House leaders ask PBMs to explain their impact on downstream drug costs

Employer insurance
Leaders of the House Energy and Commerce Committee want to know more details about PBM contracts and negotiations with drugmakers. (Getty/wutwhanfoto)

The nation’s leading pharmacy benefit managers are being asked once again to explain exactly how they negotiate lower drug prices for consumers.

In letters to seven PBMs, lawmakers with the House Energy and Commerce Committee offered up a list of detailed questions about how the companies negotiate lower prices and how exactly those savings are passed on to consumers.

Signed by Greg Walden, R-Ore., Michael Burgess, R-Tex., and Gregg Harper, R-Miss., the letters (PDF) acknowledged that PBMs have a significant role in negotiating with drugmakers, but the lawmakers were specifically interested in understanding the “relationship of a drug’s list price with the price negotiated and the different incentives that are offered to encourage reductions in list price.”

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The lawmakers added that they are particularly curious how those negotiations impact Medicare Part D, the Children’s Health Insurance Program, Medicaid and ACA plans.

“PBMs have a unique role in the drug supply pricing chain that includes determining reimbursement for drugs, processing pharmacy drug claims, negotiating rebates and discounts from drug manufacturers, designing drug plan formularies and operating mail order businesses,” the lawmakers wrote. “The ability to play several of these roles simultaneously contributes to PBMs’ ability to negotiate with manufacturers.”

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The panel sent letters to CVS, EnvisionRXOptions, Express Scripts, Humana, Prime Therapeutics, Procare Pharmacy and UnitedHealth Group. A detailed list of questions sought additional transparency about negotiations about list prices, price concessions in Medicare Part D, Medicaid managed care contracts and how contract terms impact the ability to negotiate drug prices.

“In addition to providing written answers to the questions above, please provide a copy of any standard contracts used with your clients regarding PBM services referring or relating to federal payers,” the lawmakers added.

The House committee has been closely watching the PBM industry, and it recently asked the Federal Trade Commission to do a retrospective review of PBM mergers to measure the impact on downstream healthcare costs.

RELATED: CVS, Express Scripts provide a rare moment of transparency on rebate profits

PBM operations and negotiations have been notoriously secretive. It was only recently that CVS and Express Scripts disclosed just how much they make each year in rebates.

CVS has also weathered some public criticism as of late following an Ohio auditor’s report that uncovered significant taxpayer waste through “spread pricing.” The state’s Medicaid program has terminated those PBM contracts and required the company to restructure its agreement to include pass-through pricing. The audit has raised questions about whether spread pricing may be occurring in other states.