Are PBMs working in the interest of health care – or themselves?

On May 23, the House Committee on Oversight and Accountability sought to answer this question: are PBMs (pharmacy benefit managers) working in the interest of health care, or themselves? The hearing, “The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part I: Self-Interest or Health Care?” covered a number of topics in addition to PBMs, including drug pricing, the Inflation Reduction Act (IRA), PBMs operating outside of the U.S., spread pricing, and the problems with step therapy, to name a few.

But while the hearing was comprehensive, the main takeaway was clear. There is bipartisan consensus that the PBM problem needs to be solved—soon.

More than once, Members of Congress marveled at their ability to work together, stating that everyone at the table was committed and hopeful about their ability to solve this issue cooperatively. This echoed similar bipartisan sentiment in the Senate just a week earlier.

Here are a few highlights from the May 23 House hearing.

PBMs have overstepped their intended role

“Today, health care premiums have increased faster than inflation,” began Committee Chair James Comer (R-KY) in his opening remarks. “List prices for prescription drugs have gone through the roof even though net prices have declined. And despite this increase in health care cost, life expectancy has remained stagnant.”

Who is benefitting? “Look no further than PBMs,” he said.

“The average American spends more on prescription drugs each year than people living anywhere else in the world,” added Ranking Member Jamie Raskin (D-MD). “In 2022, more than a quarter of us grownups reported that they did not take their prescription medication at some point in the last year because they couldn’t afford it. So, we’re in an affordability crisis.”

“If the U.S. healthcare system worked as intended, PBMs should be negotiating lower drug prices on behalf of insurance companies who would then pass the savings on to their patients, but that’s not what’s happening,” he continued. “As we’ll hear today, some PBM practices appear to be increasing the cost of medicine, actively preventing patients from accessing the drugs that their doctors have determined are appropriate for them, playing outrageous hide-and-go-seek games with people’s medicine, and hurting independent and community pharmacies.”

The Committee heard testimony from a variety of healthcare perspectives. Witnesses largely agreed with the U.S. Representatives’ assessments, though differed on why the cost of care seems to be endlessly rising.

Witnesses included:

• Miriam Atkins, M.D., FACP AO Multispecialty Clinic President, Community Oncology Alliance;
• Greg Baker, BS Pharm, CEO of AffirmedRx;
• Kevin J. Duane, PharmD, an independent pharmacist and pharmacy owner; and,
• Frederick Isasi, JD, MPH, Executive Director of Families USA.

PBMs are ‘practicing without a license’

“When I first started treating cancer patients, I was able to be their physician and focus on caring for them while relying on the knowledge and skills I honed during my extensive oncology training,” said Dr. Atkins.

The system has changed completely, she continued. “Every day, my partners and I literally have to fight with insurance companies and their pharmacy benefit (mis)managers to overcome their objections and hurdles to the nationally recognized life-saving treatment and care that my patients deserve and expect. The consolidation among health insurers and among the top PBMs, and now between each other, has created an oligopoly of sorts, controlling what treatments I give and how and where they are given. More and more, they are practicing medicine without a license or regard for my patients.”

“The outsized role PBMs take in the pharmacy space has caused many problems for our patients and our practice,” said independent pharmacist Kevin J. Duane. He cited Drug Channels’ report on massive PBM growth.

“Patients are forced by PBMs into using a certain pharmacy, often one owned and operated by the PBM, or they may be forced to get their drugs through the mail even though they want a pharmacist face-to-face in their community. Patients and their doctors have virtually no say in what drugs are used, since the PBM essentially forces which drugs can be used—not because a drug is better or worse, but because the PBM can make more money from it.”

Interestingly, Greg Baker, CEO of an independent “transparent” PBM, spoke strongly about the need for PBMs to be reined in.

“Traditional PBMs tell their clients they use their size and scale to get a better deal that smaller companies cannot compete with,” he testified. “We do know these large PBMs buy thousands of times more drugs than [smaller PBMs] and they very likely get a better acquisition cost. But they do not always use that purchasing power to help their clients.”

Baker advocated for a system closer to his company’s modus operandi, in which PBMs are required to publish all of their prices and rebates.

PBMs create a ‘fail first policy’

Another topic that came up repeatedly was step pricing and the fail-first policies PBMs and insurers create for patients. These policies can be dangerous, or even deadly.

Rep. Virginia Foxx (R-NC) said, “A recent study found that a significant share of commercially insured patients taking medicines face steep therapy restrictions—step therapy restrictions.” She asked Dr. Atkins, “In your role as oncologist you have patients that are required to fail first on a medication and what can you do when a patient has to fail first?”

“We deal with fail first almost every day,” Dr. Atkins said. She provided a real-world example in her testimony:

“I have a patient, a 69-year-old man with multiple myeloma, who had stage 3 disease when he was diagnosed. He had his initial rounds of chemotherapy followed by a stem-cell transplant. The standard of care for most multiple myeloma patients is to start taking the oral medication lenolidamide once the patient has recovered from the transplant. I wrote a prescription for this medication for my patient on October 14, 2022. When I saw him for a follow-up three weeks later, he told me he had not received the medication. I spoke with my pharmacist about this and was informed that his PBM required the medication to be filled by the specialty pharmacy Biologics. We contacted Biologics and were told the insurance company had redirected the prescription to their PBM, CVS Caremark. My pharmacist contacted CVS Caremark and was told they were waiting for the patient to call them. My patient called his insurance company and was told they were waiting for authorization from my office. My patient finally received his medication on December 5, 2022. His care was delayed by almost eight weeks.”

Spread pricing and PBMs

Spread pricing “occurs when a PBM charges health plans for prescription drugs more than they pay the pharmacy, which often is even below the cost for a pharmacy to acquire the drugs they are dispensing,” per Rep. Buddy Carter (R-GA).

“At the end of the day spread pricing is as simple as the [PBM] has all the rules,” said Affirmed Rx’s Baker. “They have all the data and they don’t share a lot of that, so people don’t really know what’s going on. Unfortunately, independent pharmacists are getting paid a low amount for the prescriptions that they’re dispensing to help communities live better, healthier lives.”

“Employers have a separate contract with these pharmacy benefit managers,” he continued. “And then the PBM can sit in the middle and say, ‘Hey, so here’s $10 for the prescription that you dispensed and… I’m going to charge you $20 for that same prescription because you really don’t know what I paid the pharmacy over here. It creates a lot of opacity and a lot of opportunities for profiteering.”

This observation was backed up by Rep. Becca Balint (D-VT) who discussed Vermont’s attempts to rein in PBMs. “PBMs contract with pharmacies to create these pharmacy networks and whether or not patients use pharmacies in these networks can affect the amount that patients pay at the counter. In these arrangements, arenas can drive patients away from independent pharmacies in their communities. And in fact, I had a pharmacist tell me at one of my independent pharmacies, I can’t really fill this for you or I’m going to take an incredible hit on my bottom line, and you’ve been a customer with us for years and it pains me to tell you, you’re gonna have to fill it somewhere else.”

The next steps for PBM legislation

Ultimately, just about every Member of Congress agreed something had to be done about PBMs. The next step is to draft bipartisan legislation based on the myriad hearings, investigations, and recommendations over recent weeks.

As Rep. Kweisi Mfume (D-MD) observed, “Drugs don’t work if people cannot afford them.” One might add that drugs don’t work if you can’t get access to them, either.