PBMs in the D.C. Hotseat

After years of operating pretty much in the background, pharmacy benefit managers (PBMs) are finding themselves in the political and legislative spotlight – and not in a particularly flattering and advantageous way.

This week, the Senate Finance Committee chair and ranking member released a bipartisan four-point outline for legislation they say they will draft this summer that aims to curb PBM practices the senators say results in misaligned incentives and “information asymmetries” and contributes to financial difficulties and closures of independent and regional pharmacies. The announcement came after a committee hearing in late March.

Meanwhile, the Sen. Bernie Sanders, the chair of Senate Committee on Health, Education, Labor & Pensions announced yesterday that he had scheduled a hearing for May 10 at 1 p.m. Eastern Time on insulin prices. Among those scheduled to testify are the heads of the three largest PBMs: David Joyner,executive vice and president of pharmacy services, CVS Health; Adam Kautzner, Pharm.D., president of Express Scripts; and Heather Cianfrocco, J.D., CEO of Optum Rx. The insulin manufacturers will be president by David Ricks, chair and CEO of Eli Lilly; Lars Fruergaard Jorgensen, president and CEO of Novo Nordisk; and Paul Hudson, CEO of Sanofi.

The Pharmaceutical Care Management Association, the trade association for the PBMs, responded with an email on Friday pointing to Wharton podcast interview with Lawton Robert Burns, Ph.D., MBA, a professor at the Wharton School of the University of Pennsylvania, during which Burns described PBMs as the latest in a series of middlemen in the healthcare supply chain. “They are misunderstood at the least and vilified at the worst,” said Burns who was one of the witnesses at a Senate Finance Committee hearing on PBMs.

Sen. Ron Wyden, chair of the Senate Finance Committee and an Oregon Democrat, and Sen. Mike Crapo, the ranking member of the committee, portrayed the goal of their legislative effort as modernization of the drug supply chain and readjustment of incentives and disclosure requirements rather than a full-on attack on PBMs and their business practices. They used the term “intermediaries” many times in the two-page document rather than PBMs

“Ideally, all stakeholders participating in the supply chain, including pharmacy benefit managers, should have an incentive to prefer medications that deliver the best results at the lowest cost,” says the framework from Wyden and Crapo. “Unfortunately, under the current system, higher drug list prices often translate into higher compensation for the intermediaries,

The framework says that PBMs are paid fees by both health plans and manufacturers and that “the multisided nature of the market can create potential conflicts of interest.”

The statement also mentions insufficient transparency into prices, “trends and ambiguities in Medicare’s any willing pharmacy rules and Medicaid audits showing that “intermediaries” drive up costs by charging health plans more for pharmacy reimbursement than what they pay pharmacies, which in the industry is known as spread pricing.

The policy solutions that the framework suggests include separating PBM compensation from prices, ensuring discounts negotiated by PBMs produce savings for senior, and modernizing the any willing pharmacy rules.

The scrutiny and criticism of the PBM industry isn’t limited to the Senate. In early March, Rep. James Comer, chair of the House Committee on Oversight and Accountability, announced that he was launching an investigation into the industry.And last year, the Federal Trade Commission announced it was launching into the industry.