‘We have to get beyond the blame game’

Wyden at a March hearing

Sen. Ron Wyden (D-OR) suggested a ban on spread pricing for Medicare and Medicaid. Other Senators had asked whether the companies engaged in spread pricing. Four of the five responded that they do, but not for government health plans, while Prime Therapeutics said it doesn’t at all. Spread pricing is the practice of PBMs charging a health plan one amount for a drug but reimbursing a different, often lower, amount to the pharmacies, keeping the difference as profit.

“Not a lot of people up here [are] holding rallies for spread pricing,” Wyden said. “The reason why, you heard from Democrats and Republicans, is that spread pricing is a rip-off, plain and simple.”

Wyden asked the executives to answer, yes or no, whether they would support a ban. Cigna, CVS and Humana said they would; OptumRx was neutral, and Prime would not oppose. It was one of the more concrete policy solutions proposed over the entire hearing.

Wyden wrapped up the hearing by asking PBMs, pharma and other players in the healthcare system to stop blaming each other and bring more value to the system.

“The whole healthcare system, the citizen thinks this is all one big scam,” he said. “It’s a ripoff; they’re all scratching each other’s back trying to keep the prices up, and everyone’s blaming each other. My own view is every sector of American healthcare has to bring more value and lower prices. We have to get beyond the blame game.”

Cardin out of patience

Sen. Ben Cardin (D-MD)

Sen. Ben Cardin (D-MD) is exasperated with PBMs. The execs have largely advocated for using market forces, rather than government intervention, to control drug costs. Cardin asked what role PBMs can play in helping to reduce drug shortages using those market forces.

The execs fell back on previous talking points to encourage more generic and biosimilar competition, but Cardin wasn’t having it. He said he wants PBMs to take a more active role punishing drugmakers for shortages, instead of leaving it to the government.

“We all hear about using market forces, how market forces bring down costs. Why don’t you use market forces to bring down drug shortages?,” Cardin asked. “You can make a difference today. You can use market forces to say, look we won’t tolerate our subscribers not having access to medicine because there’s a single-source manufacturer. You don’t want the government to set prices, but you want the government to deal with shortages when you can deal with shortages. You have leverage over pharma manufacturers.”

In favor of transparency, but…

The executives tried to bat away Sen. Todd Young’s (R-IN) question about making negotiations more transparent. The companies accept already-standing requirements to share rebates with the government and with clients, but argued against sharing more widely.

The executives said that making the negotiations public would give other PBMs access to their data and could increase drug prices. They also said it could make drugmakers less willing to negotiate with them.

“We’re strong proponents of transparency,” Cigna’s Steve Miller said. “Patients deserve to know what they’re going to pay, but providing transparency for competition puts a floor on the price, not a ceiling. The ability to negotiate is enhanced by companies not knowing each other’s data.”

Brown goes to bat for biosimilars

Sen. Sherrod Brown (D-OH) asked the PBM execs their thoughts on how to help biosimilars gain a bigger foothold in the U.S. market. Brown took a swipe at pharma practices designed to prevent biosimilar competition, like patent lawsuits and deals to delay potential biosimilar manufacturers. The execs said their companies embrace biosimilars as a cost-controlling factor, and often treat them the same as their branded counterparts.

The executives noted that the long development and approval process at the FDA is hindering biosimilars. Brown also suggested that the exclusivity periods for branded drugs are too long.

“We’ve seen, even in space of insulin, that when we have that competition from biosimilars, we’re able to reduce [the patient’s] bill by 9%,” said CVS’s Derica Rice. “Having more competition on the market is extremely beneficial.”

Grassley imagines a world without rebates

Grassley’s first question hints at doing away with rebates between PBMs and pharma. He asked execs from Cigna, CVS and OptumRx what other practices they would use if they didn’t have rebates. CVS’s Derica Rice described price-transparency programs and point-of-sale rebates. Cigna’s Steve Miller said generics help PBMs keep prices and premiums low. OptumRx CEO John Prince said that no rebates “would take a lot of value out of the system and increase costs.”

Cigna, CVS Health execs on the spot

The first two PBM execs, Steve Miller, chief clinical officer of Cigna; and Derica Rice, EVP of CVS Health and president of CVS Caremark, attempt to explain the PBMs’ role in the drug supply chain after Grassley and Wyden say their practices are too opaque. Miller highlighted examples in which Cigna helped increase competition for higher-priced drugs by changing formulary coverage.

Both Miller and Rice expressed support for price transparency in the prescribing process. They described programs that would allow a doctor to see the cost of a drug for their patients, and other drugs’ costs, before prescribing it. Rice also said CVS supported FDA’s efforts to bring more lower-cost generics and biosimilars to the market.

‘One of the most confounding, gnarled riddles in American healthcare’

Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) have come out strong, laying out their problems with PBMs’ business model. Grassley condemned the lack of transparency in rebates, potential conflicts of interest when PBMs merge with insurers and PBMs’ role in insulin pricing. Wyden discussed PBMs’ sky-high profit margins, the companies’ role in “spread pricing” and the Medicare out-of-pocket cap.

“This committee looking at one of the most confounding, gnarled riddles in American healthcare today,” Wyden said. “Pharmaceutical benefit managers are among the most profitable companies in America. What it is that pharmaceutical benefit managers actually do to rake in all of these profits is a mystery.”


Setting the stage

Six weeks after pharma executives testified before Congress, the Senate Finance Committee has called leaders from pharmacy benefit managers (PBMs), the companies that work between pharma and insurers to negotiate drug prices and coverage, to testify.

PBMs have been a major focus of the drug-price debate. In President Donald Trump’s speech about his administration’s drug-pricing blueprint in May 2018, he took aim at PBMs, calling them “middlemen” and claiming the White House’s plan would eliminate them.

Leaders from Cigna, CVS, Humana, OptumRx and Prime Therapeutics are set to appear this morning. Lawmakers will likely focus on the confidential negotiations and rebates between PBMs and pharma and perhaps the several mega-mergers that have taken place in this space, including CVS and Aetna and Cigna and ExpressScripts.