Lawmakers bashed the business practices of pharmacy benefit managers during a House Committee on Oversight and Accountability hearing Tuesday.
When they were asked repeatedly about steering patients, increased drug prices and pharmacy closures, the company executives largely refuted claims thrown at them.
Lawmakers were overwhelmingly frustrated with the perceived non-answers given and at one point reminded the leaders of Optum Rx, Express Scripts and CVS Caremark they were under oath. Witnesses at times were united in silence after lawmakers asked questions, knowing they would not provide an answer that would satisfy the members.
The hearing coincided with the release of a new report (PDF) compiled by the committee that found the three largest PBMs — which are vertically integrated with insurers and account for approximately 80% of the market — embrace anticompetitive behavior, reduce reimbursement rates for independent pharmacies, overcharge payers and patients through utilization and spread pricing and force manufacturers to pay rebates in order to earn a higher-tiered placement on drug formularies.
The committee began investigating PBMs in March 2023.
“This committee is in agreement that PBMs need to be reformed,” said Chairman James Comer in his closing remarks, noting there is bipartisan agreement on the issue. “PBMs were created to help drive down costs of prescription drugs. I don’t think that’s working.”
The PBM representatives present responded that their actions do, in fact, reduce prescription drug prices for Americans and the pharma industry is at fault for many of the systemic woes plaguing the system.
“We have successfully converted 90% of the prescriptions to generics, driving costs to historic lows,” said David Joyner, executive vice president of CVS Health and President of CVS Caremark.
“In 2023, we helped keep average patient cost for a 30-day prescription to $15 for those with employer-sponsored plans,” said Adam Kautzner, president of Express Scripts.
“The 5,000-plus customers that hired us … rely on OptumRx to be the counterweight to drug manufacturers’ high, and increasing, list prices,” said Patrick Conway, M.D., CEO of Optum Rx, arguing its negotiating tools and clinical discounts save more than $2,000 per person on average in drug savings.
PBMs also faced questions on group purchasing organizations, or groups that leverage purchasing power to negotiate drug prices. From 2019 to 2021, the big three PBMs established locations overseas.
Analysts suggested there GPOs were implemented to skirt transparency regulation and reduce tax liability, said Andrew Rouff, senior consultant of advisory services for Managed Markets Insights & Technology, a provider of market data in the drug space, in a statement to Fierce Healthcare.
“I think this hearing adequately indicated that PBMs are directly inflating drug prices," said Rouff. "It did so by demonstrating their dominance in the market, which allows PBMs to control all aspects of the value chain to maximize profits."
Here are some highlights from the hearing:
On legislation needed
Comer, a Republican from Kentucky, believes PBMs should not be vertically integrated with insurance companies and supports action from the Federal Trade Commission to break up the companies.
As independent companies, the three major PBMs would rank in the top 40 for greatest revenue, said ranking Democrat Jamie Raskin from Maryland. They hold significant power in the market attached to UnitedHealth Group, Cigna and CVS.
Legislation that would address some of the most criticized issues with PBMs have remained stalled in Congress for months, but even those bills don’t go far enough in truly reining in PBMs and leveling the playing field, said Comer. In fact, he believes many of the PBM reform bills that mainly address transparency are only symbolic changes.
“We believe a lot of these transparency bills are a lot like resolutions,” he said. “But a resolution really doesn’t do anything. We need real reform.”
PBMs’ responses
PBM executives were at odds with the questioners on Tuesday, disagreeing with the findings of the committee and the recent FTC report. But its explanations were met with disbelief by lawmakers that felt they were being lied to.
Lawmakers consistently brought data and anecdotes from patients and pharmacies, showing that its practices were increasing drug prices and driving pharmacies out of business.
Joyner, for instance, told Congress that many of the issues outlined in reports are fixed with the company’s switch to a new TrueCost model, designed to better reflect the cost of prescription drugs.
He also said he was not sorry for the company’s use of step therapy due to the policy’s ability to ensure medications are prescribed at the right times.
Kautzner said previous findings, that say independent pharmacies are closing because of PBMs’ actions, are not what Express Scripts has found.
“Our data would show in the last five years, within our own network, we’ve actually seen a net increase of about 20% independent pharmacies open,” he said. Rep. Shontel Brown, D-Ohio, noted the difference in characterizing pharmacies as independent versus local.
Throughout the hearing Congresspeople wondered how these companies could claim success when the corporations make unimaginable profits and C-suite earners make millions, yet prescription drug costs are still on the rise. And their frustration was evident.
"I don't understand how you're making money and making profit if you're trying to lower costs on our residents,” said Rep. Rashida Tlaib, D-Michigan, during the hearing. “I'm just confused on how you do both. “You've got to be making money from somewhere.”
“Look, guys. You’re not talking to someone that doesn’t know what’s going on,” said Rep. Buddy Carter, R-Georgia, a long-time pharmacist who showed a patient with a rare genetic disorder that struggled to receive a needed prescription from CVS Caremark after already receiving it for two years. “There’s only one word I know how to describe this, and it’s despicable.”
Carter was one many lawmakers who asked repeatedly if these PBMs steering patients toward their own pharmacy. All three executives said they do not engage in that practice.
Joyner added that other countries have lower drug prices because they negotiates for price in order to have access, but stopped short of agreeing it would lower prescription drug prices here in the U.S. Under the Inflation Reduction Act, the first 10 price-negotiated drugs will be available, beginning in 2026.
DIR fees
DIR fees, otherwise known as clawbacks, are fees PBMs get from pharmacies when PBMs do not pay an originally agreed upon reimbursement, said Rep. Raja Krisnamoorthi, D-Illinois.
He said DIR fees are devastating for small pharmacies and the rate of pharmacy price concessions increased 107,400% from 2010 to 2020, citing a statistic from Centers for Medicare & Medicaid Services.
This month, New York Cancer & Blood Specialists won a $22 million court judgment against CVS Caremark. The judge unsealed a confidential arbitration award that Caremark “attempted to keep secret from the government, taxpayers and shareholders,” law firm Frier Levitt said in a news release.
“Caremark began to assess fees on NYCBS if its patients did not adhere to taking oncology drugs prescribed to them, even if the continued use of these highly toxic medications posed health risks to the patients.”
The court said it was unlawful for Caremark to award DIR fees under this scenario, saying it was implemented in “bad faith” and “reckless indifference.”
Other oncology practices are in arbitration over the same issue, Comer said during the hearing.
“We do comply with all Medicare Part D rules,” said Joyner. “Part of this is actually creating network adequacy and making sure we’re managing the network according to terms and conditions. In this case, our goal is to apply this consistently across all 65,000 pharmacies.”
Joyner would not say whether it would fight other arbitration cases in court.
GPOs
Lawmakers were skeptical of PBMs’ foreign business operations concerning group purchasing organizations.
Express Scripts established Ascent Health Services, CVS established Zinc and Optum established Emisar Pharma Services several years ago. These operations are based in, or operate in, other countries that some lawmakers worried allow for opaque behavior.
“It is difficult to say whether PBM GPOs have improved or worsened the situation for payers and employers,” said Rouff. “They have likely improved the situation for the big three PBMs, however if this improves or worsens the situation for patients and employers is unclear and open to interpretation.”
Rep. Greg Casar, D-Texas, asked why drug prices are rising when fees have increased by $3.8 billion since the introduction of GPOs to the marketplace.
“The net price of drugs we continue to negotiate down,” said Conway. “The list prices of drugs have gone up exponentially in the U.S., and those list prices are set by manufacturers.”