Congressional Testimony Set for PBM CEOs

April 8, 2019

Advocates are calling for government regulations on PBMs and pharmacy.  

PBMs will face Congressional scrutiny this week as pharmacists and consumer advocates stress the need for an increased regulatory oversight of the pharmaceutical industry in response to rising prescription drug costs. 

On Tuesday, April 9th, the CEOs of five PBMs will testify before Congress as a part of the Senate Finance Committee hearing. On Wednesday, pharmacists and other advocates will lobby congressional representatives to vote in favor of the establishment of increased industry regulations during the annual NCPA Congressional Pharmacy Fly-In. 

On April 8th, David Balto of PBM Watch and a former Federal Trade Commissioner policy director; Ed Weisbart, MD, CPE, FAAFP, former chief medical officer at Express Scripts; and B.  Douglas Hoey, RPh, MBA, CEO of the NCPA, held a press conference detailing how PBMs manage to increase the costs of drugs, why their misuse warrants regulatory intervention, and how Congress should act.

“There are three things for a market to work effectively: choice, transparency, and a lack of conflict of interests,” Balto says. “On all three accounts, the PBMs receive a failing grade.”

A large portion of the issues surrounding PBMs, chains, and independent pharmacies, and rebates involves the conflict of interest established when PBMs also own pharmacies. 

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Hoey says the most common misconception regarding PBMs is the belief that they are small processing companies, when in reality, their profits rival the likes of household brands such as Disney, American Express, and Nike. 

"The PBM industry is controlled by three large entities, and they control at least 89% of the market or 266 million people, about three-fourths of the American population. Those patients, whether they know it or not, are often steered into the pharmacy that has an agreement or is owned by the PBM,” Hoey says. 

According to On Your Rx Side, an advocacy site by the Pharmaceutical Care Management Association, which supports PBMs, the organizations have amassed great size by building networks of pharmacies and increasing competition that favors the production of cheaper generic drugs. This site also suggests PBM size helps in price negotiations and rebates, resulting in a discount to patients and payers of 40% to 50% on prescription drugs and related medical costs. 

Though PBMs were created with the intention of lowering the cost of prescription medications, opponents believe they have often advocated for the increase in costs to satisfy the profits they make from rebates. 

"In theory, rebates go to the PBM who then shares them with the health plan sponsor, usually an insurance company,” Weisbart says. "That plan sponsor can then use the rebates to lower the premiums that they charge, but PBMs understandably want to retain those rebates and few plan sponsors have the ability or resources to audit the PBMs and find out what percentages they are actually getting. So, we’re obliged to trust that the PBMs are working in our interests.” 

According to Hoey, records indicate that drug benefits have increased over 1,100% since the mid-1980s-the same time when PBMs were becoming public companies. 

He says the PBMs rely on the mantra that they control prescription drug costs and say that they are using PBM tools to save costs despite the financial facts. 

As a result of the PBMs’ conflicts of interest and the subsequent price inflations, consumers are left with fewer options for medications and where to fill their prescriptions. In some instances, patients opt to forgo their prescriptions due to high costs, leaving them vulnerable to further health complications and death. 

More generic medications might help solve the issue of increased prices of brand name medications, as On Your Rx Side suggests; however, accessing generic medications might also face complications from PBMs.

For example, Weisbart recounted an experience where he tried to receive a generic prescription of flucatisone proprionate and salmetrol rather than pay for Advair, the more expensive brand name version. After having his pharmacist switch him to the generic, he received a letter from the PBM stating that they only filled one prescription and that Weisbart would need to have his physician submit a prior authorization for the generic if he wished to continue receiving it. 

"I had to run the gantlet to use a drug that is two-thirds cheaper with an annualized savings of more than $3,000 per year. Most patients would wind up without that authorization and pay the extra $3,000 per year, or simply go without their asthma inhaler, driving them into the emergency room or worse,” he says. 

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Sometimes, according to Hoey, PBMs even contact patients immediately after they have filled a prescription at a community pharmacy. During the press conference, Hoey cited instances of CVS’ Caremark contacting customers via text as they are leaving a competitor pharmacy, informing them that they could have saved money by filling their prescription at a CVS location. “That conflict of interest is immense and really troublesome,” he says. 

The freedom of choice, unimpeded by a lack of transparency and financial pressures, is essential to get the best healthcare necessary, Balto says.

Some sort of governmental intervention on the issue of prescription drug pricing is a likely outcome, but the extent of that intervention, and especially the extent of how Congress will act, is uncertain.