Q&A: Middlemen Push Up Rx Costs for Patients and Pharmacies

 

A: Iowans regularly share concerns about the rising cost of prescription medicine and sticker shock at the pharmacy counter. There’s particular frustration about the high cost of medicines that have been on the market for a long time, such as insulin. That’s why I’ve rolled up my sleeves at the policymaking table to help cut the cost of prescription drugs. I’m working to ensure America’s free market system continues to bring safe, lifesaving cures to Americans at competitive prices. As former chairman of the Senate Finance and Judiciary Committees, I’ve led the charge to identify what’s broken. That’s why I hauled executives from major drug manufacturers and representatives from the major pharmacy benefit managers (PBMs), whose job it is to negotiate drug prices with drug companies, pharmacies and health plans, before Congress to shine light on the pricing regime that allows drug prices to far outpace inflation. We exposed a tangled web of anticompetitive practices and murky pricing schemes that drives up drug costs in the United States. According to a recent analysis, more than 1,000 prescription drugs sold in the United States exceeded the 8.5 percent inflation rate from July 2021 to July 2022. And the average price increase was an astonishing 31.6 percent. In 2021, the U.S. health care system spent $603 billion on prescription drugs.

 

Patients and taxpayers deserve more bang – affordable drugs – for the buck. At the same time, it’s important Congress doesn’t break what’s not broken. Americans have come to expect breakthrough cures and modern medical treatments to save lives and enhance the quality of life for loved ones managing chronic conditions, such as diabetes, arthritis and high blood pressure. So, I’m committed to ironing out kinks in the system to help lower drug prices without damaging scientific research and access to lifesaving treatments.

 

My oversight work has found one of the key drivers to the skyrocketing cost of drugs is the middlemen in the industry: pharmacy benefit managers (PBMs). Their business model effectively blocks cheaper products from the marketplace. And it’s turned the free marketplace on its head so that cheaper, equally effective drugs have a harder time selling and reaching consumers. In my congressional testimony before the Senate Commerce Committee in February, I used the example of a competitor to the high-cost Humira drug, a widely used medicine prescribed for rheumatoid arthritis, Crohn’s disease and psoriasis. Although the biosimilar competitor offers a 55 percent discount to its list price, patients aren’t able to see those savings because of perverse incentives built into the pricing regime. In today’s marketplace, PBMs and health plans push the higher-priced version to get higher rebates. It’s the same song and dance I exposed in my bipartisan, two-year insulin investigation.  Sen. Maria Cantwell of Washington and I are teaming up to take on this drug pricing tango with a pair of bipartisan bills to improve transparency and curb deceptive practices.

 

 

A: Our bills take aim at unnecessary secrecy woven into the pricing regime of the drug industry. When workers and seniors enroll in health plans from one year to the next, they have no say in which prescription medicines are listed in what’s known as the formulary, the list of generic and brand-name prescription medications covered by a health insurance plan. The reasons for which drugs appear on this list are shrouded in secrecy and have fostered a climate ripe for price gouging. Policymakers can tackle these schemes and restore sanity to drug prices in America by injecting transparency into the process. Today, three PBMs control 80 percent of the market. Our Prescription Pricing for the People Act would require the Federal Trade Commission (FTC) to examine the effects of consolidation among pharmaceutical intermediaries, including PBMs, and issue recommendations to Congress within one year. I’m glad our bill recently sailed through the Senate Judiciary Committee to help put a stop to bureaucratic foot dragging at the FTC.

 

We’re also pushing to get our PBM Transparency Act to the president’s desk. It would direct the FTC to curb anticompetitive practices that allow PBMs to game the system and drive up costs to the consumer and the taxpayer, including: spread pricing and clawbacks. The bill also establishes transparency reporting requirements on PBMs.

 

Spread pricing is the practice by which PBMs charge health plans, including self-insured employers, unions and government programs, more for a prescription drug than what they reimburse to the pharmacy. And then the PBMs pocket the difference.

 

Clawbacks are when a patient’s out-of-pocket co-payment exceeds the price of the drug. In many cases, pharmacists are bound by “gag clauses” that prevent them from disclosing this to the patient. And to pour salt in the wound, the PBM or insurer “claws back” the overpayment from the pharmacist. A form of clawbacks under Medicare Part D is called direct and indirect remuneration (DIR) fees, which I’ve worked to end.

 

These two practices are ripe for abuse. I’ll continue working to ensure PBMs operate as intended, to unlock value and cost savings, not lock in profits at the expense of patients and taxpayers.