Congressional hearing adds to building scrutiny of PBMs


On May 5, the U.S. Senate Commerce, Science and Transportation Committee’s Subcommittee on Consumer Protection, Product Safety, and Data Security held a hearing titled, “Ensuring Fairness and Transparency in the Market for Prescription Drugs,” which “examine[d] steps Congress can take to increase transparency in drug prices, require PBMs to operate fairly, and ensure the FTC has the authority it needs to stop unfair practices in the prescription drug market.”

A recording of the hearing can be found here. This hearing almost exclusively focused on the need for PBM reform and regulation in order to lower drug prices and generate transparency for consumers. The hearing is also an example of the consistent and growing criticism of PBMs by bipartisan Members of Congress as lawmakers continue to question PBM business practices while considering a multitude of bills to generate PBM oversight and enforcement authority by the FTC.  A few highlights from the May 5 hearing included pointed disapproval of PBMs from:

  1. Subcommittee Chair Richard Blumenthal (D-CT), who cited lack of information provided to beneficiaries and PBM incentives to force beneficiaries to have to use high-cost drugs. Chair Blumenthal repeatedly asked the witness JC Scott, President and CEO of the Pharmaceutical Care Management Association, whether PCMA would support the FTC conducting a study on PBMs’ commercial activities. Mr. Scott replied that PCMA would not oppose working with the FTC on such a study if it comprehensively examined the entire pharmaceutical chain – a statement consistent with PCMA’s relatively recent strategy of claiming that wholesaler PSAOs behave similar to PBMs.
  2. Full Committee Chair Maria Cantwell (D-WA), who was critical of “phantom fees” charged by PBMs and said that Washington (state) outlawed them in 2019. Chair Cantwell asked the witnesses what the Committee needs to do to ensure FTC has the authority to properly police this market; and
  3. Senator Marsha Blackburn(R-TN), who stressed the need for transparency, and pointed out onerous audits, claw back provisions and patient steering. She stated perhaps the two best soundbites from the hearing: “sunlight is the best disinfectant,” and that it is “unacceptable” that CMS, in its recently released final Part D rule, delayed until 2024 the policy of requiring plans to subtract the fees that PBMs charge pharmacies from drug prices paid at the point of sale.

The hearing also drew attention to two pieces of PBM legislation:

  1. 1388, the bipartisan Prescription Pricing for the People Act of 2021, introduced by Senate Finance Committee Ranking Member Chuck Grassley (R-IA), with Senators Cantwell and Blumenthal as the two Democratic, and Senator Blackburn as one of the 7 Republican, cosponsors. The bill includes the key, previously mentioned FTC study section and requires the agency to provide Congress with recommendations to increase transparency in the supply chain and prevent anticompetitive practices.
  2. S. 298, the Pharmacy Benefit Manager Accountability Study Act of 2021, sponsored by Senator Blackburn, which requires the GAO to study and report on the role of PBMs in the pharmaceutical supply chain and recommend legislative actions to lower the cost of prescription drugs.    

Other hearing witnesses included:

  • David Balto, an antitrust attorney and former FTC official, who has been critical of PBMs for over two decades. Mr. Balto said that: 1) The FTC errs by focusing almost exclusively on whether the impact of anticompetitive PBM behavior harms the plan sponsor, instead of looking at a wide variety of negative impacts upon the entire prescription medication industry; 2) PBMs drive community specialty pharmacists out of business through requiring use of specialty pharmacies tied to integrated PBMs/plans; and 3) Congress should consider instructing the FTC to identify specific, unfair practices methods that harm consumer, such as gag clauses and DIR fees.
  • Robin Feldman, Professor and Researcher, UC Hastings College of Law, who effectively spoke about PBM practices in plain terms, but received the fewest questions; and
  • Craig Garthwaite, Professor and Director of the Program on Healthcare, Kellogg School of Management, Northwestern University, who gave a muted criticism of PBMs, including refusing to make general statements about many PBM behaviors before seeing the findings of a sufficiently thorough study of PBMs, including insurers and plan sponsors (“. . .over half of employers are in contracts now where 100% of rebates are going back to the plan sponsor.”).

We will keep you informed of further PBM developments during this Congress.

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