Comer: Congress must review role of PBMs in rising prescription drug prices

Wednesday, November 17, 2021

Comer: Congress must review role of PBMs in rising prescription drug prices

WASHINGTONHouse Committee on Oversight and Reform Ranking Member Jacques Comer (R-Ky.) Opened today’s forum on “Reviewing the Role of Pharmacy Benefit Managers in Pharmaceutical Markets” noting that congressional oversight of the increase in prescription drugs must include a review the role of pharmacy benefit managers (PBMs).

In his opening remarks, Ranking Member Comer explained how the consolidation of PBMs has negatively affected competition in the market, leading to higher drug prices for Americans. He concluded his remarks by calling on PBMs to provide greater transparency on their practices and called for a more in-depth review of proposed legislation to determine the changes needed to reduce prescription drug costs and benefit patients.

Below you will find the remarks of the ranking member Comer as prepared for delivery.

Americans spend more on prescription drugs – approximately $ 1,200 per person – than any other country.

While prescription drugs make up about 10% of overall health care spending, Americans pay more for prescription drugs than for hospital care or health insurance.

For years Democrats have attacked pharmaceutical companies – companies that market innovative and life-saving drugs, including three incredibly successful COVID-19 vaccines thanks to Operation Warp Speed.

Instead of highlighting a successful pharmaceutical innovation that leads to treatments and cures for disease, Democrats demonized these companies for high list prices regardless of the fact that patients do not pay the list price and patients can still access the drugs.

All in, Democrats gave a free pass to Pharmacy Benefit Managers even though they play an inordinate role in obtaining discounts and list prices for prescription drugs.

Despite my request to President Maloney to hold a hearing to examine the role of PBMs, Democrats decided to limit their investigation into drug prices to pharmaceutical companies only, leaving a significant void in the scrutiny of the Drug Prices Oversight Committee and many unanswered questions.

Today I am happy to host this forum to examine the role PBMs play in pharmaceutical markets.

PBMs were intended to be intermediaries to negotiate with pharmaceutical manufacturers, insurers and pharmacies on behalf of public and private payers such as Medicaid and Coca-Cola for example.

Over the past decade, PBMs have grown from more than 20 regional and national players to 3 who control around 80% of the market.

Market consolidation has allowed PBMs to exercise significant bargaining power with pharmaceutical manufacturers and has led to an increase in the use of generic drugs and savings for patients.

However, PBMs not only consolidated horizontally, they also consolidated vertically.

To date, every major PBM owns or is owned by a major health insurer.

In addition, every major PBM owns or is owned by a specialty pharmacy, mail order or retail, or all three.

This means that when PBMs negotiate with a pharmacy or health insurer, they are negotiating either with themselves or with one of their direct competitors.

Their position as intermediary, negotiator and engaging with all players in the pharmaceutical market has enabled PBMs to grow exponentially and stifle their competition.

PBMs verify competitor drugstore data, including drugstore acquisition costs and patient data, then use that data to direct commercial patients to their own pharmacies and reimburse competing pharmacies at lower rates.

In Ohio two of the largest PBMs, CVS Caremark and OptumRx, Ohio Medicaid Officer $ 223.7 million more than he paid competing pharmacies.

In my home state of Kentucky, PBMs paid competing pharmacies $ 123.5 million less than what was billed to the state’s Medicaid program in 2018 alone.

This is just one example of how PBMs negatively affect competition.

In the Medicare program, PBMs use a tactic known as direct and indirect compensation, or DIR, to claw back billions in reimbursements paid to pharmacies.

In 2019, DIR recoveries exceeded $ 9 billion, over 18% of Medicare drug spending.

While these clawbacks were originally intended to allow PBMs to accurately report pharmaceutical discounts and price concessions, they have increased significantly, allowing PBMs to create negative reimbursement in some cases.

This means that a PBM not only recovers everything the PBM paid the pharmacy for the prescription, but also recovers all or part of the patient’s co-payment.

PBMs also have immense control over patient formularies, allowing them to refer patients to expensive drugs as these drugs offer them higher discounts.

By referring patients to more expensive drugs, PBMs increase patient co-pay and force manufacturers to raise list prices to pay PBMs higher reimbursement claims.

While PBMs pass on some of the discounts they receive to payers, their lack of transparency makes it almost impossible to determine whether these discounts really benefit patients or simply increase the profits of PBMs.

Without greater transparency of PBMs, it is difficult to see how these tactics benefit patients. If the value to consumers is so great, it shouldn’t be difficult for PBMs to prove their worth and have an open discussion about their practices.

This is why this forum is so important.

Today, we take a first step by examining the role of PBMs in pharmaceutical markets to determine what changes, if any, need to be made and how proposed legislation could reduce prescription drug costs and benefit patients.

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