[Congressional Record (Bound Edition), Volume 155 (2009), Part 22]
[Extensions of Remarks]
[Pages 29402-29403]
[From the U.S. Government Publishing Office, www.gpo.gov]




  INTRODUCTION OF THE PATIENT HEALTH AND REAL MEDICATION ACCESS COST 
                          SAVINGS ACT OF 2009

                                 ______
                                 

                         HON. G. K. BUTTERFIELD

                           of north carolina

                    in the house of representatives

                       Thursday, December 3, 2009

  Mr. BUTTERFIELD. Madam Speaker, prescription drugs are among the most 
expensive components of the American health care system. Unfortunately, 
the system for delivering drugs that has emerged since Congress created 
the Medicare Part D prescription drug benefit program continues to 
needlessly drive up these costs for taxpayers and consumers.
  Failing on the promises to deliver prescription drugs more 
efficiently, effectively or at lower costs, pharmacy benefit managers, 
or PBMs, are reducing consumer choice and adding billions of dollars in 
costs for government and private health care plans.
  As a result, today I will introduce the ``Patient Health and Real 
Medication Access Cost Savings Act of 2009'' to ensure cost savings, 
accountability and transparency. The bill will ensure that taxpayers, 
providers and patients can escape the mandates, secret pricing schemes, 
and marginal savings provided by PBMs in favor of an improved pharmacy 
model that guarantees choice, transparency and measurable savings.
  Madam Speaker, nearly 60 large employers that collectively spend $4.9 
billion for prescription drugs recently dropped or forced PBMs to 
disclose their costs. The University of Michigan started the trend in 
2005, and reported an annual savings of $2.5 million when it dropped 
its PBM in favor of direct purchases. Officials at the University of 
Michigan are on record as saying that most of its derived savings came 
from eliminating fees from its former pharmacy benefit manager and from 
using the claims data to help school officials better negotiate 
prescription drug prices.
  Additionally, companies like Caterpillar are leading the trend away 
from the PBM model. According to a recent report in CFO.com, 
Caterpillar's pharmacy benefit manager indicated that the company 
``found that there was a great deal of waste inherent in a system that 
uses PBMs as middle men.''
  This information led the House Committee on Oversight and Government 
Reform's Subcommittee on Federal Workforce, Postal Service, and the 
District of Columbia to hold a hearing on June 24, 2009 to assess the 
value PBMs are providing to the Federal Employees Health Benefits 
Program (FEHBP). At that hearing, the subcommittee chairman indicated, 
``federal employee plans pay substantially more for drugs than other 
agency programs, including those run by the departments of Veterans 
Affairs and Defense, and Medicare, Medicaid and the Public Health 
Service.''
  Mark Merritt, who represents PBMs as president of the Pharmaceutical 
Care Management Association (PCMA), told the sub-committee that PBMs 
contributed to an annual reduction in drug spending by the FEHBP of 3-9 
percent. At the same hearing, however, Office of Personnel Management 
(OPM) Inspector General Patrick McFarland testified that the PBM 
contracts with FEHBP make auditing them ``almost insurmountable.''
  There is no question that if Congress is to produce large savings as 
part of its efforts on health care reform, it must challenge the PBM 
model that has emerged over the past few years with new models that 
contain costs and improve efficiency and transparency.
  PCMA successfully lobbied Congress from 2001-2003 to allow PBMs to 
manage the massive new Medicare Part D drug delivery program. As a 
result of the industry's expanded market power, PBMs are now using new 
tactics to divert patients into higher-cost services, and to divert 
taxpayer savings into higher PBM profits. These practices represent a 
significant abuse of taxpayers and patients in the health care system. 
PBMs should be held accountable to taxpayers. No other providers in the 
health care sector are allowed to conduct business like PBMs.
  With regards to patient data, pharmacists have complained for years 
to regulators that PBMs violate patient privacy laws by using their 
prescription data to push new products and steer patients to pharmacies 
owned by the PBMs. By comparison, physicians who ``self-refer'' to 
facilities they own face very serious legal liabilities. In addition, 
there is a concern that pharmacy benefit managers routinely sell 
patient drug histories to drug companies without the knowledge of 
patients, doctors or plan sponsors.
  According to the Association of Community Pharmacists (ACP), patients 
receive letters every day from PBMs that use the confidential patient 
data pharmacies must collect to force them to move to pharmacies the 
PBMs own. ACP has collected thousands of petitions from

[[Page 29403]]

patients who are asking Congress to stop this abuse of patient 
confidentiality. ACP has also collected actual letters to patients from 
PBMs that threaten to cut off pharmacy benefit coverage unless the 
patients fill their prescriptions at PBM-owned pharmacies.
  In fact, PBMs have merged with pharmacy chains to accommodate this 
new marketing model, which relies on monopolization of drug care for 
patients in plans that are administered by the PBM. For example, CVS 
purchased the Caremark PBM company as soon as Congress passed the 
Medicare Part D program, which directs virtually all pharmacy services 
to go through PBMs. CVS/Caremark now mandates that all patients in its 
system use CVS exclusively to fill any prescriptions not mailed by 
Caremark. Patients who opt out, even if they are not near a CVS store, 
must pay 100 percent of their prescription costs regardless of how much 
they have paid in premiums for drug coverage. As a result, CVS now 
fills one of every seven prescriptions in the U.S.
  PBMs also use predatory practices to steer patients away from 
competing pharmacies and into mail-only prescription drug services. For 
example, PBMs allow patients to obtain 90-day prescriptions--usually at 
big discounts--from their mail-order services. While this can be a 
bargain for patients, the retail pharmacies where patients may prefer 
to fill their prescriptions are prohibited from offering the same terms 
to the patient.
  Coupled with the lack of enforcement action by the Federal Trade 
Commission, these PBM tactics are combined with a practice of 
systematic underpayment to any pharmacy that provides services to a 
patient whose drug benefit is managed by a PBM. The Association of 
Community Pharmacists has collected thousands of examples from 
pharmacies across the country that clearly demonstrate that PBMs are 
refusing to reimburse any pharmacy for its actual cost of a drug if the 
pharmacy is competing with the PBM to serve the patient. This is 
despite the fact that the pharmacies are required under Medicare and 
other federal programs to submit all costs they incur for the programs 
to the PBMs for reimbursement. Today, these tactics are being used to 
consolidate market power and destroy competition. The result is higher 
prices for taxpayers and consumers.
  An additional concern for Congress, taxpayers and consumers is the 
complete lack of information about the actual prices PBMs pay for 
drugs. As a result, we have no way of knowing just how much PBMs profit 
from underpayments to pharmacies. I am also sure that many of my 
colleagues here are unaware that PBMs require pharmacies filling 
prescriptions under their plans to sign non-disclosure agreements that 
cover drug prices. This includes pharmacies that must deal with PBMs 
through Medicare and other government programs.
  The role of the PBM has evolved in a relatively short period of time. 
PBMs emerged during the advent of managed care as pharmacy benefit 
administrators. Their role was to help large plans simply process drug 
benefit claims. The companies evolved into pharmacy benefit 
``managers'' when they reached a scale large enough to steer volume 
sales for drug manufacturers.
  Today, PBMs have tremendous and questionable impact on the rising 
costs in the current drug program. Community pharmacies purchase drugs 
from wholesalers to fill prescriptions, and submit reimbursement forms 
to the PBMs for any patients covered by the PBM plan.
  PBMs that own their own pharmacies or mail programs simply pay the 
pharmacies below their actual acquisition cost for the drugs and pocket 
the difference. This provides two benefits to the PBMs. First, they 
make big profits on the spread between the low reimbursement they pay 
for the medication and the inflated price they charge the program. 
Second, it drives the competing pharmacies out of business, which 
allows further market share gains and increased pricing power.
  More recently, the PBMs have developed an additional revenue stream. 
When Congress passed the Medicare Part D program, large pharmacy chains 
realized the value of merging with PBMs. The merged companies now 
control huge shares of the prescription drug market, and use this 
control to extract fees from competing pharmacy retailers that service 
Part-D patients.
  In short, Madam Speaker, PBMs have simply placed themselves in the 
middle of the drug supply chain between manufacturers or wholesalers 
and retailers without any proof that they add value. The ``Patient 
Health and Real Medication Access Cost Savings Act of 2009'' will help 
end these abuses by requiring transparency. It will also ensure that 
lower-cost generic medications are prescribed when appropriate whenever 
taxpayers are paying the bill. Most important, the bill will make sure 
that Congress and the taxpayers we serve can actually measure the 
savings they have been promised.
  In closing, Madam Speaker, let me say that my home state of North 
Carolina is a model for how to achieve savings by moving away from the 
PBM model in its state administered drug benefits program. Under its 
plan, generic utilization has already increased, and the state projects 
annual utilization to reach nearly 75% in the first year. The North 
Carolina model proves that when retail pharmacies manage the drug 
benefits for plans, generic utilization increases even more. I am proud 
of what has been accomplished in my state, and can only hope that 
Congress will choose to focus on this issue so that all Americans can 
reap the benefits and savings from a similar approach at the federal 
level.

                          ____________________