Stopping a ‘moral obscenity’: Senate Judiciary Committee expresses support for PBM reform

Sen. Chuck Grassley, R-Iowa, suggested Congress could once again move to overhaul PBMs’ controversial business practices after it passes President Donald Trump’s conservative megabill this summer.

Healthcare Dive

Reporter: Rebecca Pifer Senior Reporter

There’s still significant support in Congress for overhauling the pharmacy benefit manager industry, after reforms almost made it across the finish line late last year but died at the 11th hour, lawmakers said during a Senate Judiciary Committee hearing on Tuesday.

“Americans are fed up… they’re eager for Congress to act to put a stop to shady PBM practices,” said Judiciary Chairman Chuck Grassley, R-Iowa, during the hearing.

Congress was poised to pass significant PBM reform in an end-of-year spending bill in December. However, the policies were stripped from the legislation after being criticized by billionaire Elon Musk, a close advisor of President Donald Trump. The delay was widely viewed as a gift to the massive PBM industry.

But now, that gift is looking more like a brief reprieve than a total stay of execution. Congress is still interested in tweaking how PBMs do business, and should act quickly in light of evidence that PBMs contribute to higher drug prices, impede patient access to drugs and cause independent pharmacies to go out of business, senators on both sides of the aisle said Tuesday.

“This is a level of corporate violence that is costing American lives. A level of colossal greed at the expense of patient well-being,” said Sen. Cory Booker, D-N.J., adding: “This is a moral obscenity.” 

‘Nobody can afford their drugs in this country’

PBMs negotiate discounts on drugs with manufacturers, contract with payers to oversee members’ access to medications and pay pharmacies for filling prescriptions.

Scrutiny of major players in the industry has been rising, with critics especially concerned about the highly concentrated and vertically integrated nature of the market. Just three PBMs — CVS’ Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx — control 80% of all U.S. prescriptions, and each company also operates a major insurer and pharmacy network of its own.

During the Judiciary hearing, witnesses testified how PBM practices impact different elements of the healthcare industry. However, much of the hearing focused on the ramifications on independent pharmacies and patient access to drugs.

PBMs commonly reimburse pharmacies below the cost of a drug, said pharmacist Randy McDonough, the CEO and co-owner of small business Towncrest Pharmacy Corporation in Iowa. McDonough gave an example of a patient who was prescribed a medication that cost over $700, but for which their PBM reimbursed only about $10.

Along with inadequate reimbursement, practices like charging pharmacies performance-based fees and enacting spread pricing, when a PBM reimburses pharmacies a lower rate for dispensing a drug than what it charges the health plan, are forcing independent pharmacies out of business, according to the pharmacist.

Towncrest, which owns six pharmacy locations, operated at a loss of $116,000 last year, McDonough said. The company has had to convert one pharmacy to a hybrid telepharmacy and recently decided to close another pharmacy entirely in order to stay afloat.

“At the end of the day I just call it a broken system. A system where I want to provide care but it’s become financially unfeasible,” McDonough said. “The race to the bottom has ended and I along with my community pharmacy colleagues can no longer survive.”

PBMs also create hoops that physicians need to jump through to get patients needed medications, testified Sheetal Kircher, an associate professor of hematology and oncology at Northwestern Medicine in Chicago.

The middlemen frequently switch where a patient can fill a medication to their in-house pharmacy, or change the drug a patient is prescribed to a pricier brand-name version — with no input from the patient or physicians, Kircher said.

“It’s unclear who benefits,” she said. “This committee has a meaningful opportunity to help reform the policies and practices that are causing delays, confusion and burden.”

PBMs maintain that their role in the pharmaceutical supply chain is to lower costs for their health plans and employers, and that their clients choose how to set up their contracts and decide on pharmacy networks and how services are paid.

Instead, the middlemen point to drug manufacturers as the biggest driver of high drug costs, given that drugmakers set list prices for medications.

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“Our mission is to negotiate for lower net costs for employers and clients, which means lower costs for patients. A lower list price means a better starting point for those negotiations, and we have been actively calling on drug companies to lower their prices,” testified Juan Carlos Scott, the CEO of the Pharmaceutical Care Management Association, a major PBM lobby.

“I do not dispute that there is an affordability challenge for many patients and a need to continue to improve how the system serves consumers. Understanding drug costs must include a look at the entire supply chain, including drug companies,” Scott added.

Lawmakers allowed that drugmaker actions, including setting high list prices and frequent marketing, are influencing consumer access to medications. Multiple senators, for example, spoke out against round-the-clock pharmaceutical advertising on TV.

However, PBMs are not blameless, given their influential position in the pharmaceutical supply chain and research that they are profiting heavily off of it, lawmakers said... CONTINUE READING

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