Middlemen who play a key role in how much prescription
drugs
cost have received renewed scrutiny in the 118th
Congress
as lawmakers on both sides of the aisle push for increased transparency in drug pricing.
The House Committee on Oversight and Accountability launched an investigation into pharmacy-benefit managers, or PBMs, third-party administrators that function as intermediaries between
insurance
companies and consumers, and the Senate Commerce Committee has reviewed legislative solutions that would prohibit PBMs from charging health plans more for a drug than they reimburse to
pharmacies
.
“I think both Republicans and Democrats, as they learn more, can certainly kind of come to agreement on that, you know, markets work based on transparency,” said Wayne Winegarden, senior fellow in business and economics at the Pacific Research Institute. “Well, here you have middlemen creating all sorts of opacity. That’s problematic, and I think that’s something that left- or right-of-center people can agree that markets don’t work when prices aren’t transparent.”
THE GOP’S RECKONING WITH ENTITLEMENT PROGRAMS
PBMs negotiate drug spending with manufacturers and generate profits through administrative fees and spread pricing, a practice in which PBMs charge health plans and their customers more for a prescription drug than what they reimburse the pharmacy and keep the difference. For example, PBMs could purchase a five-day supply of a generic antibiotic prescription from a pharmacy for $5.19 and turn around and bill a health insurer $26.87 for the same supply, profiting $21.68 on the sale,
according
to the Advisory Board.
High drug pricing has been a rare target for bipartisanship in the new Congress, with Republicans and Democrats giving an early focus on PBMs’ role. The scrutiny on PBMs has been welcome news for the pharmaceutical industry, which argues that PBMs’ consolidation with health plans and pharmacy chains has driven up drug costs. PBMs, however, have placed the blame on drug manufacturers’ high list prices on drugs and claimed they are essential to negotiating patients’ discounts.
Lawmakers have proposed several bipartisan policies to address the matter. Sens. Chuck Grassley (R-IA) and Maria Cantwell (D-WA) reintroduced the Pharmacy Benefit Manager Transparency Act of 2023, which aims to increase drug pricing transparency by empowering the Federal Trade Commission and state attorney to stop “unfair and deceptive PBM business practices,”
according
to a summary of the bill.
“Opaque middlemen and anti-competitive practices have resulted in unacceptably high prescription drug prices. Access to life-saving medication shouldn’t be a partisan issue, which is why I’ve led the charge to solve this problem in a bipartisan fashion,” Grassley said in a statement to the Washington Examiner.
President and CEO of the Pharmaceutical Care Management Association, a trade association representing PBMs, JC Scott said the legislation gives the FTC an “egregious expansion of the power, authority, and jurisdiction” that could result in higher drug prices for patients.
Republicans have also used their oversight authority to review PBM practices, as well as oversee pricing controls on prescription drugs for Medicare beneficiaries set in the newly enacted Inflation Reduction Act. The House Committee on Oversight and Accountability investigation has called on the largest PBMs — CVS Caremark, Express Scripts, and OptumRx — that control roughly 80% of the market to provide documentation to justify their practices.
The renewed focus on drug pricing comes as President
Joe Biden
makes lowering healthcare costs a tenet of his health budget for the year. Biden has proposed almost to double the number of drugs subject to Medicare pricing negotiation and to cap the cost of insulin at $35 for people with private insurance, expanding on provisions in the Inflation Reduction Act.
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Some Republicans have pushed back on efforts to expand governmental authority, arguing it stifles prescription drug competition and would therefore raise prices.
“The Inflation Reduction Act is an attempt to slap on controls in order to fix a real problem when the actual problem is that the market is not functioning properly,” said Winegarden. “The better way to approach it is, you know, fix the market problem, find out what was structurally wrong, and fix it.”
