US lawmakers now want to hear from the middlemen PBMs to unpack their role in drug pricing

The US Senate Finance Committee is upping the ante on the issue of drug pricing with yet another hearing — this time with pharmacy benefit managers, the middlemen that negotiate rebates with drugmakers in exchange for formulary coverage and the purported villains behind skyrocketing list prices (according to big Pharma) in a hearing last month.

On Tuesday, Senators Chuck Grassley and Ron Wyden invited executives from five PBMs — Cigna, CVS, Humana, UnitedHealth’s OptumRx and Prime Therapeutics — to testify on April 3 in the third drug pricing hearing this year.

Chuck Grassley

The first hearing in January focused on insulin affordability, while the second in February involved seven pharmaceutical executives, who squarely placed the blame for skyrocketing list prices on the middlemen, asserting that they are forced to hike the prices of prescription drugs in response to higher rebates that all-powerful PBMs negotiate.

Last week, large US PBM Express Scripts $ESRX shot back, suggesting the power to lower drug prices ultimately lies with the manufacturers. “We often have asked drug companies to simply lower their prices. Instead, drug companies have elected to increase prices and increase rebates. This is the option drug makers have chosen for themselves and for the marketplace,” the company said in a statement.

“The PBMs defense is often finger pointing, blaming exorbitant drug pricing on the manufacturers and taking no responsibility for the problem. In fact, it is the PBMs who bear a great deal of the blame, and their practices have led to severe inflation of the prices of both generic and branded medications. This limits access to needed medications for patients.  It is our hope that the Committee does not let them get away with passing the buck,” said Robert Levin, president of the Alliance for Transparent and Affordable Prescriptions (ATAP), in an emailed statement to Endpoints News.

The general job description for PBMs is to administer drug benefits for employers and health plans and run big mail-order pharmacies. But what goes on behind closed doors between these firms and drugmakers in terms of negotiations remains somewhat of a mystery.

Ron Wyden

“Middlemen in the health care industry owe patients and taxpayers an explanation of their role. There’s far too much bureaucracy and too little transparency getting in the way of affordable, quality health care,” Grassley and Wyden said in a Tuesday statement.

All rebates are passed through in Medicare and 95%+ on the commercial side with continued efforts to move rebate to subsidize out of pocket (OOP) costs for higher utilizing seniors at the point of sale, Leerink’s Ana Gupte noted. “(E)specially UNH which is now moving their efforts from fully insured employers in 2019 to self- insured commencing 2020. The large PBMs (CVS, CI (ESRX), UNH) are already implementing alternative payment models that rely less on rebates.”

Earlier in the day, UnitedHealth said it was expanding a change to how it handles rebates from drugmakers by requiring new employer clients to pass the discounts on to people who take the medications. The move will apply to employers that ink new contracts after Jan 1, 2020, the company said.

At the last hearing with pharmaceutical executives, drugmakers argued in favor of cutting rebates not just for Medicare but also on the commercial side to even the playing field for all drug manufacturers, as sufficient incentive to lower list prices.

“Although the pharma execs expressed their preference for a potential rebate restructuring to occur in both government and commercial sectors, we believe any large-scale changes in commercial will be difficult with a divided Congress and the expected push back from large employers who already pass along rebates to reduce costs for their employees,” Gupte said.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
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Atlas Venture Cambridge, MA

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