Search
  • PUTT

Lawmakers ask GAO to probe pharmacy benefit managers over their role in drug pricing

STAT News


Amid intensifying scrutiny of pharmacy benefit managers, a group of House Republicans is urging the U.S. Government Accountability Office to investigate the role these controversial middlemen play in the opaque pharmaceutical pricing system.


In a June 17 letter, the lawmakers cite increasingly familiar questions about the interactions between pharmacy benefit managers and drug companies, commercial health plans, state Medicaid programs, and pharmacies. At issue are various rebates and fees that pharmacy benefit managers charge, which critics say add to the cost of prescription drugs due to a lack of transparency.


They also reiterated concerns about competition, given that the three largest pharmacy benefit managers – CVS Caremark, Express Scripts and OptumRx — control an estimated 79% of the market. Moreover, each one is also associated with a major commercial health plan and specialty pharmacy, which provides incentives to steer patients to use the affiliated services.


“Policymakers have raised concerns about the way pharmacy benefit managers are reimbursed for their services and the extent to which (their) practices decrease drug spending,” the lawmakers wrote, noting the GAO previously probed the role of pharmacy benefit managers in Medicare Part D. “Congress could… benefit from a better understanding of the role of PBMs in the commercial drug market.”


A spokesman for the Pharmaceutical Care Management Association, a trade group that represents pharmacy benefit managers, wrote us that “we look forward to working with Congress and the Administration on constructive policies that increase the competition needed to do what PBMs do best – which is to reduce drug costs for every patient, and to hold other entities in the healthcare system responsible for arbitrarily raising drug prices to whatever the market can bear.”


A GAO spokesman told us the request will be reviewed and a decision typically takes two weeks or so.


This is not the first time, by the way, lawmakers have asked the GAO to probe pharmacy benefit managers. Last year, a pair of U.S. Senators introduced a bill calling for an investigation, but it did not go anywhere. But the House lawmakers sent their letter as pharmacy benefit managers have come under a proverbial microscope.


Earlier this month, the U.S. Federal Trade Commission signaled plans to investigate pharmacy benefit managers that steer patients toward their own pharmacies, run allegedly unfair audits of independent pharmacies, use opaque methods to determine pharmacy reimbursement fees, and place formulary restrictions on certain medicines.


The FTC subsequently issued a new policy statement to place pharmaceutical companies and pharmacy benefit managers “on notice” it will “ramp up enforcement” of any “illegal bribes and rebate schemes” that make it harder for patients to access lower-cost medicines. The FTC plans to scrutinize rebates and fees for signs that antitrust and consumer protection laws are being violated.


Drugmakers pay rebates to pharmacy benefits managers in order to obtain favorable placement on formularies, the lists of medicines covered by health insurance. Drug companies argue that, over time, pharmacy benefit managers require higher rebates that cause them to raise list prices. But pharmacy benefit managers say drug companies raise prices to hit profit targets.


This opaque pricing system can be especially costly for people who lack health insurance or have high-deductible plans, because what they pay at the pharmacy counter is tied to the list price of a medicine. For this reason, the blame game has infuriated lawmakers and regulators amid outcry from Americans who say it is increasingly difficult to afford their medicines.


One lawsuit alleged how CVS profited from arrangements with drug companies to block generic competition for more than a dozen high-priced, brand-name medicines. According to the lawsuit, its Caremark pharmacy benefit manager took rebates from brand-name drug companies while its SilverScript subsidiary — which runs one of the largest Medicare Part D plans — prevented beneficiaries from obtaining lower-cost generics.


As the lawmakers noted, the GAO has previously studied the role played by pharmacy benefit managers in Medicare Part D. A 2019 report found pharmacy benefit managers worked with Part D plan sponsors to negotiate rebates that offset Part D spending in 2016 by 20%, from $145 billion to $116 billion. Plan sponsors used pharmacy benefit managers to provide about three-quarters of Part D prescription drug services.


The report also found that pharmacy benefit managers earned revenue from the rebates they negotiated with manufacturers for Part D drugs, which accounted for $18 billion of the $26.7 billion in rebates in 2016. Pharmacy benefit managers retained less than 1% of the rebates, passing the rest to plan sponsors.


Meanwhile, a growing number of states have been examining pharmacy benefit managers over concerns they are overcharging state Medicaid programs. Pharmacy benefit managers work on behalf of the state programs and contract with managed care organizations and pharmacies. In the process, pharmacy benefit managers collect various fees, but have sometimes been accused of inappropriately pocketing some of those fees.


In Florida, a report found pharmacy benefit managers appeared to have profited from what is known as spread pricing, which refers to the dispensing fees that they pay pharmacies, but then bill at a different rate to state Medicaid programs. The Louisiana Attorney General filed a lawsuit accusing OptumRx of inflating the price of medicines that cost the state Medicaid program billions of dollars.


The Ohio Attorney General filed similar lawsuits against Express Scripts and OptumRx. And Centene, one of the largest health insurers in the U.S. — and which also operates a pharmacy benefit business — has settled lawsuits filed by several states that accused the company of allowing its pharmacy benefits subsidiary to overcharge state Medicaid programs.


One issue that has generated controversy is the use of a so-called rebate wall. The term refers to arrangements between drugmakers and pharmacy benefits managers over placement of medicines on formularies. By offering a higher rebate to a pharmacy benefit manager for a drug, or especially for a bundle of medicines, a drugmaker can wall off rivals from gaining favorable formulary placement.


Last year, the FTC issued a report that noted a rebate wall “may give payers strong incentives to block patient access to lower-priced medicines, whereas absent rebates, a lower-priced, equally effective product would tend to take sales from the higher priced incumbent product.” At the time, though, the agency had not committed to an investigation.


Last month, Regeneron Pharmaceuticals filed a lawsuit accusing Amgen of using a bundling scheme to entice health plans to cover a cholesterol medicine. Regeneron alleged Amgen relied on rebates pertaining to several medicines in order to win favorable formulary placement, and that the move effectively crowded out its own cholesterol drug.

0 comments