PBM executives are heading to Capitol Hill this week. Here are 4 things to watch 

Capitol building in Washington
PBM executives will testify before the Senate Finance Committee on Tuesday. (Photo by rarrarorro/iStock/Getty Images Plus/Getty Images)

Pharma CEOs went before the Senate last month, and now it’s PBMs' turn to be on the hot seat. 

Executives at five pharmacy benefit managers will testify before the Senate Finance Committee on Tuesday in the latest hearing on solutions to drive down drug prices. Express Scripts, CVS Caremark, Humana, Optum and Prime Therapeutics will be represented on the panel. 

Drug rebates—and the Department of Health and Human Services’ plan to eliminate them—are likely to be center stage in the discussion around the role that PBMs play in rising drug prices. PBMs play a shadowy role in the pharmaceutical supply chain and have been a prime target for criticism, especially from drug companies, in the price debate. 

Innovation Awards

Submit your nominations for the FierceHealthcare Innovation Awards

The FierceHealthcare Innovation Awards showcases outstanding innovation that is driving improvements and transforming the industry. Our expert panel of judges will determine which companies demonstrate innovative solutions that have the greatest potential to save money, engage patients, or revolutionize the industry. Deadline for submissions is this Friday, October 18th.

Committee Chairman Chuck Grassley, R-Iowa, and Ranking Member Ron Wyden, D-Ore., said in a statement upon inviting the PBMs to testify that “middlemen in the healthcare industry owe patients and taxpayers an explanation of their role.” 

RELATED: Pharma CEOs go after familiar target in drug hearings—insurers 

“There’s far too much bureaucracy and too little transparency getting in the way of affordable, quality healthcare,” Grassley and Wyden said. “We’ve heard from pharmaceutical companies, and it’s only fair that the committee has the opportunity to ask questions of other players in the healthcare supply chain.” 

Here are a few things to watch at Tuesday’s hearing: 

1. Breaking into the drug rebate ‘black box’ 

As Grassley and Wyden made clear in their invitation to the PBMs, one of policymakers’ key concerns about drug rebates is the lack of transparency around the negotiations and who gets a cut of the discounts. 

Azar echoed this concern when HHS announced the rebate rule, saying that shining light on this “hidden system of kickbacks to middlemen” is driving up drug costs. 

The central criticism lobbed at PBMs by drug companies is that, because these negotiations happen behind closed doors and are not provided directly to consumers, insurers use the savings to line their own pockets instead of driving down costs for plan members. 

RELATED: Express Scripts hits back at criticisms of PBMs, says it ‘would do just fine’ without drug rebates 

PBMs have hit back at this criticism. The Pharmaceutical Care Management Association launched an ad campaign called #OnYourRxSide to dispute the idea that pharmacy benefit managers are the key driver behind rising drug costs. 

“PBMs have an established and successful track record of implementing consumer-friendly, market-based tools, such as negotiating with drug manufacturers, to lower costs for consumers,” PCMA President J.C. Scott said. 

2. Will eliminating rebates bring down drug costs? Depends on who you ask 

HHS argues that its rule—which would eliminate the anti-kickback protections for rebates and instead provide those legal safeguards to point-of-sale consumer discounts—will drive down drug prices. Drug companies have said the same. 

However, insurers, as one might expect, have disputed that claim. PCMA issued a report on Thursday that analyzes the costs that might be associated with the end of rebates, and it suggests that it could drive up overall drug spending by nearly $200 billion over the next decade. 

RELATED: Winners and losers under bold Trump plan to slash drug rebate deals 

The Centers for Medicare & Medicaid Services Office of Actuary does, to some degree, back up this assertion. An analysis from the actuaries on the rule estimates (PDF) that if the rule were implemented it could drive up overall drug spending by $137 billion by 2029, and Part D spending by $196.1 billion. 

Expect this debate to be a hot topic during the hearing. Coincidentally, the comment period on HHS’ proposed rule ends Monday, so the rule could take effect in short order following the PBMs’ testimony. 

3. The blame game 

Finger-pointing has been the name of the game in this debate, and Tuesday’s hearing is likely to include more of that. At their hearing, drug companies deflected blame for rising drug costs by targeting insurers and PBMs. 

Expect PBMs to return the favor on Tuesday. Industry groups, including PCMA, America’s Health Insurance Plans and the American Hospital Association have had harsh words for drug companies and say that they—not PBMs and payers—are the source of rising costs. 

RELATED: CVS looks to begin rollout of new PBM contracting model in 2019 

“The drugmakers have a long tradition of finger-pointing,” said Erik Rasmussen, AHA's vice president of advocacy and public policy. “They’ll say it’s everyone’s fault but mine.” 

Of note in this cross-sector blame game is that the hearing panel will be entirely made up of PBM executives, so drug companies will not have the opportunity to respond directly to criticisms of them made at the hearing, paralleling their own hearing where PBMs were unable to counter their claims. 

4. Expect the grilling to be bipartisan

As evidenced by the joint statement, addressing drug prices is of bipartisan interest, and in the Senate Finance Committee’s series of hearings so far, both Democrats and Republicans have been tough on industry players who may have a role in rising costs. 

Though a divided Congress is not likely to undertake a major legislative overhaul, industry experts have noted that action on drug prices is one issue that draws interest from both sides of the aisle

It’s an issue that’s also of particular interest to Grassley, who became chairman of the committee this year, as evidenced by the hearings. 

In the statement, the two senators said that “every part of the industry” has a role to play in driving down drug prices, and said they hope PBMs come to the hearing armed with “real information” and will discuss “real solutions.” 

Suggested Articles

Genealogy company Ancestry is expanding into genetic health testing, ramping up competition with 23andMe.

Oscar Health will appeal a judge’s decision to toss its lawsuit against Blue Cross and Blue Shield of Florida over insurance broker agreements.

Physician-led ACOs generated nearly seven times more savings in 2018 than ACOs led by hospitals, a new analysis finds.