PBMs escape Senate hearing largely unscathed
In the finger pointing over high drug costs, PBM executives had their chance before the Senate Finance Committee on Tuesday, sticking to their familiar tune of blaming manufacturer list prices for fueling skyrocketing prices. They also floated some solutions — including speeding up the availability of biosimilars and creating more competition throughout the supply chain.
The hearing was light on drama despite the hype, and few lawmakers grilled executives on the issues. The PBMs seemed to escape unscathed after the over two-hour hearing, which featured executives from Cigna, CVS Caremark, UnitedHealth's Optum Rx, Humana and Prime Therapeutics. Shares of the PBMs remained relatively unchanged despite being called to appear before the powerful committee.
Barclay analysts characterized it as a benign hearing with "no notable negative surprises," and analysts at J.P. Morgan noted "nothing materially incremental or surprising" occurred.
Sen. Ron Wyden, D-Ore., did call attention to spread pricing schemes, which he said were setting off alarm bells across the country in state Medicaid programs. The Columbus Dispatch has reported on spread pricing extensively, in which PBMs get more money from taxpayer funded health plans by charging the health plan one price for drugs and reimbursing the pharmacies another.
PBMs acknowledged they use spread pricing in their contracts with clients.
Both Committee Chairman Chuck Grassley, R-Iowa, and Wyden have called on the HHS Office of the Inspector General to investigate spread pricing.
The Trump administration that has made reining in drug prices one of its key initiatives. Last summer, the administration laid out a blue print for how to achieve lower prices, including restricting rebates.
PBMs use rebates as a mechanism for extracting pricing discounts from manufacturers in exchange for preferred formulary status, or easy access to patients — a win for drugmakers. The administration has proposed eliminating rebates in Medicare Part D and managed Medicaid plans, attempting to pass the pricing discounts directly to patients at the point of sale.
With rebates under fire, the executives emphasized that they pass almost all of the rebates back to their clients in the commercial business and said eliminating the practice would not fix pricing concerns. "The committee did seem to understand and agree with PBMs that the rebate rule, in isolation, would not bring gross list prices down on branded drugs," Barclays said.
Drugmakers, including Sanofi and Pfizer, were already called before the Senate Finance Committee to address their role in the rising drug prices, another event that proceeded without much drama. "This was an opportunity for the PBMs to defend themselves against the finger pointing by the Biopharma industry," Ana Gupte, a Leerink analyst, told Healthcare Dive.
On Wednesday, drugmakers and PBMs testified in front of a separate congressional committee on insulin prices, which have attracted lawmaker scrutiny amid stories of patients being exposed to high prices and forced to ration the lifesaving medication, sometimes resulting in death.
Last week, Express Scripts and CVS tried to get ahead of the possible grilling by lawmakers by announcing they would cap insulin copays, eliminating the risk of patients being exposed to the full list price of insulin due in part to high-deductible health plans. Executives said the timing of the announcement was unrelated to the hearing.
Lawmakers Tuesday called on the PBMs to be more transparent. "The current system is so opaque that it's easy to see why there are many questions about PBMs' motives and practices," Grassley said.
But executives rebuffed the idea of full transparency of rebates and pricing negotiations available to the public. They said they were open to being transparent with their clients but additional openness would undermine price negotiations.
There's too much still unknown about the tools used by PBMs, Patrick Finnegan, an analyst with Fitch Ratings, said in a statement. Before legislating any changes, more information needs to be laid bare. "Without a comprehensive and transparent picture of all the building blocks in the prices charged by the payer and the amounts paid to the drug stores and hospitals, it will be difficult to estimate the actual spread earned by a PBM," he said.
After payers have bought up many of the nation's largest PBMs, Grassley said he's concerned about whether the integration has helped patients or fostered anticompetitive activity.
Ohio's largest Medicaid managed care provider said Tuesday it was firing CVS Caremark as its PBM following the spread pricing issues. Pricing spats have also caused high-profile rifts between PBMs and their clients. Most notably, Anthem's dispute over pricing with Express Scripts and, more recently, CVS and Walmart, though they later agreed to terms.