“The system is convoluted, opaque, and no longer serves the patients’ best interest.”
That’s how Rep. Diana DeGette (D‑CO) described the broken drug pricing market in a recent congressional hearing aimed at scrutinizing the rising cost of insulin (the second in a two-part series).
She’s not alone in her thinking. According to a recent Kaiser Family Foundation public opinion poll on prescription drug prices, 79% of respondents say the cost of prescription drugs is unreasonable, and a similar share say profits made by pharmaceutical companies are a major factor contributing to the price.
Big Pharma blames industry middlemen for high prices, arguing that the rebates pharmacy benefit managers, or PBMs, negotiate lead to rising costs and alleging that PBMs pocket the discounts rather than passing them through to the patient. (They made the same argument at a recent Senate Finance Committee hearing.)
But PBMs have pointed the finger right back at drug companies, blaming the high prices set by manufacturers, not the rebates, for the prescription drug crisis. Earlier this year, the drug manufacturers appeared before the Senate Finance Committee. Last week, it was the PBMs’ turn as they faced questioning over their opaque rebate system and whether those practices put profits over patients.
The system is convoluted, opaque, and no longer serves the patients’ best interest.Rep. Diana DeGette (D-CO)
Here are the latest developments in drug pricing over the past week:
PBMs and ‘secret rebates’ under scrutiny
The non-transparent and confusing nature of the PBM model is getting increased attention, with President Trump and Health and Human Services Secretary Alex Azar taking a firm stand earlier this year with a proposed rule to end the rebate system as we know it.
The drug supply chain creates perverse incentives that contribute to higher list prices and spending — something policymakers ought to address. And while PBMs have their faults, it’s important to keep in mind that the rebate system is only one factor. Drug manufacturers, monopolistic pricing practices, and anti-competitive behaviors contribute far more to the spending problem than PBM practices and must also be addressed through a comprehensive legislative package.
Executives from the five largest PBMs — CVS Health, Cigna, Prime Therapeutics, Humana and UnitedHealthcare’s OptumRx — testified last week (three of them appeared twice — before the Senate Finance Committee and the Committee on Energy & Commerce) and as expected, they largely shifted the blame to drug manufacturers.
“A major factor contributing to the increase in drug spending is the list price of prescription drugs. Drug manufacturers alone set the list price of prescription drugs,” said William Fleming, president of health-care services at Humana. “Drug manufacturers raise list prices to boost their revenue.”
The PBM executives called on lawmakers to consider policies around competition and biosimilars before considering Medicare negotiation. Specifically, they backed legislation to end pay-for-delay tactics, shorten exclusivity periods, and address “evergreening” — the tactics used by brand-name pharmaceutical companies to extend their patents by making slight modifications to the drugs.
But those policies do little to shed light on the opaque rebate system. The PBMs were less supportive of greater transparency for clients, consumers, and the government — a hot-button issue for lawmakers who are still unclear as to how the so-called “secret rebates” work and are calling for supply chain reform and greater transparency.
Unjustified rising cost of insulin debated before Energy & Commerce Committee
Executives from the three top insulin makers faced a very skeptic congressional crowd on Wednesday as they were grilled on the unjustified rising prices of a lifesaving drug.
The Oversight and Investigations Subcommittee heard from executives from Eli Lilly, Novo Nordisk, and Sanofi. Tempers flared as lawmakers grew impatient and frustrated at the blame game and lack of accountability and solutions.
A few arguments made by the executives did more harm than good. In one instance, lawmakers cast doubt on the effectiveness and availability of patient assistance programs that some executives bragged about because “it takes weeks to get into and there’s no transparency in those,” said Rep. Joe Kennedy (D‑MA).
Sanofi’s Executive Vice President for External Affairs, Kathleen Tregoning, came under fire for her comments about a new program that, starting in June, will make a month-long supply of insulin available to uninsured patients for $99. “You announced (the program) today when you’re in front of Congress?” asked Kennedy in disbelief.
Chairman Frank Pallone (D‑NJ) pressed drugmakers on the issue of list prices, suggesting a system where the government sets those prices. The drug companies were quick to reject that approach, adding that simply lowering prices may not help patients at the pharmacy counter. The three PBMs represented at the hearing also took some heat during questioning.
Rep. Buddy Carter (R‑GA), the only pharmacist member of Congress, had salient comments for them, pointing to consolidation of PBMs. (Three PBMs cover 80% of the market share and are also vertically integrated within major insurance companies – CVS/Caremark/Aetna; Express Scripts/Cigna; and Optum/United).
“You have done something that I have wanted to do for four years and that is to create bipartisanship around an issue. What you have witnessed here today is bipartisanship. This is going to end,” Carter said in reference to the complicated arrangements that drive up the prices of insulin and out-of-pocket costs for diabetic patients.
STAR Act to demand price transparency from companies and PBMs
The House Ways & Means Committee on Tuesday unanimously approved drug-pricing legislation that would demand price transparency from drugmakers and pharmacy benefit managers.
The STAR Act would:
- Require drug manufacturers to publicly justify large price increases for existing drugs and high launch prices for new drugs
- Require applicable manufacturers to report to the Secretary of Health and Human Services the total aggregate monetary value and quantity of samples provided to covered entities.
- Require the Secretary to conduct a study on inpatient (Medicare Part A) drug costs, including trends in the use of inpatient drugs by hospital type.
- Require the Secretary to publicly disclose the aggregate rebates, discounts, and other price concessions achieved by pharmaceutical benefits managers (PBMs) on a public website, so consumers, employers, and other payers can understand and compare the discounts PBMs receive.
- Require all drug manufacturers to submit information to the Secretary on the average sales price (ASP) for physician-administered drugs covered under Medicare Part B.
