Expert witnesses and lawmakers tussled over who is really to blame for high drug costs during a hearing focused on pharmacy benefit managers (PBMs) held by the House Committee on Oversight and Accountability on Tuesday.
While PBMs are meant to lower costs by negotiating rebates on a drug’s list price, multiple experts have noted that they typically keep a percentage of the rebate, which means they benefit when drug prices go up.
At the hearing, witnesses blamed PBMs for everything from skyrocketing prices, to delays and denials of life-saving treatments, to the closing of independent pharmacies. Despite their flaws, some experts said scrapping them could have unintended consequences.
Step Therapy Challenges
Miriam Atkins, MD, president of the Community Oncology Alliance, described how PBMs force patients into “fail-first” or step therapy — when a patient must prove that the PBMs’ preferred drug is ineffective before taking the one his or her physician prescribed.
Atkins offered the example of trying to pair certain antiemetics with certain chemotherapy drugs. While she may choose drug A, the PBM will direct her patient to drug B. “And if the patient fails that, by getting really really sick, then I can go back to the drug I want to use,” she explained.
Insurers will often make decisions about which drugs a patient gets based on whatever is cheapest for them instead of what’s best for the patient, she added. However, in the process, “they also destroy the patient’s hope and destroy their quality of life.”
After being subjected to certain ineffective treatments, they may give up on treatment altogether, Atkins said.
‘The Game Is Rigged’
PBMs also have been known to steer patients to their own mail-order pharmacies for medications, which creates more obstacles for patients, Atkins said, noting that chemotherapy agents have been left on patients’ porches “in the heat of summer,” which can render them useless.
Some oral oncolytic drugs may be safe to send by mail, said Greg Baker, CEO of AffirmedRx, a nontraditional PBM, but some injectable drugs may have very bad side effects, “and in my opinion, the mailman … is not the best person for injection technique. Probably an independent pharmacist would be much better at that.”
In addition, one in eight pharmacies closed between 2009 and 2015, and independent pharmacies were disproportionately affected, according to a 2019 research letter published in JAMA.
PBMs’ “take-it-or-leave-it” contracts are driving these closures, said Kevin Duane, PharmD, owner of Panama Pharmacy in Jacksonville, Florida.
“There’s no competition because the game is rigged. The PBMs own health insurers, drugstores, [and] they’re buying doctors offices now. A small business like mine can’t hope to compete when the deck is stacked against us,” Duane said.
As Rep. James Comer (R-Ky.), chair of the committee, noted in his opening statement, “CVS Caremark, Express Scripts, and Optum Rx collectively control 80% of the market,” and each one is owned by a major health insurer. (UnitedHealth Group owns OptumRx, Cigna owns Express Scripts, and CVS Health and Aetna merged in 2018.)
Duane noted that because of this lack of competition, PBMs can and do reimburse pharmacies for less than the cost pharmacies paid to acquire certain drugs. As for the cost to dispense the drug, it’s not uncommon for his pharmacy to receive “maybe a nickel … Some PBMs don’t even pay a single cent for it.”
On top of everything else, PBMs include direct and indirect remuneration fees in their contracts, or “clawbacks,” which allow them to charge patients a copay that exceeds the cost of their drug and then later collect that money back from the pharmacy, Duane said.
“When I get paid one amount of money and then months later have a very large proportion of that money clawed back … it’s very hard for me to forecast hiring and retention of employees, things like bonuses [and] benefits. It makes it almost impossible to do that kind of business,” he explained.
Finding Bipartisan Solutions
Rep. Earl “Buddy” Carter (R-Ga.), who is a pharmacist and who is not a committee member but was allowed to sit in on the hearing, was adamant that PBMs “bring no value whatsoever to the healthcare system.”
Drugmakers at least invest some of their profits into research and development, he argued. “This is highway robbery. They are, as the Attorney General of Ohio has said, they are ‘gangsters.’ We need to stop them.”
According to Rep. Kweisi Mfume (D-Md.), PBMs were “practicing medicine without a license.” He noted that he was particularly outraged about patients being denied the drugs their physicians prescribed.
“They are making determinations that oftentimes end the lives of people who cannot fight back for themselves … It is a sin. It is an abomination and it is an affront to everything that we hold moral and right,” he said.
Asked what Congress should do to correct the flaws in the prescription drug market, Duane did not hesitate. “Number one, I think you have to get rid of the rebates,” he said. While he’s heard the argument that “Big Pharma” is responsible for setting list prices and can raise and lower those prices at will, he believes rebates are central to the problem of high drug prices because they obscure the true price of a drug.
Second, Duane urged Congress to look to state Medicaid programs for examples of how to ensure that pharmacy reimbursement for both drugs and services are based on a “fair evidence-based, reference-based price.”
One example highlighted by Rep. Anna Paulina Luna (R-Fla.) are the PBM reforms being enacted in Florida, which would prohibit step therapy and create “a fair and level playing field” for independent pharmacies.
Duane also urged Congress to address vertical integration in the prescription drug market. “It’s just very difficult for us to compete … when the person who makes the contract is also the person who owns the competitor, which is also the person who increasingly owns the doctor’s office, which is also increasingly the person who owns the insurance company,” he said.
However, Frederick Isasi, JD, MPH, executive director of Families USA, argued that the focus on PBMs was distracting lawmakers from what he views as the real problem: drug manufacturers.
“The only reason PBMs exist is because we don’t have the ability to fairly negotiate with Big Pharma,” he said.
As for getting rid of rebates, he pointed to a proposed policy under the Trump administration that sought to do just that. “The CBO [Congressional Budget Office] scored that at $170 billion in cost, because PBMs are actually saving us money,” he said.
Under Medicare, PBMs save money because they are constrained by the medical-loss ratios, which limit how much profit PBMs are allowed to make, but that doesn’t exist in other areas of the healthcare system.
While the Inflation Reduction Act will allow the government to negotiate drug prices for a subset of drugs in the Medicare program for the first time, those authorities should be expanded to include negotiating a fair price for all consumers, Isasi argued.
Baker, CEO of AffirmedRx, landed somewhere between Duane and Isasi.
“We feel that PBMs do a very good job, in general, in trying to keep down prices when they want to,” he said. However, “we do fundamentally believe that the market can take care of itself, if the market is given the right rules to follow.”