. Can you expound on the significance of these 10
drugs?
Ms. Conti. Sure. Approximately 10 million Americans are
taking those drugs currently, and we expect that, again, their
cost savings at the pharmacy counter will amount to
approximately 20 percent, maybe more. That will be significant
savings for them and, again, lead to greater access in using
these drugs.
Ms. Brown. Thank you, Dr. Conti. So, President Biden's
announcement regarding these 10 drugs is just the start. Thanks
to the Inflation Reduction Act, Medicare will be able to
negotiate the price of even more lifesaving drugs in subsequent
years, an additional 15 drugs starting in 2027, another 15 in
2028, and another 20 each year afterwards. We must build on the
successes by increasing access to affordable and equitable
healthcare and requiring comprehensive transparency rules in
drug pricing. If my Republican colleagues truly wants to reduce
staggering drug costs, they should join with the Democrats to
build on the achievements of the Inflation Reduction Act. And
with that, I yield back. Thank you.
Chairman Comer. The gentlelady yields back. The Chair now
recognize Mr. Higgins from Louisiana for 5 minutes.
Mr. Higgins. Thank you, Mr. Chairman. I appreciate the
panelists for being here today.
It is a really painful discussion for my constituents and
my family back home. I feel that our Nation, in many ways, has
betrayed our biblical responsibility to care for our elders. It
is a real problem. The Word tells us, ``Cast me not off in the
time of old age, forsake me not when my strength faileth.'' I
am not sure how does PBMs sleep at night. It is an issue. Our
elders are like treasures. They are commonly frightened. They
have no financial stability, too commonly alone.
They are constantly receiving confusing letters in the mail
from insurance companies and doctor's bills and benefit plan
offers and wild promises from this company and that agency and
the other offer. They might think this is funny. You find it
funny, talk to me in the hallway. We will see how that
conversation goes. We are talking about our elders in our
country that deserve to be respected and cared for. And one of
the last remaining remnants of what America was when we cared
for our elders was our pharmacists, and our pharmacists have
been driven out of business by PBMs and the cost of medicine.
Let me see another giggle, you will meet a side of me you do
not like.
Mr. Chancy, you have been in the pharmacy business for
generations, sir. That is what your statement clarifies. I
recall growing up the seventh of eight children. I was born in
1961. My father, we raised and trained horses. We did not have
money. We did not have health insurance. What you know we had,
we had a doctor, we had a pharmacist, and we get injured,
injury was common in a life like that, would get to the doctor,
my dad would pay him cash. There was no middleman. There was no
government bureaucracy. There was no insurance restrictions and
mandates. There was my family, there was the doctor, there was
the pharmacist, and it was a formula that worked.
Mr. Chancy, you come from that background, it sounds like,
sir. Yes, I am quite sure you recall those days, your
grandparents and your parents. I am going to turn the floor
over to you. Tell us from your heart from your story of how
this deep pain is being brought into your community, especially
to the homes of your elders, by the monopolistic power of these
PBMs and the cost of healthcare medicines by elders. I will
give you my remaining minute, Mr. Chancy.
Mr. Chancy. Thank you, sir. I grew up in a small town, and
my father was a pharmacist, and he cared for the people in that
community. We had relationships with them, and they depended on
us, and it was back in the day before we had PBMs. It was all
cash, and we charged to those patients that could not pay for
it at the time. And there are four counties in the state of
Georgia that the only accessible healthcare practitioner is a
pharmacist. There are no doctors. There are no hospitals or
anything. And if we do not do things to change, if we do not
have PBM reform, then we are going to have pharmacy deserts,
not just in rural America, but in the cities.
So, it is critical that we make some reform that is going
to allow us to stay in business and take care of the seniors
like you are talking about. It is critical for us to be able to
do that. Under the system we have now, we are restrained, and
you talk about wreaking havoc on our business. In 2018, we paid
$865,000 in DIR fees. In 2022, that almost doubled, and this
year alone, I am at $1.2 million just through July. Now, that
is taken away from jobs, and that is taken away from
opportunity in small communities that I live in. So, I think
there needs to be a lot of reform. We need to have clear
transparent pricing, and we also need to stop the ability for
the PBMs to be steering patients to other pharmacies where they
do not have a relationship and people are not there to care for
them.
Mr. Higgins. Thank you, Mr. Chancy.
Mr. Chancy. Thank you.
Mr. Higgins. Mr. Chairman, my time has expired. I yield.
Chairman Comer. Thank you. The Chair now recognizes Ms.
Bush from Missouri for 5 minutes.
Ms. Bush. Thank you, Mr. Chairman. St. Louis and I are here
today in defense of patients, pharmacies, and healthcare
providers. Before I came to Congress, I worked as a nurse in a
hospital and a community mental health agency. I had to worry
every single day about whether my patients could afford the
medication that I knew they needed. It is an awful part of an
otherwise extremely rewarding profession.
We know that PBMs play a critical role in the
pharmaceutical supply chain, but that does not mean that drug
manufacturers are being let off the hook. Big Pharma plays a
leading role in drastically and unethically raising the cost of
lifesaving medications for the sake of profit and for the sake
of greed. Notably, only three companies
--OptumRx, CVS Caremark, and Express Scripts--make up a
staggering 80 percent of the PBM market, which we have heard
earlier. Three companies play a central role in making
decisions about what medications are covered by healthcare,
insurance plans, and the cost of those medications.
PBMs negotiate pricing with drug manufacturers and use
these negotiations to determine which medications are covered
on someone's insurance formulary. The difference between life
or death is a series of shady contracts struck between the drug
manufacturer, the PBM, the insurer, and the pharmacy. The end
result of this complicated design is patients are expected to
shell out thousands of dollars in out-of-pocket medical costs,
even for lifesaving prescription medicine. Professor Conti, how
does PBM control over drug formularies affect the medications
patients are able to receive at the pharmacy?
Ms. Conti. PBMs steer patients to use, in general, the
cheapest and most effective drug for them. That includes over a
90-percent utilization of generics and biosimilars when they
are available. This benefits patients, and it benefits their
health.
Ms. Bush. My understanding is that PBMs consider
formularies, though, as sensitive business information. PBM
decisions about which medications to cover and how to sort them
into tiers or rankings are generally not available to patients,
and as a nurse, I was never able to get that information early.
I had to wait until they sent us the book, and this was very
devastating and horrifying for so many of our patients.
Professor Conti, if a patient does not understand why a
specific medication is chosen for inclusion on a PBM formulary,
how will they know that the price that they are being asked to
pay at the pharmacy is a fair price?
Ms. Conti. They will not.
Ms. Bush. Thank you. It is clear both the PBM and the
pharmaceutical industries are in desperate need of reforms that
increase transparency and reduce costs for patients and for
pharmacies. In fact, Barnes-Jewish Hospital, the largest
hospital in Missouri and the largest private employer in my
district, has the following to say about their experience with
PBMs: ``Often pharmacy benefit managers create additional
financial and administrative challenges for many providers,
pharmacies in particular, and delay or deny patients' access to
the medications they need.'' The biggest hospital system in the
state of Missouri is at the mercy of PBMs. They often require
step therapy treatments or burdensome prior authorizations
before covering medications ordered by a healthcare provider,
which is devastating to patients and their care. They lose
jobs, they lose homes, they can lose children because they are
now unstable on medications. And I am speaking to that being a
mental health nurse that watched it happen to my patients over
and over again. They were stable, and then the new formulary
came out.
Insurance companies, PBMs, and Big Pharma are deciding what
medications patients should take, not patients with their
doctors. These obstacles compromise patient care at every
single turn by denying patients the lifesaving medications and
the treatments that they need. As a nurse, I have seen it over
and over with the patients I have cared for, as I said, who
were stable on medication, some for decades. Their care was
upended when their PBMs and insurance companies decided that
their medication was not profitable. The health and well-being
of the people of this country lie in the hands of industries
represented right here today.
How can we be confident that these companies are acting in
the patients' best interest if they face so little competition?
People with terminal illnesses, disabilities, seniors, and our
most vulnerable members of our community deserve more. I
implore my colleagues on both sides of the aisle to enact
sensible legislation to drastically reform the PBM industry and
get drug prices under control once and for all. Thank you, and
I yield back.
Chairman Comer. Thank you. The Chair now recognizes Mr.
Palmer from Alabama for 5 minutes.
Mr. Palmer. Thank you, Mr. Chairman. Mr. Burton, I have got
some questions for you. How do the rebates affect the
biosimilar market, and be as concise as you can because I have
got a few others.
Mr. Burton. Absolutely. Simplest way to look at it,
biosimilars right now have a choice: they can price, keep a
high price and offer a rebate, or they can drop their list
price which benefits patients, but dropping their list price is
not getting them on formulary. So, they have a choice of engage
in the rebate games, which has a chance of getting them on
coverage, or have a lower list price which benefits patients
but is not being covered by PBMs.
Mr. Palmer. So, what you are saying is this has a negative
impact on patients.
Mr. Burton. Yes, sir.
Mr. Palmer. Well, let me ask you this. The passage of the
Inflation Reduction Act permitted the Centers for Medicare and
Medicaid to negotiate the prices of some prescription drugs
covered under Medicare Part D. As the Senior Vice President of
the Association for Accessible Medicines, Mr. Burton, how will
the Inflation Reduction Act's government price-setting scheme
affect patient access to lower-cost generic and biosimilar
medicines, in your opinion?
Mr. Burton. Yes. We are concerned that the negotiation
provisions of IRA could undermine generic and biosimilar
competition. They could reduce incentives for generic and
biosimilar entry. Depending on how the price is set by CMS,
that could actually end up rewarding the brand and giving the
brand more of a monopoly for a longer period of time, if it
reduces incentive for generic entry.
Mr. Palmer. But it also reduces the number of different
types of drugs that some patients might need. Would that be an
accurate statement?
Mr. Burton. So, I believe the way IRA works, as they choose
products, generics and biosimilars are looking for certainty.
In order to invest, I mentioned biosimilars can cost several
$100 million to develop. Without knowing what products will be
negotiated and what the negotiated price will be, it becomes
challenging for a biosimilar manufacturer to make that
investment commitment years before that price is ever
negotiated. And we believe that biosimilars and generics, at
the end of the day, will drive prices lower than anything CMS
negotiates through this scheme. We think there is a long track
record showing that.
Mr. Palmer. So, what you are saying to the Committee is
that this price setting could impact the availability of
generics and certain biosimilars.
Mr. Burton. Yes, sir.
Mr. Palmer. OK. I think that it stands to reason then that
it would make these drugs less available to patients. Can you
explain how that works because a moment ago you were talking
about if they are not listed.
Mr. Burton. Yes.
Mr. Palmer. That seems to indicate to me that it makes them
less successful to patients because they are not going to be
covered, but if they are listed, it is going to make them more
expensive to the patient, so it is a confusing game that is
being played. But the thing that I do not want to get lost in
this is that the patient is not the No. 1 concern here.
Mr. Burton. I think that is right. I think if you look at
the market as it stands today, the biosimilars that are on the
market are not being preferred. They are not being driven by
PBMs. PBMs are not driving coverage of biosimilar insulin. They
are not driving coverage of the biosimilar Humira. If we look
forward at what will happen under an IRA price-setting
approach. There seems to be an assumption that a brand drug
will stay on that market in perpetuity. That is probably not
going to be the case. So, you need biosimilars. You need
generics to be able to come onto the market to fill that which,
frankly, pushes the brand into other markets into pursuing new
therapies. It is that dynamic, that competitive dynamic that we
are concerned could be lost.
Mr. Palmer. I really appreciate your response to the
questions. I appreciate all of the witnesses being here and the
unanimity that I think I see here in this Committee in regard
to this issue. With that, Mr. Chairman, I yield back.
Chairman Comer. The gentleman yields back. The Chair now
recognizes Ranking Member Raskin from Maryland for 5 minutes.
Mr. Raskin. Thank you, Mr. Chairman. I want to thank Mr.
Palmer for his line of questioning and for that point that he
just made because I agree very much that there is a real
consensus on this Committee about a major problem the American
people are facing. And I heard it in Ms. Bush's comments and
Mr. Higgins' comments, too.
Mr. Scott, let me ask you something. You said something
that just struck me. You said that your mission was to lower
prices for patients? Did I get you right when you said that?
Mr. Scott. To lower costs.
Mr. Raskin. To lower costs for patients. There is such
confusion in this field, and I want to get it straight. You are
a private for-profit company, right?
Mr. Scott. The companies we represent are largely not----
Mr. Raskin. The PBMs are private for-profit companies that
you represent, so isn't everybody's mission really to make
money? And if they can make money by lowering costs, they will
do it, but your mission is really to make money for the
shareholders, right, for your component members.
Mr. Scott. Right. The companies are only going to be
profitable if they are accomplishing the mission of lowering
costs for the people who hire them.
Mr. Raskin. So, I guess that is the question I want to ask
you. In July, a MedPAC report found that PBMs had taken in over
$50 billion in drug manufacturer rebates that were not shared
with patients at the counter in 2021, $50 billion that were
savings that were made, that it is rebates from manufacturers
that were not passed on. And I know you made a very compelling
case that there is a lot of money being made by the
manufacturers and that represents most of the costs, and all
that might be true. That might be a separate problem for a
separate hearing, but isn't it the case that there were $50
billion in 2021 that your members got in rebates that were not
passed on to the patients?
Mr. Scott. The rebate value can benefit patients in a
number of ways. It is up to the plan sponsor to decide if that
is by making their healthcare benefit more affordable and
keeping their premium down, adding other elements to the
benefit because they have those savings, like adding vision or
dental, or applying that to help offset their out-of-pocket
cost at the pharmacy counter. And that is a balancing act the
plan sponsor has to determine as they are designing their
benefit.
Mr. Raskin. Yes. I mean, you are not disagreeing that
sharing a greater portion of the rebate dollars would lower
costs at the drug counter and, thereby, increase people's
adherence to the drug protocols.
Mr. Scott. I think it is a very reasonable conversation to
have about whether those tradeoffs are being balanced correctly
and all.
Mr. Raskin. All right. A small handful of players dominate
the PBM market and have outsized power. Three companies--CVS
Caremark, OptumRx, and Express Scripts
--control 80 percent of the PBM market. Each of the three
holds a staggering amount of power. CVS Health reports to CVS
Caremark. Its PBM provides pharmacy benefit services for more
than 110 million people. The question is whether these
companies use their market power to enrich themselves at the
expense of the patients and other players in the healthcare
system. And the high degree of market consolidation is
intrinsically troubling, but we are also seeing increasing
integration of PBMs with other institutional players in the
healthcare system. Each of the three big PBMs are owned by a
parent corporation that also owns a major health insurance
company, a specialty pharmacy, and a medical services provider.
We basically have something like government-controlled
healthcare, but without the government, we are having entire
systems grow up.
Professor Conti, can you explain how this high degree of
market concentration could allow PBMs to prioritize their
profits over keeping prices low across the system? And I wonder
if you could respond to Mr. Scott's point about how there might
be other benefits that are masks that are actually being given
to the patients?
Ms. Conti. Sure. Our system is predicated on competition.
Vertical consolidation between PBMs and plans can erode the
competitive benefits to consumers both in terms of lowering
costs but also expanding benefits. There is emerging evidence
suggesting consolidation does not produce lower premiums, and
it does not produce more expanded access to drugs, particularly
drugs that people depend on to manage their current disease.
Mr. Raskin. Isn't that the whole premise of antitrust
economics?
Ms. Conti. Sure. So, consolidation can improve access and
lower costs, more bargaining power can produce lower price
concessions that expands access. However, in this particular
market, we are not seeing evidence that expanded consolidation
is driving prices lower.
Mr. Raskin. Do you have a theory as to why it is not
working that way? And forgive me, Mr. Chairman, I will yield
back after this?
Chairman Comer. The Chair now recognizes----
Mr. Raskin. If she could answer that question, yes, sir.
Chairman Comer. Feel free to answer the question.
Ms. Conti. Sure. Vertical consolidation is very tricky.
There is a lot of economic theory that suggests it can be
perverse.
Mr. Raskin. Thank you. I yield back, Mr. Chairman.
Chairman Comer. The Chair now recognizes Mr. Fallon from
Texas for 5 minutes.
Mr. Fallon. Thank you, Mr. Chairman. As a Member of
Congress that represents a rural area and there are increasing
numbers of people leaving to go into the suburbs in the cities,
and the folks that are left that are representing rural areas,
I think we need to increase our vigor and fierceness. And one
of the concerns I have, of course, being a strong proponent of
the free market is also the accessibility of rural healthcare.
And the free market, as we all know, is founded on choice, and
that choice is between products and services, and the consumer
makes that choice ultimately. And why the free markets work is
because it is working, in theory, the right way. The market is
competitive, and the price is manageable.
But when you have three PBMs controlling 80 percent of the
prescription drug market and they are becoming larger every
day, this is not really free market. It tends more to lean
toward cronyism. And so, what is particularly hurting in the
rural areas like my constituents are there are fewer pharmacy
options, the medium and small pharmacies are being bought up by
the larger ones, and the increasing vertical integration that
we are seeing in the system exacerbates that issue.
So, in fact, the big three PBMs controlling the market,
each one of them is also integrated with an insurance company.
So, one tool we are seeing PBMs use to manipulate the market is
called co-pay accumulators. And essentially, real simple, I
mean, it does not matter if I am paying out-of-pocket, say,
$1,000, or I get a coupon, or a charity is paying for it. That
$1,000 I spent should go toward my deductible. And that is, I
think, one of the reasons why we have seen 20 states ban co-pay
accumulators, and Puerto Rico and my home state of Texas just
did the same thing. So the Texas legislature, of which I served
there for 8 years, has recently banned them. And, Ms. Reilly, I
wanted to ask you if you could speak to how co-pay accumulators
are used by the PBMs, and how they impact what our constituents
pay.
Ms. Reilly. Yes, absolutely. Thank you for the question.
So, the way co-pay accumulators work is that, at times,
patients, as has been noted by the Committee, struggle to
afford their medication. They may need a medicine that is on
the high tier of a formulary where they are asked to pay
oftentimes 40 percent based on the list price of the medicine.
For many patients, that is not access. As a result,
pharmaceutical manufacturers often provide assistance to
patients in the commercial market to help better afford those
medicines. And so, patients use that assistance when they go to
the pharmacy counter to lower what they pay out-of-pocket in
order for those patients to actually get the medicines they
need.
The way accumulators work is that the PBM siphon the money
off of that assistance. They take it for themselves, and they
do not allow those resources to count toward the patient ever
getting through potentially their deductible or hitting their
out-of-pocket max. So, what oftentimes happens is patients find
themselves mid-year, they have exhausted all the financial
assistance that is on the card that has been provided to them.
They realize they have made no progress toward meeting their
out-of-pocket cap, and they are left with the unenviable
decision of whether or not they can take their medicine or not.
As you noted, 18-plus states, including the state of Texas,
have banned those. There is legislation in Congress called the
HELP Copays Act, which would make this a Federal requirement
that these types of programs can no longer be in existence to
ensure that patients get the help they need because
unfortunately, too often today, costs are left out of reach
because of PBM formulary design because PBMs are demanding that
patients pay either the full list price of the medicine before
they reach their deductible or, after their deductible, asked
to pay a percentage of the list price of their medicine, not
getting the benefits of negotiation, and then they turn around
and take the assistance from the patient as well. It is not a
good system. It is not working on behalf of patients, and I
would encourage this Committee and others to look at the HELP
Copays Act to make this a national prohibition.
Mr. Fallon. Do you think that it is fair to say that that
the way in which the system works now, that the co-pay
accumulators are essentially allowing the PBMs to double dip?
Ms. Reilly. Yes, absolutely. They get discounts and rebates
from the pharmaceutical manufacturer for that. They then take
the resources that the patient is providing them as well as the
money off of the copay card, and take that money, too. So, they
are getting it from both ends, which is why study after study
has found that patients are often being asked to pay more,
sometimes significantly more than the insurance company or PBM
has for that medicine.
Mr. Fallon. Well, it makes sense that 18, 20-some-odd,
something of that number of states have banned this practice.
Ms. Reilly. Absolutely.
Mr. Fallon. And hopefully we can look at that in a
bipartisan fashion here in D.C. Mr. Chairman, I yield back.
Chairman Comer. The gentleman yields back. The Chair now
recognize Ms. Stansbury from New Mexico for 5 minutes.
Ms. Stansbury. Thank you, Mr. Chairman, and thank you to
the Ranking Member and to all of our witnesses.
As somebody who is the primary caretaker of a member of my
family, I have to say that this morning's Committee hearing has
been pretty disturbing. And I think it is really important that
the American people understand that there are private for-
profit corporations that are getting in the middle of our
family members getting lifesaving care, getting access to
medications that are necessary and that their doctors have
prescribed, and that it is for profit. It is to line the
pockets of private corporations. This is not about healthcare,
but it is also important, and I want to take a moment as we
return back to that issue, to acknowledge the work that we have
been doing to take on Big Pharma.
In fact, lots of folks have mentioned this this morning,
but last year, we took on Big Pharma and we won, in fact, with
the passage to the Inflation Reduction Act. We not only lowered
certain prescription drug costs, like putting a cap on
insulin--for example, if you live with diabetes, you now have
your insulin capped at $35 a month--but it also empowered
Medicaid to negotiate these certain prescription drugs and
especially lifesaving drugs like blood thinners, which my
family member who I take care of is on.
And so, it is important that the American people know how
important this is for tackling prescription drug costs, and
because we know so many of our family members are living
paycheck to paycheck or Social Security check or Medicaid/
Medicare reimbursements in order to survive. But that is why I
find this practice of PBMs interfering in patient care so
disturbing, and I really want to dig in and help people
understand this because I think it is hard when you get into
all the jargon to really understand the visceral aspect of
this.
So, Dr. Conti, I know, you have talked about this a lot
this morning, but I want to take the American people on a ride
to the doctor. In New Mexico, which is the state that I
represent, sometimes it takes months to get in to see a
specialist. We have a severe shortage of healthcare providers
in our state, especially in our rural areas, so you are waiting
months. You finally get in to see the doctor. You wait hours.
You have driven hours to get to the doctor. You get your
prescription. The doctor calls it into the pharmacy. You drive
down to the CVS or the Walmart or wherever you pick up your
prescriptions, and you get told at the counter that you can not
have the medication that you have waited months to have
prescribed--months.
And what I do not think most folks understand is that there
is some group of individuals sitting in a corporate boardroom
somewhere in America making that call, telling your pharmacy
that they can not give you that drug, that lifesaving drug that
your mother, your father, your grandfather waited for months to
get. I mean, it is really outrageous when you think about it
that folks are putting profits over the health and livelihoods
and well-being of our family members, so you go. You are about
to pick up this prescription. You are told you can not have it,
and let me understand this. So, these PBMs are negotiating
directly with the drug manufacturers. Is that correct?
Ms. Conti. That is correct.
Ms. Stansbury. And part of why they determine whether or
not a certain drug gets put available for a specific pharmacy
is that they are making a claim that it saves costs for the
pharmacy or for the doctor, for the patient. But at the end of
the day, the drug manufacturers are actually providing rebates
to these companies that they get to pocket as a part of the
profit margin that they make on these drugs. Is that right?
Ms. Conti. Yes. Drug makers set the list prices of their
drugs, but the discounts and rebates accrue to the PBMs and
their subsidiaries.
Ms. Stansbury. Right. So here we are, we are at the drug
counter, we are trying to pick up this lifesaving drug that we
have waited months for, and I am told that I can not pick up
this medication for my mom who needs it because some corporate
company manager has said I am going to make more money if we do
not allow this drug to be sold at that pharmacy. Is that
correct?
Ms. Conti. I would say formulary exclusions are actually
quite rare, but what happens at the pharmacy counter is that
the price that is charged the patient can be exorbitant. And
that is a function of both drug makers setting very high prices
and PBMs not preferencing those drugs and the formulary to
provide access to patient.
Ms. Stansbury. So, this is actually a really interesting
point because I have had this exact experience. In fact, a
family member of mine was recently in the hospital, and when we
went to go get the drug that was prescribed for them, it was
going to cost $400 out of pocket. And that was because a
private for-profit corporation had made a decision that it was
more profitable for them to pocket that profit than to serve
our communities. So, Mr. Chairman, I am grateful that we are
having this hearing. We desperately need to regulate and to
address this issue because, as Representative Bush said,
literally, lives depend on it. And with that, I yield back.
Chairman Comer. Thank you. The Chair now recognizes Mr.
Grothman from Wisconsin for 5 minutes.
Mr. Grothman. Sure, we will go with Mr. Chancy. How do PBMs
negotiate drug pricing and reimbursement rates with community
pharmacies, and what factors influence these negotiations?
Mr. Chancy. Well, we are not actually involved in any of
the negotiation on the pricing, and I am not quite sure how
they come about what they do. We have a pharmacy service
organization that actually negotiates or works out the plans
with them. We have very little negotiations at our point.
Mr. Grothman. OK. Does Ms. Reilly want to answer that?
Would you have an opinion on how this happens?
Ms. Reilly. About how negotiation happens----
Mr. Grothman. Right.
Ms. Reilly [continuing]. Between PBMs and pharmaceutical
companies?
Mr. Grothman. Right. How do they arrive at it?
Ms. Reilly. I am not party to those negotiations, but as I
understand it, companies start with the list price, which is
set by the manufacturer. They enter into a negotiation with the
PBM. As I said before, the PBMs are solely responsible for
setting the parameters of what their prescription drug benefit
looks like. They determine if our medicine gets covered. I
would just counter what Dr. Conti said about 850 medicines are
actually excluded from formularies on a yearly basis. That
number has shot up increasingly over the number of years, so it
is actually a large number that is excluded.
Mr. Grothman. Can you tell me why it shot up?
Ms. Reilly. It is a way for PBMs to try and drive greater
rebates. So, they tell a company if you do not give us a rebate
of this amount, we will exclude you from the formulary so that
will cover your competitor product. So, they set the terms for
what their drug benefit looks like, how much patients pay out-
of-pocket, what tier of the formulary they are on, how much
coinsurance they may have to pay. And then pharmaceutical
manufacturers have to negotiate in order to try and get their
drug approved in order to hopefully get their medicine on the
preferred tier so that patients can actually access it at a
reasonable price.
Mr. Grothman. OK. I will give you another question. Insulin
prices have been a growing concern for Americans. How have PBM
practices, such as rebate negotiations and formulary
replacements, impacted the affordability of insulin for
patients with diabetes?
Ms. Reilly. Thank you for that question. Actually, the net
price of insulin has actually decreased from 2007. We are
actually lower today in terms of the net price of insulin than
we were in 2007. But most patients have not necessarily felt
that, again, because PBMs insist on charging patients a full
list price of the medicine, not the negotiated rate. The
typical insulin has a rebate of about 84 percent lower than
what many patients are being asked to pay.
So, our companies have come forward. They have offered
lower price versions of insulin in the hopes that those lower
price versions would actually get covered on formularies, and
typically, they have been rebuffed. The PBMs have not had an
interest in putting lower price insulins on the market. All
three of the insulin manufacturers earlier this year came
forward and, starting January 2020, for all or offering insulin
to patients, be it commercially insured or uninsured, for $35 a
month as a way to circumvent the current system, again, where
patients are often overcharged for medicines like insulin and
made to pay the full undiscounted price when they go to the
pharmacy counter.
Mr. Grothman. Mr. Scott, how would you respond to that?
Mr. Scott. I would say a couple of things on insulin and
then on the negotiation process. On insulin, as Lori noted,
drug companies did happily lower the list price on a number of
those products. And my understanding is that there is access
being provided to those through the PBM formularies.
But essentially, what we are conflating here is not only
did the list price come down, but did the net cost come down to
the same low discount level because the PBM's job, when the PBM
is negotiating with a drug company, is to try and get the
competitors to each offer the discount. And whoever is going to
take that net cost to the lowest point, that typically is what
gets the formulary placement, if all the clinical
considerations are equivalent. And a number of PBMs, I would
also point out, have even, prior to those companies lowering
their list prices, put programs in place to cap or limit out-
of-pocket costs for insulin specifically to patients on plans.
If I could, Congressman, just respond to the earlier
questions that you asked some of the other panelists. I have
talked a little bit now about how we negotiate with pharma, and
there is also a separate negotiation with the pharmacy. And Mr.
Chancy makes a good point that oftentimes 83 percent of
independent pharmacies are part of pharmacy services'
administrative organizations that collectively bargain on
behalf of thousands and pharmacies together with the PBM to
help them negotiate favorable contract terms. So, I think that
is a good point to highlight.
Mr. Grothman. OK. The final question for Mr. Burton, how
can Congress ensure that PBMs prioritize the inclusion
biosimilars in formularies and promote their use to reduce
healthcare costs?
Mr. Burton. So, I think there are a number of
opportunities. The simplest that we have encouraged that
Representatives Kuster, Miller-Meeks, and others have
introduced, would real simply require that Medicare plans
prefer new generics and biosimilars when their price is less
than the brand price. This still gives PBMs the opportunity to
negotiate for a lower price. It still allows brands to exclude
generics and biosimilars from the formulary. They just have to
do so based on by lowering their price. So, I think what is
getting lost in this discussion of lowest net is lowest net
cost to whom. There is a lot of discussion of lowest net, but
that is to the PBM, to the plan sponsor. That is not benefiting
the patient, and I think we have to get this back to what gets
the lowest cost medicine to the patient.
Chairman Comer. The gentleman's time has expired. The Chair
now recognizes Mr. Casar from Texas for 5 minutes.
Mr. Casar. Thank you, Chairman. Today, I really appreciate
that we are having this Committee hearing to investigate drug
pricing and the role that different actors in the system play
in the exorbitant drug costs that our constituents pay.
Americans spent $333 billion on prescription drugs in 2017, and
by 2027, that number, by some reports, is projected to increase
by about 75 percent. To me, that shows, and this hearing shows
how there being so much self-interest in the system can hurt
the patient's interest and that this is something we have to
reform at all levels.
And so, before we get to my questions, I do want to go on
the record about the important work that Democrats have done on
this issue. The Inflation Reduction Act passed by Democrats in
the Congress signed by President Biden, one, empowered the
executive branch to negotiate drug prices paid by Medicare, and
two, use those savings to cap out-of-pocket costs. That was an
important step. There is more we need to do on issues of PBMs,
on issues of drug pricing. But on this important bill that was
signed and has gone into effect, so many people are going to be
benefiting from these sorts of changes. But we hear oftentimes
in the halls of Congress, from my colleagues on the other side
of the aisle, that Medicare negotiating lower drug prices is
going to reduce innovation because Big Pharma's profits may go
down, and I just have trouble fully believing and understanding
that. I appreciate that we have people from all across the
industry here with us today.
Ms. Reilly, if I understand correctly, you represent many
of the large drug manufacturers. Do you know how much the top
five pharmaceutical companies made in profit last year?
Ms. Reilly. Not off the top of my head, I do not.
Mr. Casar. The information that I have pulled up has that
the answer is about $82 billion in profit last year from the
top five pharmaceutical companies. Professor Conti, of the 210
prescription drugs approved by the FDA between 2010 and 2016,
do you have a sense about how many were supported likely by
taxpayer funding?
Ms. Conti. Likely all.
Mr. Casar. Yes. My understanding is that it is all of them.
To me, we need to both address any kind of self-dealing that we
see in PBMs. I appreciate that we are tackling that issue, but
I also think that we should be looking at the entire picture
and making sure that we are making sure that we are investing
in innovation and research but also the enormous amount of
profit that we see is also directly impacting the huge prices
that everyday people have to pay. Negotiating drug prices, it
is going to reduce the deficit and save seniors money, and if
we end up going to a Medicare-For-All system eventually, those
savings will accrue overall to the American public.
Now turning to the question of PBMs, we have heard that
there can be these charges, direct and indirect remuneration
fees, known as DIR fees, weeks after a medication is sold at a
pharmacy. These can sometimes be unpredictable fees, can be
challenging for independent and community pharmacies. DIR fees
that PBMs charge have increased by large amounts, in some
reports by thousands of percent, 100,000 percent in the past 10
years by some reports.
During Dr. Dwayne's testimony, it sounded like DIR fees and
other fees that PBMs charge pharmacies can constrain the
ability of independent pharmacies to stay in business. Dr.
Chancy, how did DIR fees affect your members' ability to stay
open and serve patients?
Mr. Chancy. Thank you for the question. As I alluded to
earlier, especially when the DIR fee started originally, they
almost doubled every year. And in the last few years, from 2018
to 2022, it almost completely doubled in our small business,
and this year through July, it is almost where it was last
year, so we have seen a huge increase in DIR fees this year.
This is the first year I think I have gotten calls from eight
or nine of my colleagues in the Georgia area, they do not know
how they are going to make it. They are already concerned about
the underwater reimbursement they are getting, and they are
real concerned about what is going to be happening in 2024. We
already are seeing the plans with lower reimbursement next
year, and they are having a hard time surviving this year. So,
it is critical because there are going to be small businesses
like mine that are not going to make it through this situation.
Mr. Casar. Well, I appreciate it, and I look forward to
working with anyone on this Committee on bipartisan efforts to
address all of the different parts of the system that need to
be addressed. Thank you to each of you for your testimony, and
I yield back, Mr. Chairman.
Chairman Comer. The Chair now recognizes Mr. Biggs from
Arizona for 5 minutes.
Mr. Biggs. Thanks, Mr. Chairman. Ms. Reilly, can you tell
us what the profit was for PBMs last year?
Ms. Reilly. No, but it was higher than for pharmaceutical
companies.
Mr. Biggs. Mr. Scott, what was PBMs' total?
Mr. Scott. PBMs represent about 6 percent of the drug
dollar. Four percent of that goes to paying----
Mr. Biggs. Yes. What I want to know is how much did you
guys make last year.
Mr. Scott. I do not have a dollar figure. I can tell you it
is about a two-percent margin on average.
Mr. Biggs. Did you make more than the Big Pharma?
Mr. Scott. I do not know the answer to that question.
Mr. Biggs. OK. I had hoped that you would respond. Mr.
Chancy, you said that you guys are in the community pharmacy or
you guys use a pharmacy service organization. How many
community pharmacies are in this pharmacy service organization?
Mr. Chancy. I think, and the one that I am involved in, it
is over 7,000.
Mr. Biggs. Seven thousand, and who do they negotiate with?
Are they negotiating with PBMs? Are they negotiating directly
with pharmaceutical companies?
Mr. Chancy. They are negotiating directly with the PBMs.
Mr. Biggs. With the PBM themselves. OK. Great.
Mr. Chancy. Correct.
Mr. Biggs. Thank you. I have got questions for everybody. I
just do not have time for everybody. Sorry about that. And
then, Dr. Conti, in your written testimony, you said PBMs act
as intermediaries that bargain on behalf of payers for lower
prescription drug prices while receiving payments from drug
makers, right?
Ms. Conti. That is correct.
Mr. Biggs. And then you said that PBMs create an arena for
retail prescription drug maker competition. How do they create
that arena for drug retail competition?
Ms. Conti. Essentially, drug manufacturers bid using
rebates to enter into coverage on the formulary.
Mr. Biggs. OK. And you mentioned some benefits to consumers
and payers through promoting access to drugs. Can you expand on
that a little bit?
Ms. Conti. Sure. Formularies push patients to use low-cost,
safe, and effective drugs, largely generics and biosimilars
when they are available. That reduces costs for us all and also
expands access.
Mr. Biggs. And yet, this is not a foolproof system,
especially, I take it, from reading what you said what some of
the others have included is this vertical integration. Is that
the biggest problem with the PBM system?
Ms. Conti. I would say that patients not being able to
access drugs that are most beneficial for their specific
condition is the most pressing concern.
Mr. Biggs. I am sorry. I was going to ask is that because
of the vertical integration, or is that because the PBMs are
engaged in some kind of conduct, or is that because of the Big
Pharma engaged in some kind of conduct? Where does that lie?
Ms. Conti. Sure. I would say the blame lies in multiple
places. No. 1, drug manufacturers set the list prices of their
drugs many times at prices that are just simply too affordable
for us all.
Mr. Biggs. You mean unaffordable for us all?
Ms. Conti. Right. Sure. So, I mean, so there are drugs that
are now priced at higher than a college education, for example.
That is excessive.
Mr. Biggs. Does that have anything to do with these
discounts or rebates that they are giving, or what is the
feature for that?
Ms. Conti. Drug prices are set high in the United States
because simply drug manufacturers can charge them, and we will
pay them.
Mr. Biggs. And who pays that? Is that through the insurance
companies themselves, or is that through the government paying?
Is it both?
Ms. Conti. Yes, it is both.
Mr. Biggs. OK. We have talked about Medicare being able to
negotiate for drugs directly. Is that any way analogous to PBMs
negotiating?
Ms. Conti. Yes. Essentially, our system is based on this
competition. PBMs are acting as agents for us all, negotiating
lower drug prices, and getting patients to use lower price just
as safe and effective drugs when available. However, our system
is eroding that activity by expanding or forestalling generic
competition altogether or, frankly, not providing access to
drugs that are needed at the pharmacy counter.
Mr. Biggs. And, Mr. Burton, you included something. I am
glad Dr. Conti touched on generics because you said patients
are increasingly facing barriers to access to new generics and
biosimilars as a result of formulary decisions to delay or
block coverage. Expand on that, please.
Mr. Burton. Let me give you two examples. We have tracked
coverage of first generics. These are the first generics on the
market in the Medicare program over the last 6 years. It now
takes at least 3 years for new generics to achieve formulary
coverage on as much as half of Medicare formularies.
Mr. Biggs. OK. So, you have talked about formularies.
Mr. Burton. So, they are launching. They are not being
covered for 3 years.
Mr. Biggs. Right. OK. And you are attributing that to PBMs,
if I am not mistaken.
Mr. Burton. Absolutely.
Mr. Biggs. I am sorry, Mr. Chairman. How about the
development of generics in and of itself? We have got problems
with the development of generics on the front end and then
listing in the formularies.
Mr. Burton. Yes. So, a lot of this comes back to the
incentives. And if a new generic or a new biosimilar is not
going to be able to be covered, if a biosimilar that cost $300
million to develop is not going to be able to get the market
adoption necessary to get that return on investment, then it is
not going to be developed, and we have seen manufacturers exit
the biosimilar market. We have seen them decide it is actually
easier to develop a brand drug and get their return on
investment there because they are not getting the adoption in
the commercial market to date.
Mr. Biggs. Mr. Chairman, thank you so much.
Chairman Comer. The Chair now recognizes Mr. Garcia from
California for 5 minutes.
Mr. Garcia. Well, thank you, Mr. Chairman. Thank you to our
witnesses that are here.
Certainly, there has been a lot of finger pointing that is
going on between the PBMs, of course, and our big
pharmaceutical companies. It has happened here today at this
hearing. I just think it is important also to note who the big
PBMs are. We have been hearing the term ``PBM'' a lot. We are
talking about CVS Health, Cigna, United Health, a lot of these
large PBM companies.
We know that last year, the three major PBMs, which I just
mentioned, here in the U.S. made almost $30 billion in profits.
That is a 483-percent increase over just the past decade. And I
am glad there has been bipartisan support and input on how to
deal with this approach and ensure that the American public, of
course, gets better cost for them when they are receiving the
medication that they deserve and need.
These are serious conversations about antitrust
regulations, about enforcement. It has been noted multiple
times that PBMs control almost 80 percent of the entire market,
which is enormous. PBMs also integrate with insurance companies
and pharmacies to funnel businesses to their own pharmacies and
retailers, but the big picture here is a lot of finger
pointing. I want to share, you guys, one of my absolute
favorite memes, which, to me, this is a perfect example what
has actually been going on as it relates to the American
consumer.
[Chart]
Mr. Garcia. We have our pharmacy benefit managers pointing
at Big Pharma and Big Pharma pointing back at our pharmacy
benefit managers. Now, there is also a reason why Pharma is
spending millions of dollars over here to trash PBMs. Let us
also distract the American people from their central role in
driving up costs while stuffing their own pockets. The eight
Big Pharma players--AbbVie, Amgen, Bristol Myers Squibb, Eli
Lilly, Gilead, Johnson & Johnson, Merck, and Pfizer--earned
$110 billion in profits in 2022 and, by the way, according to
the Senate Finance Committee, paid only 2 percent in taxes. And
so, I want to make sure that these companies are called out by
name on both the Big Pharma side and also the PBM side.
On the 5-year period, from 2016 to 2020, pharmaceutical
companies raised the prices of branded prescription drugs by 36
percent. That is 4 times the rate of inflation. From 2016 to
2020, the 14 leading drug companies spent $577 billion on
buybacks and stocks, which is $56 billion more than they spent
on research and development over the same period of time. In
2021, 10 major pharmaceutical companies that made over $100
billion in profits--$100 billion in profits--that is a 137-
percent increase from the previous year. So, both Big Pharma
and PBMs are at fault, as we saw in that meme, so I want to
make that just clear today for this hearing.
Professor Conti, isn't it true that pharma manufacturers
have specifically collaborated with PBMs to block generics from
coming to the market and leaving consumers with higher prices?
Ms. Conti. Yes.
Mr. Garcia. And is it also not true they use their market
power to obtain contract terms with payers, PBMs that limited
or blocked generic competitors from being covered?
Ms. Conti. We believe exclusions are rare. There are
approximately 20,000 drugs sold in the United States every day
and only a handful are excluded. However, generic forestalling
of competition is real, and the GAO has just produced a report
suggesting that it is increasing over time.
Mr. Garcia. And I think what is really critical here is
that if we are going to have actually reform here within this
incredibly important part of the kind of American economy and
people's healthcare, that reform is going to happen on both
sides. It has got to happen on both sides. One thing that is
concerning, and that has been about this hearing and other
conversations around this topic, is that pharma and House
Republican allies have also fought meaningful action on drug
price reform and negotiation for decades.
Now, President Biden and House Democrats passed the biggest
prescription drug reform in decades in the Inflation Reduction
Act that was brought up multiple times today, and every, by the
way, single Republican voted against it. So, all of these
comments about some of my colleagues feeling bad or sad for our
American seniors or those that need medications, they voted
against actually the Inflation Reduction Act, would actually
help and it is helping this issue today.
Now, Democrats have expanded negotiating for the best price
for prescription drugs and Medicare. Again, Republicans opposed
that. And Big Pharma, as we have heard today and have heard in
their former public statements, are suing to overturn that,
which is quite shameful, honestly. We have capped the cost of
insulin at $35 for those on Medicare. To remind you folks, all
the leading Republicans running for President, including Donald
Trump and Ron DeSantis, have promised to repeal that, and so we
have a lot of work to do here.
I want to finally, Professor Conti, can you reiterate again
why negotiating drug prices is so critical?
Ms. Conti. Bottom line, it will reduce the price of drugs
at the pharmacy counter and expand access. This should improve
individual's lives and also population health.
Mr. Garcia. Thank you so much. That concludes my time. I
want to submit to the record of this article by the Wall Street
Journal, which came out September 11, 2023, just recently on
generic drugs, why they should be cheap, but why insurers are
charging thousands of dollars for them, and so let us submit
that. Mr. Chairman, I yield back.
Chairman Comer. Without objection, so ordered, entered into
the record.
Chairman Comer. The Chair now recognizes Mr. Perry from
Pennsylvania for 5 minutes.
Mr. Perry. I thank the Chairman. Ladies and gentlemen,
appreciate your time. I am not here to vilify anybody. I am
trying to figure out some answers. My bosses, the people I
represent, want access to affordable pharmaceutical products,
and they know that the cost keeps going up. It has become
unaffordable, and they do not know why. They just know that
they can not afford it. And so, I am not here to point fingers
at anybody. I am here to try and get a couple of answers.
I represent a few independent pharmacies that are still
hanging on, and we are not saying anything bad about the other
ones that do good work as well for the community. But for
independence, where people find value in seeing the same person
that their parents saw or that they went to when they were a
child, there is a trust there, but the independence, seem like
they struggle. Well, I know they struggle, right, with the DIR
fees, changes to Federal programs like TRICARE, and it does not
seem fair.
My question on behalf of, I think, these independent
pharmacies to both the manufacturers and the PBM, so this is
directly to you, Ms. Reilly and Mr. Scott. Why do PBMs, or
maybe the PBMs do not. I do not know who does. Why is it that
pharmacies are required to dispense brand when approved generic
is a fraction of the cost? How does that happen? Why does that
happen?
Ms. Reilly. Well, as I have mentioned before, the PBMs are
solely responsible for setting the formularies that exists for
a health plan, so they decide what medicines get covered. They
decide how much patients ultimately pay for those medicines,
and oftentimes they make a choice to cover a medicine. And
there are lots of government reports to show this where they
prefer medicine with a high list price over a lower price
generic or biosimilar medicine.
Mr. Perry. I am sure Mr. Scott has an opinion.
Mr. Scott. I do, Congressman. Thank you. In fact, generics
are not usually placed on higher formulary tiers. Our companies
have championed the dispensing of generics, which has
contributed greatly to the fact that 90 percent of
prescriptions dispensed today are for generic drugs. And in
fact is, our companies contract with independent or chain
pharmacies. One of the things that we are incentivizing through
value-based contracts is for them to encourage more uptake of
generics, so we have a very proven track record on that front.
Mr. Perry. So, who is requiring? How does the brand get put
into this is what the person can get and not the generic? How
does it happen then?
Mr. Scott. There may be instances where the first generic
comes to market and has the positive competitive effect of
having the originator drug, cut their cost down to a lower
level, and the PBM is always going to favor the lowest net
product.
Mr. Perry. Because I will tell you, sir, my pharmacists are
telling me there are countless--I do not know, right
--but they are telling me, and I trust them. I do not know
why they would tell me otherwise, but there are countless
examples where the brand is the one that is prescribed as
opposed to the generic. And it sounds like you are saying this
is an episodic thing, but it sounds to me, according to them,
like this is an epidemic issue. And, ma'am, do you have
something to weigh in on here?
Ms. Conti. Sure. The preponderance of evidence suggests
that that behavior is actually quite rare.
Mr. Perry. So, what would you contend? Is it the
manufacturer? The next question, I will tell you, and maybe you
can, Mr. Burton, you can weigh in here is, if you watch TV, and
probably all do, sadly, you are going to be deluged with ads
about things that you can not pronounce. You have no idea what
the heck they do. And I just did a little research, and we are
talking about hundreds of millions of dollars in prices for
ads. We are encouraging people to go talk to their doctor and
get this drug for this malady, and, of course, it is the list
of all the things that are going to go wrong with you if you
take it and so on and so forth.
But where does that money come from, right? They come from
customers, right? Doesn't it come from customer? Ma'am, Ms.
Reilly, doesn't that come from customers who are, some are on
the margins, right, can barely afford the medicine. They are
being prescribed the brand instead of the generic, and the
brand is on TV spending hundreds of millions of dollars saying
buy this brand.
Ms. Reilly. I do not know of any instance where a company
is advertising a brand medicine when there is a generic that is
available. That typically does not happen. The purpose of
advertising is to make people aware of new drugs that may come
to the market. It is intended to make people aware of symptoms
that they may have but may not know why, in fact, they have the
symptoms, to encourage a conversation with the doctor. At the
end of the day, though, it is up to the doctor to make the
decision about what medicine is most appropriate for that
patient, and we think it is important for people to have
conversations with the doctor.
Mr. Perry. Sure. So do I.
Ms. Reilly. But ultimately, the doctor should be in charge.
Mr. Perry. I agree. Mr. Chairman, with your indulgence. Mr.
Burton, can you weigh in on this whole conversation here?
Mr. Burton. Absolutely. So it is, in a lot of cases, coming
back to lowest net cost to whom: cost to the PBM or cost to the
patient. So, there has been a lot of discussion of insulin.
Mr. Perry. I notice that instead of price, it was cost,
cost to whom. That is important.
Mr. Burton. Right.
Mr. Perry. Can you elaborate on that?
Mr. Burton. So, if we look at the biosimilar insulin
market. Biosimilar insulin is priced two-thirds, 65 percent
lower list price than the brand insulin. And if we look at the
best way to judge adoption in this market is looking at new-to-
brand prescriptions, new-to-brand prescriptions in that Lantus
market are 65 percent of those prescriptions are written for
the biosimilar, but only 30 percent of the prescriptions that
are actually filled are for the biosimilar, because what is
happening is those prescriptions for the biosimilar are hitting
blocks and utilization management from the PBMs that push the
patient to the branded product.
Mr. Perry. All right. Well, thank you. My time has expired.
I just do want to say this. We appreciate what you do in the
larger sense because we all want to have access to these
lifesaving treatments. That having been said, having government
intervention and price fixing only discourages the research and
development necessary to have things that saves people's lives,
and so none of us here want our constituents, our bosses, to
pay higher prices. But I would think that on my side of the
aisle, and I will speak for myself in particular in my case, I
do not think that government determining these things is the
answer. And on the insulin front, we had companies that were
willing to manufacture below the cap, who are maybe now being
put out of business because of the cap. That is the beauty and
the fallacy of government. They solve a problem by making
another problem, and that is why we are opposed to government
price fixing, not because we want our constituents and our
bosses to pay more. That is indeed the exact opposite. With
that Mr. Chairman, I yield.
Chairman Comer. The Chair now recognizes Mr. Frost from
Florida for 5 minutes.
Mr. Frost. Thank you, Mr. Chairman. One moment. All right.
Everyone in this country deserves access to medicine at a price
they can afford. PBMs are one part of the problem, but we
should not forget the massive role that Big Pharma plays in
this, and my colleague, Mr. Garcia, had the very funny meme
that he put up, which is 100 percent true. Big Pharma drug
companies are watching this hearing, relieved that Republicans
are putting all the blame on PBMs and that the $9 million spent
in attack ads on PBMs is paying off.
Mr. Chairman, I seek unanimous consent to enter into the
record the Oversight Committee's Democratic staff report
culminating the Committee's 3-year investigation into the
pharmaceutical industry, which found that drug companies engage
in anti-competitive behavior and exploit our healthcare system
to make record profits at the expense of sick Americans.
Chairman Comer. Without objection, so ordered.
Mr. Frost. Thank you. With this investigation, they found
some very important information. I think it is important people
read about it. Professor Conti, as an expert on drug pricing
and affordability, can you tell us, would breaking up PBMs
without addressing the drug manufacturers' role guarantee that
drug list prices will fall to more affordable levels?
Ms. Conti. No. In fact, we expect prices will go up.
Mr. Frost. OK. What are some of the tactics that drug
companies have used to enrich themselves?
Ms. Conti. Certainly, setting list prices and taking year-
over-year price increases on these list prices is enriching
themselves and harming seniors and other Americans who depend
on those drugs. In addition, forestalling competition in the
form of generic and biosimilar competition is, again, enriching
themselves without providing benefit to the American public.
Mr. Frost. President Biden's Inflation Reduction Act
allowed Medicare to negotiate directly with drug manufacturers,
kept out-of-pocket patient costs, and put a life-changing
monthly cap on insulin of $35. Professor, how can this
Committee build on the work of President Biden's Inflation
Reduction Act to help make prescription medication even more
accessible and affordable?
Ms. Conti. Two ways. First, expand access to all insured
individuals and uninsured individuals for those lower prices,
and second, by promoting transparency and competition
throughout the system.
Mr. Frost. Thank you so much. I would love to hear my
Republican colleagues commit to holding a hearing on both PBMs
and drug companies. I think it is important that we hold both
accountable, and there is a lot of work that needs to be done
there. Last year, drug companies, like Johnson & Johnson and
others, continued to launch medicines at sky high prices, with
the average cost of a new drug being more than $220,000 a year.
And just last week, Republicans on this Committee sympathized
with Johnson & Johnson, allowing them a representative to sit
here and complain and air out complaints on citizens, holding
them accountable.
So, I think it is important that we look at all the bad
actors in this, and I think PBMs and drug companies are both
bad actors and part of the reason why we have Americans
deciding between medicine and rent, medicine and food. And we
can not talk about the people who negotiate the prices without
talking about the people who set the prices, and I think both
are very important. Thank you. I yield back.
Chairman Comer. The gentleman yields back. I will recognize
myself now for 5 minutes of questioning.
Mr. Scott, I want to reexamine what Mr. LaTurner briefly
touched upon, and that is just a question why one of your
members CVS would charge $17,700 for a 30-day supply of
Imatinib when transparent pharmacies charge $72 and still make
a profit. Is that normal behavior by the PBMs? Is that an
anomaly? Why would that scenario happen?
Mr. Scott. I believe it is an outlier situation,
Congressman. As I mentioned to Congressman LaTurner, the job of
the PBM is to manage to the lowest net cost across all the
drugs that they are negotiating for. Of course, they have to
take into account other issues about supply and clinical
effectiveness and all of those other questions. I can not speak
to that specific drug. I know for Gleevec, that there are any
number of different generic competitors at different price
points out in the market at different levels of supply, but I
think it is an outlier.
Chairman Comer. When it has been mentioned earlier about
PBMs--fill in the brand name--when they could fill a generic
instead that would be cheaper and save money for everyone, is
that because the PBMs get a higher DIR fee from the brand name?
Mr. Scott. No. Typically, what I would assume would be
happening there is that the actual net cost of the brand is
coming in lower than the cost of the alternative and then lower
net cost drug is being favored. And that net cost benefits the
plan sponsor, the employer, who is deciding then how to use
that savings to benefit the patients they represent.
Chairman Comer. Well, we will touch on that----
Mr. Raskin. Mr. Chairman, could I followup on your
question?
Chairman Comer. Go ahead.
Mr. Raskin. Thank you for yielding for a second. You keep
talking about lowest net cost, and it is been pointed out that
that is different from lowest consumer price. If we are
interested in benefiting patients and consumers, why should we
care about lowest net cost to you? Would you explain that?
Mr. Scott. Right. It is not lowest net cost to the PBM
because the PBM is essentially negotiating those savings for
the employer, whoever hires them, and the amount that the
patient pays out of pocket at the pharmacy counter is a
function of that employers benefit design. So, are they using
the savings from that lower net cost drug to try and make the
benefit affordable for everybody that benefits the patient, or
are they using it to say you are not going to have out-of-
pocket cost on these particular drugs? It is the tradeoff that
is been decided there.
Chairman Comer. Mr. Scott, that is not consistent with
anything that our research has found, and we are going to
continue to investigate PBMs. And I know you represent the
PBMs, and we wanted you to be here at the table because you all
made some tweets in the last Committee hearing. We will mention
one of those momentarily. But in communicating with all the
stakeholders that we have communicated with and met with and
spent hours, and we do not agree on a whole lot on this
Committee, but we agree that PBMs need to be reformed
significantly, especially from a transparency standpoint.
Ms. Reilly, I want to turn to you now. Generics are usually
less expensive than brand name, right? Why is that?
Ms. Reilly. Well, you know, when a brand name medicine
comes to market, it often takes 10 to 15 years, often in excess
of $2 billion, to bring a product through. Ninety percent of
what we do fails, so the likelihood of bringing a brand name
product to market is quite low. On the contrary, generic
medicines, they do invest some money, obviously, to bring a
medicine to market, but it is almost as if we have baked the
cake, and we hand over the recipe. And then----
Chairman Comer. Let me ask you this. What role do drug
manufacturers have in setting drug prices?
Ms. Reilly. We set the list price of a medicine, which is
the starting point for negotiation with a pharmacy benefit
manager. And then we have to negotiate with PBMs, some of which
negotiate, you know, for more people than entire countries like
France. They have a lot of leverage, as we have talked about
earlier today because----
Chairman Comer. OK. Let me cut you off for time sake.
Ms. Reilly. Sure.
Chairman Comer. In our last hearing, we heard expert
witness testimony on how PBMs use rebates and formularies to
steer patients to certain drugs and that high rebates lead to
high list prices. PCMA, represented by Mr. Scott, tweeted
during our first hearing that rebates are completely unrelated
to high drug prices, and I believe he said that. Now, Ms.
Reilly, is that accurate that rebates have no impact on drug
prices?
Ms. Reilly. That is contrary to lots of folks, including
the OIG, the Federal Trade Commission, Senate Finance Committee
report, and others.
Chairman Comer. Can you explain how rebates impact the
price of pharmaceuticals?
Ms. Reilly. Well, as I said before, you know, we do set the
list price, but the preferences of PBMs do matter. They set the
terms of negotiation. And again, there have been multiple
studies that have shown that PBMs typically prefer medicines
with high list prices, in part because they make their
compensation in part based off of the list price. Whether that
is a rebate or a fee, it is tied to the list price of the
medicines. The higher the list price, the more money in their
pocket.
Chairman Comer. Exactly. And just to be clear, who in the
market benefits the most from rebates?
Ms. Reilly. I would argue the PBMs, insurers.
Chairman Comer. PBMs benefit the most from the rebates, and
that is something that I believe there is bipartisan support in
this Committee at least to reform that, and we would love to
continue to have discussion with all the stakeholders. Both
Republicans and Democrats on this Committee are going to
continue to work to try to come up with a meaningful solution.
I do not believe just increasing transparency is going to
do a whole lot. We are in close communication with our friends
on the Energy and Commerce Committee. I know there are several
bills over there. We are waiting to see what happens over
there, while at the same time we are going to continue to
investigate and try to come up with meaningful solutions to
reform the PBMs and all the problems that we have heard today
from both sides of the aisle about PBM abuse. And I believe
that we can hopefully get something done in a bipartisan
manner.
My time has expired. The Chair now recognizes Mr. Mfume
from Maryland for 5 minutes.
Mr. Mfume. Thank you. Mr. Chairman, I want to thank you and
Ranking Member Raskin for calling us back together on this
issue. The first hearing was an eye opener, and this one seems
to be the same way. I think there is a lot of finger pointing
here, but what we are not seemingly able to do is for anybody
to take any real blame or responsibility for a terrible,
terrible situation that is affecting people all across this
country. As I said during that last hearing, people are hurting
while companies are profiting.
PBM profits have increased rapidly even as lifesaving
medications continue to be unaffordable and inaccessible for
many people across this country. However, because PBMs operate
in this opaque and impenetrable manner, the specifics about PBM
practices are not well understood, such as their contracts with
pharmaceutical companies, such as their rebate structures, such
as their spread pricing. It is all kind of hocus-pocus for the
average citizen, who just knows that they are paying more and
are often told that they can not get a drug that has been
prescribed by their doctor because some other party has made a
decision that that is not to be the case.
PBMs, in my opinion, sometimes have more to say about drugs
than the actual doctors, so I am going to do a couple of things
here. Professor Conti, I want you to think for just a minute. I
am going to come back to you about specific PBM business
practices that you believe can increase transparency as we know
it. I am one of those that believe you open the window and you
let the sun shine in, and so I am a big advocate for
transparency. I want you to think about your own suggestions in
that regard and your own considerations.
I do want to make it clear, though, that it seems that from
our discussion today and our previous discussion that we know
two things that we knew before: PBM profits are soaring, and
second, PBMs' position in the drug supply chain puts them in a
place where they can and do exert enormous influence on all the
players who are part of that. Dr. Chancy, two quick things from
you, and I would appreciate if you could, because of time, a
``yes'' or ``no'' answer. Renumeration fees have increased 33
percent in 2 years. Yes or no?
Mr. Chancy. Yes.
Mr. Mfume. And how much of a burden has that put on you and
others like you in a very short amount of time?
Mr. Chancy. It is a huge burden.
Mr. Mfume. And I want to ask you also as we think about
those renumeration fees, you had mentioned in your testimony,
as I understood it at least, that your perspective is a
drowning perspective, and that what is happening in rural
America and what is happening even in urban America has brought
together two sets of constituents that want real relief. Could
you just tell me for a quick second if you have got an idea
about how to break that or what this Congress ought to be doing
with respect specifically to renumeration fees?
Mr. Chancy. Well, I think the remuneration fees are
critically impacting the small businesses. We are going to see
a change of that come first of the year. What my colleagues are
concerned about is what that is going to do the first 3 to 6
months of the year when they have those fees that are added
back, but they are also reducing the cost of the reimbursement
on the drugs.
Mr. Mfume. OK. And one other quick thing here. Mr. Scott, I
appreciate your testimony. I know who you are representing, but
I really got offended when you said that drug companies happily
lowered the cost of insulin. That is an outright
misrepresentation. If they were happy about doing it, it would
not take the U.S. Government to make them to do it. They fought
every step of the way. So, I want to correct that aspect of the
record. While that may be your opinion, it is not one that I
share, and it is not akin to what the truth is as we know it.
Mr. Chairman, I am holding a report as a comprehensive
overview of the healthcare industry and our society released
last year that says a number of things that underscore what we
are hearing today that I would like to have unanimous consent
to be entered into the record. And I have a study of the
operation of the generic drug market by the Maryland
Prescription Drug Affordability Board that I also would ask
unanimous consent to have entered into the record.
Chairman Comer. Without objection on both requests.
Mr. Mfume. Ms. Conti, would you take a second to respond?
Ms. Conti. Sure. Formulary replacement behavior that erodes
the use of generic and biosimilar drugs should be investigated.
Other contracting practices that, again, contribute to the
forestalling of generic and biosimilar competition should also
be investigated; and then, finally, most favored nation clauses
in contracts that reduce the ability of generic drugs to enter
the market or to compete and/or reduce PBMs' ability to
negotiate the lowest prices on behalf of America.
Mr. Mfume. Thank you, and thank you, Mr. Chairman. My time
has expired.
Chairman Comer. The Chair now recognizes Ms. Harshbarger
from Tennessee for 5 minutes.
Ms. Harshbarger. Thank you, Mr. Chairman. Thank you for the
panelists for being here today. Mr. Scott, I will start with
you. Would you agree that lowering prices paid by prescription
drug plans is not the same as lowering prices that patients pay
at the counter? Yes or no.
Mr. Scott. Not always.
Ms. Harshbarger. And, in fact, pharmacy and drug
manufacturer discounts treated as DIR do not lower drug prices
at the counter. Isn't that correct? Yes or no.
Mr. Scott. They can in some instances, and others they do
not.
Ms. Harshbarger. If Congress' goal is for seniors to
benefit from drug manufacturer and pharmacy discounts
negotiated by PBMs at the pharmacy counter, then would you
agree that patient cost shares or deductibles should be based
on the drug's net cost? After all, pharmacy discounts and drug
manufacturer discounts are paid to PBMs and their affiliates.
Mr. Scott. I think we need to continue to provide choice
and flexibility to employers when they are designing their
benefit and making decisions about premium and out-of-pocket
cost.
Ms. Harshbarger. OK. Ms. Reilly, while rebates have grown
and net prices continue to fall, patient out-of-pocket costs
are increasing. To illustrate this, despite a 62-percent
decrease in the net price of a leading insulin since 2012, the
average out-of-pocket cost for commercially insured and
Medicare Part D patients taking this insulin increase by 60
percent over this period. And my question is, what impact do
you think that requiring rebates to be passed on to patients
would have on the pharmaceutical market?
Ms. Reilly. I think you would see many patients, insulin-
dependent patients, but many others would find significant
savings at the pharmacy counter if rebates were actually being
passed on to the patients.
Ms. Harshbarger. Yes. Would it start to address some of the
distortions seen in the market today?
Ms. Reilly. Absolutely.
Ms. Harshbarger. Thank you. I will go back to you, Mr.
Scott. According to a December 2021 study by the drug pricing
research nonprofit, 46brooklyn Research, in October 2021,
competition among new generic manufacturers brought the median
list price of generic Tecfidera, a blockbuster MS drug, down to
$900 per prescription. The average pharmacy acquisition cost at
that time was $184 per prescription. Considering the brand
version of that drug, it had a list price of more than $8,200
per prescription at that time. So, my question is, what do you
say to the more than half the seniors who were stuck in
Medicare Part D plans whose PBMs forced them to buy the more
expensive brand version when they could have saved thousands of
dollars by taking the generic?
Mr. Scott. So, without knowing the specifics on that drug,
I would operate off an assumption that the brand was able to
bring, not the price, but the cost of that drug down below the
cost of the competitor, and so it made the cost for the
Medicare plan less expensive.
Ms. Harshbarger. You know, I just left another hearing on
Energy and Commerce with CMS, and we talked about these things,
and there is a lot of work to be done. And the GAO just did a
study that proves that there is a lot of work to be done, and I
am going to suggest that the GAO study that they did complete
goes to the FTC to do their inquiry, investigation, whatever
you want, on PBMs. But there is a lot of disparity there, and I
know as a pharmacist and as a compounding pharmacist what the
cost of these drugs are. So, a lot of work to be done, and I
appreciate you all being here today. And thank you, Mr.
Chairman, for letting me waive on. Thank you, sir.
Chairman Comer. The Chair now recognizes Mr. Auchincloss
from Massachusetts.
Mr. Auchincloss. Thank you, Chairman. I appreciate you
allowing me to waive on. I wish that the gentleman from
Missouri had stayed. We could have had a good colloquy because
he brought up Netflix as an analogy, and it is a shame because
it is actually a terrific analogy. And yet, he derived the
exact wrong conclusion from that analogy, but it is a useful
case study because we get drawn into all this jargon to help us
think through what is really happening here.
Netflix is actually kind of exactly how we would hope that
insurance companies and PBMs would work. You pay a subscription
fee every month, $11 for Netflix. That is like your premium to
an insurance company. They have a catalog of shows. Some of
them cost a lot to make, some of them cost nothing at all to
make, blockbusters or indie films, and yet because you pay that
subscription fee, you get to watch the whole catalog, which is
like their version of a formulary. And they even have, like, a
specialty pharmacy kind of where you can get mail order DVDs if
you really want something esoteric that they can not supply off
of the streaming service. So, I wish insurance companies would
look like Netflix. It actually has a good competitive model,
and they have got Disney Plus and Paramount, and they got a
nice competitive marketplace there. It is keeping the premiums,
as in the subscription fees, on a monthly basis low.
Now, let us actually use the Netflix analogy to describe
how PBMs actually work. Let us say you wanted to watch Real
Housewives. They would instead say, oh, that actually costs a
lot of money to make. Could you try Gilmore Girls first? We
need you to watch that and see if you like it. That is called a
step edit. That is what the PBMs do there, or they would say,
you know what? We need a written permission from your wife to
go watch Real Housewives because we will not let you watch it
otherwise. That is called a prior authorization. Now, let us
say that you wanted to watch Pirates of the Caribbean. And they
said, well, wait a minute. That costs $250 million to make. We
are going to need you to pay co-insurance on that. So, can you
fork over $25,000 to help us cover the cost of that production?
Now, of course, consumers would say get lost, right? They
would unsubscribe immediately. They would go to Disney. You do
not have that kind of behavior. Why doesn't that happen in
PBMs? Why don't we have that same kind of competition? Now,
there are a lot of reasons. I do not want to overexert the
analogy. There are legitimate differences, particularly with
genericization, et cetera. But a big one is that wanting to
watch Pirates of the Caribbean is different than having cancer.
When you have cancer, you do not get to just say actually, I
would rather not pay that co-insurance. What you have to say
is, oh my goodness, my husband has to quit his job to take care
of me, and I have to sell my car, and we are going to have to
sell the house, and we are going to go into medical debt, which
is one of the leading causes of bankruptcy in this country.
We have a system where the insurance companies, through
formulary design, have put the onus of out-of-pocket costs
squarely on the patients in this country in a way that is
driving people to despair and debt. Now, PBMs like to claim
over and over that drug manufacturers alone are responsible for
high drug prices and for setting drug prices, but it is just
not true. A 2022 report from 3 Axis Advisors' single plan
analysis found a 51-percent increase in prices at the counter
for generic medications in a 30-month period in Medicare Part
D, despite the fact that NADAC saw 8.7 percent deflation for
the same basket of generics, so the actual cost versus the
billed cost.
Now, also in a newly released report by 3 Axis Advisors,
their analysis found that one PBM reimbursed an independent
pharmacy at five different prices for an antidepressant
medication, duloxetine, dispensed by the pharmacy on the same
day. Five different prices the same day, same pharmacy. The
prices range from $9.30 to $96, a tenfold difference in price
for the same drug at the same pharmacy on the same day. Mr.
Chancy, would you agree that based on the foregoing, it is the
PBMs that are driving drug prices up for American seniors?
Mr. Chancy. Yes.
Mr. Auchincloss. And then, Mr. Scott, can you explain
please how generic medications, where the market is supposed to
work efficiently, can decrease by 9.1 percent, yet their costs
for seniors increase by 51 percent?
Mr. Scott. I am sorry. Congressman, could you say that
again? How generics----
Mr. Auchincloss. Can decrease by 9.1 percent as measured by
NADAC. That is the actual cost, that we have to improve NADAC
to get more transparent reporting, but even so it is still the
best measure, yet the cost for seniors increase by 51 percent.
This is an independent analysis.
Mr. Scott. Depending on the generics question, I think it
gets back to the issue we have discussed for much of the
hearing around whether the competitor drugs are coming in at a
lower net cost and, therefore, getting favorable formulary
replacement.
Mr. Auchincloss. Well, we are talking about generics here.
Mr. Scott. Right, and generics normally get that favorable
formulary replacement the vast majority of the time, and that
is why we have seen that 90 percent dispensing rate for
generics.
Mr. Auchincloss. Well, the vast majority of time except, it
seems, from this analysis. Would you agree that we need better
NADAC reporting as a basis for pharmacy reimbursement for those
claims?
Mr. Scott. We certainly would be open to talking about
that.
Mr. Auchincloss. Would you be open to having out-of-pocket
cost predicated on NADAC as opposed to on the list price?
Mr. Scott. I think you have to involve plan sponsors in the
conversation about how they want to design benefit for the
unique populations they represent.
Mr. Auchincloss. No, no, no, that is a circumlocution. Do
you agree as a representative of the PBM that it would be more
fair to predicate out-of-pocket cost for what the actual
pharmacy paid for that drug?
Mr. Scott. The PBM is there to work on behalf of the
employer or the plan sponsor who is going to make the
determination about those questions on out-of-pocket cost.
Mr. Auchincloss. OK. I am here to work on behalf of the
patient, OK? And what is good for the patient is that they are
not paying co-payment rates that are predicated on the list
price that nobody pays. It is a made-up price, it is literally
fiction, and the only person who is exposed to it are my
constituents. Why shouldn't they have an out-of-pocket cost
that is based on what the actual transaction and payment is for
goods delivered?
Mr. Scott. To the extent that we are deploying the savings
delivered by the PBM, if you put all of that toward out-of-
pocket cost, then you risk the potential of having an impact on
the affordability of the benefit. It is a tradeoff. As long as
the cost or price is high----
Mr. Auchincloss. Over and over again you point to the
premiums going up. There is just no evidence to support that.
It is not true that the premiums have to go up, and, indeed,
what we have seen is out-of-pocket cost going down, improving
medication adherence, and it will lead to an overall healthier
risk population.
Mr. Scott. And I know----
Mr. Auchincloss. It is a false assertion.
Mr. Scott. And I know when you and I last visited, we
talked about the static versus dynamic scoring issues that have
come around some of the estimates. But prior estimates, for
example, around the Trump Administration's rebate rule
demonstrated a fairly dramatic effect on premiums, so it is
something I think we have to be sensitive to.
Mr. Auchincloss. I am over my time. Chairman, thank you.
Chairman Comer. The gentleman's time has expired. A very
good analogy there. I enjoyed that. Now, our questions have
concluded. And prior to adjournment, the Ranking Member and I
are going to give brief closing statements. I now yield to the
Ranking Member for his closing statement.
Mr. Raskin. Mr. Chairman, first of all, thank you for
calling us together for this important hearing. Thanks to the
witnesses. I want to thank my friend, Mr. Auchincloss, for the
great insight he brings to this problem.
I appreciate the insights of all the witnesses and the ways
that different players in the healthcare system, from the
pharmaceuticals to the PBMs, may be placing barriers in the way
of people just getting affordable medication. And it is
troubling to me that three companies dominate the PBM market,
giving them outsized influence in the healthcare system that is
replete with actors, who, if we are being honest, are all
incentivized to put their profits over the needs and the
interests of the patients, our constituents. I do not want to
lose sight of the role that Big Pharma plays in this complex
and multifaceted pharmaceutical supply chain. Mr. Scott makes
some fine points about that. Drug companies have spent years
making billions off of patients, and PBMs are now just one
piece of the puzzle. They have gotten in on the action.
The Inflation Reduction Act has already begun to create
savings for seniors because we made sure that the market works
by giving Medicare the power to negotiate with Big Pharma for
lower drug prices, and President Biden is now working to expand
these wins for people covered in the commercial markets as
well. We have got to figure out a way to make sure that the
patients are not paying exorbitant, bloated, inflated prices so
different actors within the medical system can get rich off of
them. We got to put the patients first.
I am glad for this hearing, and I am glad to continue our
work of investigating ways that we can be prioritizing the
needs of the American people first. Mr. Chairman, I look
forward to working with you on legislation to that effect. I
yield back to you.
Chairman Comer. Thank you. You want to ask questions, Ms.
Porter? Is that OK? Ms. Porter, go ahead. She has been an
advocate on this issue. I will make an exception. You have 5
minutes.
Ms. Porter. Thank you very much, Mr. Comer. I am sorry. I
was coming from a hearing that was not run as well as you do
here in Oversight. Ms. Reilly, we can both agree that pharmacy
benefit managers, PBMs, are not working for patients, but I
really want to illustrate the problem for the American people.
What are pharmacy benefit managers supposed to do?
Ms. Reilly. The goal of a pharmacy benefit manager is to
negotiate on behalf of employers and plan sponsors to lower the
net cost of drugs, and I actually think they do that very
effectively. I think the challenge is those rebates and
discounts, which often exceed 50 percent of the list price, do
not make their way back to the patient to lower the price that
they ultimately pay.
Ms. Porter. Are PBMs transparent about how much savings
they negotiate and where those savings are realized?
Ms. Reilly. Typically, not. I think that is one of the big
challenges in the system today, is that it is hard for
employers and plan sponsors to understand where the money goes.
Increasingly, employers are demanding passthrough of almost all
the rebates, but as a response, PBMs have shape-shifted and
they have started transferring and getting more revenue off of
fees they create, which are often opaque. They get them not
just from pharmaceutical manufacturers, but from pharmacies as
well.
Ms. Porter. So as a patient, do patients have a way to
know----
Ms. Reilly. No.
Ms. Porter [continuing]. Whether they are getting cheaper
prices because their insurance plan uses a PBM?
Ms. Reilly. No.
Ms. Porter. OK. So, if PBMs were more transparent, it is
possible that patients would know, and employers would know. We
would have this data, and we would be able to figure out
whether patients are really benefiting from PBMs and which
PBMs. I have seen your ads, by the way, that you run about
PBMs, and your ads say that transparency is key. And many of
your members, large pharmaceutical companies, advertise their
medications on TV. Even though only doctors can prescribe these
medications, these companies advertise directly to consumers.
What is the purpose of those ads?
Ms. Reilly. The purpose of those ads is to raise awareness
for patients about medicines that may be available to treat
conditions that they either know they have or know that they do
not have yet. They raise symptom awareness to prompt a
conversation between a doctor and the patient. But ultimately,
the decision about what medicine gets prescribed is up to the
doctor and oftentimes the PBM or an insurer depending on
whether that medicine is actually on the formulary or not.
Ms. Porter. So, there are lots of disclosures, though, that
are made in these ads. We have all seen----
Ms. Reilly. Yes.
Ms. Porter [continuing]. That virtually every drug is going
to give you a headache and constipation and who knows what
else. Those disclosures do not include in these direct to
patient ads any disclosure about price? There is no price
transparency in those ads, correct?
Ms. Reilly. Well, that is in part because the price paid
depending on the consumer can vary. A patient on Medicaid may
pay a different price than a patient with commercial insurance,
so no, they do not, but those ads do direct patients back to
those companies' websites to find out more information about
pricing and what prices might be applicable for them.
Ms. Porter. Are the companies' websites required to
disclose the pricing?
Ms. Reilly. They are not, but our companies have
voluntarily agreed to do that.
Ms. Porter. The list price?
Ms. Reilly. Yes.
Ms. Porter. OK. So, can you commit today to change in
policy that your organization will disclose pricing? I realize
there are multiple prices, but we could come up with a rule
that says you have to disclose a range, you have to disclose
the median price, the average price. Will you commit to that?
Ms. Reilly. I believe our companies are already and have
committed to doing that. They direct patients back to their
website, where patients can find more information about the
prices of the medicines. It is important as a patient, first of
all, to not be scared off. They may go to the website and say,
well, that is the list price. That is what I am going to have
to pay, which may not be the case.
Ms. Porter. I am reclaiming my time. I mean, they may be
scared off by the headaches and constipation, too. I mean, the
idea here is to give people information. You said transparency
was key. I think it would be key for people to have a sense of
the possible range of cost. Not everyone is going to get the
side effects either. Let me make you list those, and so the
idea here is you would give some information about price to
give some idea. I mean, I think the problem here is that you
are arguing for transparency in the case of PBMs on price, but
then your company is not willing to--your organization, excuse
me--is not willing to commit for transparency in your own
advertisements. Now, as you know, the Trump Administration----
Ms. Reilly. I would disagree that we have not been willing
to advocate for transparency. We supported the Trump rebate
rule, which would have provided transparency across every
single medicine sold in the Part D program. The only entities
that opposed that were the pharmacy benefit managers, who did
not want transparency into those prices.
Ms. Porter. OK. I want to make sure we are talking about
the same thing because I do not want to talk past to. The Trump
Administration rule that would have required drug manufacturers
to disclose list prices in TV ads, your organization and its
members supported that? Yes or no.
Ms. Reilly. Our organization did not support that, no.
Ms. Porter. So, you spent time and money and your
organization spent time and money opposing transparency for
pricing when you advertise, but you want to hold PBMs to make
those disclosures?
Ms. Reilly. In part because the list price is not a price
that nearly any one pays. Patients should know the price that
they are going to pay when they go to the pharmacy counter, not
the list price of a medicine. It is important for patients to
have transparency in terms of their insurance design and how
much they are going to be asked to be paid when they go to the
pharmacy counter. And our companies' websites provide much more
detailed information because it is not as simple as one number
to be disclosed.
Ms. Porter. I would just argue that, and I appreciate your
indulgence, Mr. Chair. I would just argue that, you know, none
of the disclosures that we are making when we are advertising
directly to patients about something as complicated as
prescription medicine, which they are not even authorized to
prescribe to themselves, I think we could come up with a
disclosure amount.
What I want you to think about and what I really appreciate
your good faith engagement with me on is that I feel a little
bit like the pharma industry is pointing a finger at PBMs
saying they are not disclosing enough about price, but you are
not leading the way on price disclosures either. And I
respectfully say that when people are watching a TV ad and they
are in the middle of ``O-O-Ozempic'', they are not running to
their website and looking up the price. Like, you put the
important information for a market in an ad, and I think that
with a lot more transparent drug pricing, we should have more
transparency across the board. I yield back.
Chairman Comer. OK. The gentlelady yields back, and I will
conclude by saying I think this was a very substantive hearing,
a very bipartisan hearing, a lot of different ideas and
opinions. And the role that this Committee is going to play is
we are going to continue to shine a light on this. We are going
to continue to investigate. We are going to continue to
brainstorm.
We are watching our friends in Energy and Commerce very
closely on this issue. We expect something to be done. There is
support for something to be done, something meaningful. We want
to increase transparency, and I think we all have the goal of
lowering the cost of prescription drugs for consumers, and that
is what PBMs were supposed to do, but we do not believe that
that is happening. And when you have Republicans complaining
about excessive profits, that is pretty bad because most
Republicans are for the free market, and Republicans want to
see companies succeed and we want to reward risk takers and
innovation in research and development.
But that is not what the PBMs are supposed to do. The PBMs
are supposed to lower the price of prescription drugs, and I do
not think when PBMs were created anyone ever envisioned the
PBMs to become such massive vertically integrated companies.
And that is a problem, and that is a problem that I think there
is overwhelming bipartisan support to solve.
You know what I was thinking? Congress passes lots of
bills, and every bill that is passed is well intended, but
oftentimes what happen are unintended consequences. And I was
thinking about a couple of issues and bills that I have a
pretty good amount of knowledge on in banking: Dodd-Frank. You
know, Dodd-Frank was passed after the banks failed. The goal
was to hold the banks accountable and to not have any more
banks that are too big to fail, and what has happened since
Dodd-Frank, there have been no new banks created. All the small
banks are consolidating or being taken over by big banks, so we
have less choice out there, and it has not reduced the price of
banking. I would argue it has increased the price of banking,
more fees because there is less competition.
The Farm Bill. I am a farmer by trade. I am going to
support the Farm Bill, but the Farm Bill has a lot of policy in
there in my opinion, and I have argued and argued, that gives
the large farmer a competitive advantage over the smaller
farmer. It is almost impossible for a small farmer to get
started in agriculture today, but the big farmers keep getting
bigger every day.
Then you look at healthcare. We have legislation that is
passed and written in the legislation. There are higher
reimbursements to larger medical providers with respect to
Medicare and Medicaid reimbursements. And what has happened is
it has almost forced every small family physician to join a
larger network, and you have less choice out there, and it has
not reduced the cost of healthcare. It has reduced competition.
It has reduced choice and options for people, especially in
rural America. And then PBMs. As I said earlier, no one ever
envisioned PBMs to get to where they are today and be such
massive vertically integrated companies.
So, we need to have robust debate about this, we need to
continue to have dialog, we need to start exploring options,
and we need to get something done because healthcare is one of
the biggest, if not the biggest, problems we have in America.
And a very few times in Congress is there bipartisan agreement
to fix something in healthcare, so I welcome the opportunity to
continue to work with my Democrat colleagues to try to come up
with a solution to fix this problem, to add transparency, and
to lower the cost of prescription drugs for every American.
With that, I want to again thank our panelists once again
for their important and insightful testimony today.
With that and without objection, all Members will have 5
legislative days within which to submit materials and to submit
additional written questions for the witnesses, which will be
forwarded to the witnesses for their response.
Chairman Comer. If there is no further business, without
objection, the Committee stands adjourned.
[Whereupon, at 1:08 p.m., the Committee was adjourned.]
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