Witnesses at a Senate hearing Thursday said PBM anti-competitive practices like clawback fees are putting them out of business.
Senators pilloried the lack of transparency from pharmacy benefit managers during a hearing Thursday, as lawmakers hope to pass reforms this session.
The Senate Commerce Committee hosted the hearing amid concerns that PBMs steer patients toward pharmacies that they own. Lawmakers have introduced legislation to shed light on the issue, but some Republicans have balked over giving the federal government more authority.
“I don’t know why the hell they even exist,” said Sen. Jon Tester, D-Montana. “There is no transparency in PBMs. When you combine that with anti-competitive tactics, this is a recipe where the only people who win in healthcare costs are PBMs.”
For example, lawmakers noted that some PBMs will steer patients who need specialty drugs into their own mail-order pharmacies.
Pharmacies testified that contracts with PBMs include conditions that are unbearable and they have “zero negotiating power,” said Ryan Oftebro, CEO of the independent Kelley-Ross pharmacy group, at the hearing. Pharmacies have also complained about clawback fees where the PBM will recoup some of its payments to pharmacists for certain drugs.
Commerce Committee Chairwoman Sen. Maria Cantwell, D-Washington, decried the consolidation in the PBM market, where three companies have an 80% market share. She asked witnesses how the consolidation has impacted the drug supply chain.
Since many PBMs have their own specialty or regular pharmacies, there is “an entrenched set of incentives … to essentially steer funds to themselves, preferentially over the other independent pharmacies,” said Erin Trish, Ph.D., an economics professor at the University of Southern California.
The hearing is the latest example of bipartisan efforts to jump-start reforms in the industry. Last week, the Senate Judiciary Committee passed the Prescription Pricing for the People Act, which calls on the Federal Trade Commission (FTC) to study the industry and issue recommendations to Congress within one year.
Cantwell and Sen. Chuck Grassley, R-Iowa, co-sponsored that legislation and another bill called the PBM Transparency Act, which calls on the FTC to end clawback fees and spread pricing, another controversial practice where a PBM can upcharge a health plan for a drug’s cost and then pocket the difference.
Cantwell and Grassley pushed for PBM reform in the last Congress. While potential legislation did get out of committee, it never came up for a vote on the full Senate.
PBM industry group Pharmaceutical Care Management Association (PCMA) has pushed back on the legislative effort. The group released a new policy platform that lays out recommendations to address high drug prices.
The platform primarily lays the blame on drug companies for high prices, with recommendations to end anti-competitive practices such as “evergreening” and “patent thickets” that can stifle generic competition.
PCMA also argued that the PBM Transparency Act would constrain the ability of employers to lower drug costs.
"PCMA would welcome the opportunity to work with the committee to advance policies that will address prescription drug affordability without undermining the parts of the system that have been proven to drive value for patients and employers," said PCMA President and CEO J.C. Scott in a statement before the hearing.
Even though PBM reforms have some bipartisan support, other Republicans on the Commerce Committee instead focused on controversies at the FTC, where the lone Republican commission member resigned in protest.
Ranking Member Ted Cruz, R-Texas, questioned whether PBMs deserve the scrutiny they are receiving, as well as the need to give the FTC “substantial regulatory power,” as he claims the bills would do. Cruz added the bill would prejudge an ongoing FTC probe on the PBM industry.
“I’ve long had concerns with the FTC’s vague statutory authority,” he said.
Grassley pushed back during the hearing, saying that the bipartisan legislation doesn’t give the FTC “any new power or regulatory authority.”
Reporter: Robert King