[Congressional Record Volume 149, Number 91 (Thursday, June 19, 2003)]
[Senate]
[Pages S8244-S8245]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. CANTWELL:
  S. 1300. A bill to prohibit a health plan from contracting with a 
pharmacy benefit manager (PBM) unless the PBM satisfies certain 
requirements, and for other purposes; to the Committee on Health, 
Education, Labor, and Pensions.
  Ms. CANTWELL. Mr. President, I rise today to offer the Prescription 
Drug Consumer Information Act. I believe this legislation will 
dramatically improve the way in which prescription drug benefits are 
provided to our Nation's 40 million senior citizens through the 
Medicare program.
  The Prescription Drug Consumer Information Act is intended to provide 
some assurances that the billions of dollars being spent on this new 
prescription drug benefit for Medicare is going as far as possible. The 
Act is focused primarily on the practices of pharmacy benefit managers, 
the private companies that would most likely administer the new 
prescription drug benefit called for under the Prescription Drug 
Benefits Bill.
  PBMs have come to dominate the prescription drug benefit market and 
subsequently, have been the target of criticism by the employers and 
health plans that contract with them. The source of the controversy has 
been the cost cutting practices of PBMs, which have allowed them to 
make prescription drug coverage more affordable. However, the fact that 
drug prices continue to rise in the face of these cost-cutting efforts, 
has led some to question PBM practices in the private sector. As we 
move forward in providing prescription drug coverage within a 
government-operated program as large as Medicare it is critical that 
there be adequate safeguards in place. My bill would provide greater 
scrutiny and auditing of PBMs contracting with the government and also 
provide some consumer protections for all Americans who purchase 
prescription drugs.
  The market share of prescription drug benefits managed by PBMs has 
grown enormously in recent years. Currently, 90 percent of Americans 
with prescription drug coverage have their benefits administered by a 
PMB. Of that 90 percent, nearly 70 percent of those people are served 
by one of the four major PBM companies. PBMs provide benefits to nearly 
200 million Americans, including 65 percent of the Nation's senior 
population. PBMs have become as powerful in the delivery of 
prescription drug services as the manufacturers which produce 
medications.
  As PBMs have come to dominate the market, they are increasingly 
drawing the attention of State lawmakers struggling with skyrocketing 
prescription drug costs for state workers and large programs like 
Medicaid. As States focus on reducing pharmaceutical costs, suspicions 
are growing among state lawmakers and health department officials that 
the ``behind-closed-doors'' practices of PBMs are responsible for some 
of the escalating costs of prescription drugs. In 2002, Georgia become 
the first State to regulate PBMs by requiring they be licensed as 
pharmacies. This year, 19 States have introduced legislation to 
regulate or license PBMs.
  At issue are the rebates, discounts and other savings that PBMs 
negotiate with drug manufacturers in exchange for giving their 
medications ``preferred'' status on the PBMs list of available drugs. 
Those contracts are a primary source of revenue for the PBMs and for 
the drug manufacturers who see use of their products increase as the 
PBM steers its massive consumer base toward the preferred drug. 
However, because PBMs are so secretive about their arrangements with 
manufacturers, it is difficult for PBM clients to know if a significant 
portion of the rebates are being passed back to them as the PBM 
promises.
  PBMs also negotiate lower prices with pharmacies but fail to share 
those savings with consumers, particularly on generic drugs. A recent 
Wall Street Journal investigation found that for one drug fluoxetine, a 
generic of Prozac, PBMs were buying the drug from the pharmacy for 
about 30 cents a pill. However, most of the PBMs clients were paying 
$1.06 a pill based on the average markup formula. The PBM was pocketing 
the difference, which was 76 cents per pill. Multiply that by the 
number of fluoxetine pills dispensed by the PBMs and it is clear that 
these private companies are getting rich while consumers continue to 
pay unnecessarily high drug prices. This may be in the best interests 
of the PBMs shareholders, but it is a disservice to its customers, 
which turn to PBMs in an attempt to save money and lower drug costs.
  Efforts to better understand the PBM industry have reinforced this 
attitude of secrecy and backroom deals. Last year, Senator Dorgan 
requested a General Accounting Office study of whether PBMs were 
sharing the savings achieved through rebates and discounts with the 
members of the Federal Employees Health Benefits Plan. Unfortunately, 
the study provided us with little understanding of how the PBM industry 
operates because GAO was denied access to the financial documents of 
the PBM companies. GAO had no way of fulfilling its obligation of 
reporting to Congress because the PBMs refused to disclose any 
information about rebates, discounts and other savings generated by 
FEHBP.
  Yet, these same companies want the federal government to hand them 
billions of dollars for a new Medicare drug benefit without providing 
any accounting of how that money was spent. Allowing the PBMs to 
operate a government program in such secrecy is outrageous and would 
set a terrible policy precedent.
  The Prescription Drug Consumer Information Act would improve this 
system with a five-part approach. First, the Act would eliminate 
potential conflicts of interest by prohibiting cross ownership of 
pharmaceutical manufacturing companies and PBMs. Second, it would 
contain costs by requiring that any PBM contracting with Medicare 
provide any cost savings negotiated with a pharmacy back to the PBM 
client, be that client an employer, a health plan or the government.
  Third, it would require all pharmacies to disclose the retail cost of 
a prescription drug upon request by a consumer. Several States, 
including Washington State, Montana, New York, Oregon and Rhode Island, 
along with the Virgin Islands, currently require pharmacies to make 
retail prices available to consumers. This provision is desperately 
needed across the country. A 2002 survey conducted by the Washington 
State Attorney General's Office found that retail prices on 
prescriptions could vary as much as $25 within a city and within a 
pharmacy chain. All consumers should be able to comparison shop for the 
best price amongst pharmacies in their area but they cannot do that if 
they do not know the retail price of various drugs.
  Fourth, the amendment would require PBMs on an annual basis to make 
public the percent of rebate received from the manufacturer that is 
passed back to the client, such as an employer, health plan or the 
government. The amendment does not require full public disclosure of 
the PBMs' negotiations with manufacturers because I realize that such a 
requirement could damage their ability to get good deals from the 
manufacturer. This disclosure does not have to take an all or nothing 
approach. The Act allows the PBM to keep private the specifics of their 
contracts, but at the same time provides senior citizens some assurance 
that they are benefiting from the savings achieved in those contracts.
  Finally, my bill would strengthen the audit requirements for PBMs 
administering the Medicare drug benefit to ensure that PBMs are passing 
those rebates and other savings along to consumers. One of the problems 
for employers and health plans using PBMs now is that it is difficult 
for them to

[[Page S8245]]

confirm that the PBM is meeting its contractual obligations to pass on 
a portion of its savings. Auditing provisions in my bill include 
complete disclosure of the amounts and types of rebates. The results of 
the audit would not become public, to ensure the PBMs ability to 
continue to negotiate discounted prices. This approach strikes a fair 
balance between the PBMs rights as private companies and the duty the 
PBMs have to share any savings generated by the new benefit with 
Medicare recipients.
  Together, these provisions will ensure that senior citizens and the 
government are getting the most out of every dollar spent on a Medicare 
prescription drug benefit and that other consumers who purchase 
prescription drugs are armed with information before spending their 
hard-earned money. Consumers should have some assurance that the 
private companies providing prescription drug insurance are not running 
up costs and cutting down coverage in an attempt to boost their own 
bottom lines. The Prescription Drug Consumer Information Act provides 
those assurances and protections.
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