Calls for greater transparency and meaningful legislative reform
WASHINGTON—House Committee on Oversight and Reform Ranking Member James Comer (R-Ky.) today issued a report outlining how pharmacy benefit managers’ (PBMs) practices increase prescription drug prices, impact patient health, hurt competition, and distort the marketplace.
“Democrats talk a big game when it comes to lowering prescription drug prices, but they refuse to conduct oversight over the middlemen who are driving up costs for patients to increase their bottom line,” said Ranking Member Comer. “Pharmacy Benefit Managers must be held accountable for their role in rising prescription drug prices, and Congress must take on PBMs to implement transparency and restore competition. Republicans on the House Oversight and Reform Committee are shining a light on this issue in the healthcare system and will continue to examine solutions to make prescription drugs more affordable for all Americans.”
The report, entitled “A View from Congress: The Role of Pharmacy Benefit Managers in Pharmaceutical Markets,” details findings from a recent forum held by Ranking Member Comer examining how PBM tactics contribute to the rising cost of prescription drugs for Americans. The report emphasizes the need for greater transparency to determine the extent of the damage PBM practices are having on patients and the marketplace and calls for further congressional review of legislative solutions to provide meaningful reform.
Below are key findings from the report:
- PBM practices impact patient health. In some circumstances, PBMs require prior authorization before a patient is approved for a given prescription. Sometimes there are lengthy delays for such prior authorizations, and patients can suffer – or even die – while they wait. PBMs also engage in “fail first” practices, in which a drug must either prove ineffective or intolerable for the patient before they can opt for different drug. In some cases, patients have to “fail first” on a far more expensive option, even if cheaper alternatives exist. Why? Because the PBM has a financial incentive to force the patient onto a more expensive option.
- PBMs use their market leverage to increase their profits, not reduce costs for consumers. PBMs control which medications are included on a given health plan’s formulary, or the list of drugs that plan agrees to cover. Drug manufacturers agree to discounts, or pay rebates, in order to get their products placed more favorably on formularies. But the savings from the discounts and rebates do not make their way down to the consumer; they go to the PBMs’ bottom line.
- Drug manufacturers actually raise their prices due to PBMs. As PBMs demand larger and larger rebates or discounts, manufacturers offset these reductions by raising the “list” prices for their drugs. PBMs encourage this practice because they pocket the higher rebates received from higher priced drugs.
- PBMs own their own pharmacies, which creates conflicts of interest, hurts competition, and distorts the market. Another key function of PBMs is to establish a network of pharmacies from which plan beneficiaries can get their prescriptions filled. However, the three largest PBMs—CVS Caremark, Express Scripts, and Optum Rx—own their own pharmacies. They also control 80 percent of the market. But they are not the only ones – smaller PBMs own their own pharmacies too. PBMs “steer” patients to the pharmacies they control, making it difficult for independent pharmacies to survive. PBMs also reimburse unaffiliated pharmacies at low rates and charge a number of fees to independent pharmacies. These retroactive fees can be for just participating in the network, or they can be tied to performance metrics, such as pharmacy refill rates, error rates, or audit rates, which the PBM establishes. These retroactive fees add up – sometimes it costs a pharmacy more to fill a prescription than it is reimbursed. For specialty pharmacies, they accrue fees based on irrelevant metrics.
- Rebates are not the only way PBMs drive up costs. A list price is like the sticker price on a car: few people actually pay that amount. Higher list prices still drive-up costs, even if that’s not the actual cost patients are paying. Insurance premiums and copayments are based on list prices. PBMs engage in a number of questionable practices, one of which is “spread pricing,” in which PBMs pay a pharmacy a lower amount than they report to a health plan sponsor. The PBM pockets the difference. Sometimes they get caught – PBMs have overcharged state Medicaid programs in Ohio, Kentucky, Illinois, and Arkansas more than $415 million once spread pricing schemes were discovered. It is difficult to determine the full extent of the impact of these practices, but it is always the American taxpayer who loses.
- Greater transparency is necessary to determine the extent of the damage PBMs’ tactics are having on patients and the marketplace. Without insight into PBM practices, it is difficult to determine the extent to which these practices are damaging pharmaceutical markets.
There are twenty-two Republican and bipartisan legislative solutions which could provide meaningful reform and lower prescription drug costs for Americans
Click here to read the report