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Pharmacy Benefit Managers Put in Crosshairs of Drug Price Fight

House probe requests data from top PBMs, Broad supply chain transparency needed, analysts say


A House investigation into the entities that manage prescription drug benefits should be accompanied by other actions that can help shed light on how US drug prices are formed, analysts say.

The House Committee on Oversight and Accountability on Wednesday launched an investigation into pharmacy benefit managers like CVS Caremark and Cigna’s Express Scripts and their impact on patients.

The probe was welcome news for the pharmaceutical industry and independent pharmacies, who argue that PBM fees and consolidation with major health plans and pharmacy chains has driven up drug costs and limited consumer choices. PBMs say they help deliver discounts to patients, and that drug manufacturer list prices are the root of high drug costs.

Analysts say the investigation is just the latest indication of increasing momentum in Washington to scrutinize the role of PBMs in shaping high prescription drug costs. This, as well as the ongoing probe into PBMs by the Federal Trade Commission, could lead to policies to boost oversight and help lower drug costs for patients, policy observers say.

But analysts also caution that this attention to PBMs doesn’t negate the need to look into drug manufacturer price setting and other practices that analysts say contribute to the convoluted system that determines what Americans pay at the pharmacy counter.

“Many members of Congress are frustrated by the lack of transparency in the drug supply chain and PBMs are a pretty easy target,” said Stacie Dusetzina, an associate professor in the Department of Health Policy at Vanderbilt University Medical Center. “It is important to realize that drug manufacturers set the list prices; PBMs the terms for coverage. PBMs, plans, and drug manufacturers share the blame for the increase in list prices,” Dusetzina added.

Committee Chairman James Comer (R-Ky.) requested data from the Office of Personnel Management, the Centers for Medicare & Medicaid Services, and the Defense Health Agency to determine the impact of PBMs on government-administered health-care programs. He also sent letters to the country’s three largest PBMs—CVS Caremark, Express Scripts, and OptumRx—for documents and communications related to their business practices.

Transparency Push

Congress and the FTC have examined PBMs in the past, but the growth of the market and consolidation with health plans and pharmacies has fueled a greater push to understand the entities that many analysts say rely on secrecy to shape drug coverage. Today, the three largest PBMs control nearly 80% of the market.

The passage of President Joe Biden’s landmark Inflation Reduction Act (Public Law 117-169) has also prompted lawmakers to look at other areas to help lower drug costs. With the IRA, Medicare now has the authority to negotiate the prices of some of the drugs it spends the most on, and also to demand rebates from drugmakers who raise prices on their products faster than the rate of inflation.

“As pressure builds to address pharmaceutical prices, PBMs increasingly are in the cross-hairs,” said Robin Feldman, a law professor and researcher at the University of California, San Francisco.

Several top lawmakers have identified PBM oversight as a top priority this Congress. The Senate Judiciary Committee in February advanced a group of bills aimed at lowering drug costs, including the Prescription Pricing for the People Act (S. 113). This bill would direct the FTC to study the effects of consolidation in the PBM industry on pricing, and also to provide recommendations to Congress on other ways to improve competition and protect consumers.

A week later, the Senate Commerce Committee held a hearing on a bill (S.127) from Chairwoman Maria Cantwell (D-Wash.) and Sen. Chuck Grassley (R-Iowa) that would prohibit PBMs from charging health plans more for a drug than they reimburse pharmacies. The Pharmacy Benefit Manager Transparency Act would also require PBMs to report annually to the FTC certain information about payments they receive from health plans and fees charged to pharmacies.

The House probe is especially focused on the rebates drug manufacturers pay to PBMs in exchange for better placement on lists of covered drugs known as formularies, as well as fees PBMs charge to unaffiliated pharmacies.

“PBMs are supposed to help consumers by lowering prices through the passing on of rebates they receive from manufacturers. But those rebates don’t seem to be making their way to consumers,” said Michael Carrier, an antitrust professor at Rutgers Law School.

Brian Newell, a spokesperson for the leading drug industry trade group, the Pharmaceutical Research and Manufacturers of America, said of PBMs: “These entities work hand in glove with insurers to determine what medicines people have access to and what they ultimately pay at the pharmacy. Their business model is rife with conflicts of interest that independent experts and other congressional investigations have found can lead to higher costs for patients. People are looking to Congress to rein in these abusive tactics, and we hope this is one step in that direction.”

But JC Scott, president and CEO of the leading PBM trade group the Pharmaceutical Care Management Association, said PBMs “have a proven track record of reducing prescription drug costs in federal programs, ultimately for patients and taxpayers.” “While we appreciate—and share—the Committee’s concern around drug pricing and existing gaps in affordability, we strongly urge members of the committee and Congress to stay focused on real solutions that are proven to reduce prescription drug costs,” Scott added.

Price ‘Dysfunction’

The value of the House probe’s findings will depend on how lawmakers use it to understand how PBMs operate within a drug pricing system that analysts say feeds off misaligned incentives.

The probe “is something that’s an acknowledgment that drug pricing dysfunction more broadly is not just the result of one singular layer of the supply chain, but many layers of supply chain working in concert with one another to yield the dysfunction,” said Antonio Ciaccia, CEO of Ohio-based drug pricing data firm 46brooklyn Research.

“I’m hoping that we can get more of that nuance right—not just blame it all on PBMs but demonstrate how what PBMs do to the market exacerbates the problems that we had with the other layers in the supply chain,” Ciaccia said.

The focus on drug pricing policy is certain to result in even more demands for answers on how drug prices are formed, Dusetzina said.

“There is going to be more pressure on PBMs, plans, and manufacturers around what type of pricing information is made public going forward,” she said.


To contact the reporter on this story: Celine Castronuovo at ccastronuovo@bloombergindustry.com

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