The Senate Finance Committee discussed ways to combat rising drug prices at its March 30 meeting "Hearings to Examine Pharmacy Benefit Managers and the Prescription Drug Supply Chain, Focusing on the Impact on Patients and Taxpayers."
The committee's discussions focused on Pharmacy Benefit Managers (PBMs) and their practices, which have come under fire for artificially inflating prescription-drug costs for seniors and those on life-saving medications.
Committee Chairman Sen. Ron Wyden (D-Ore.) said that PBMs were originally intended to use access to drug data not widely available to negotiate lower prices for consumers; however, when Medicare Part D was introduced in 2006, PBMs “shifted into overdrive” in a larger market involving more than 180 million Americans.
“It’s increasingly apparent that PBMs are using their data, market power and know-how to keep prices high and pad their profits instead of sharing the benefits of the prices they negotiate with consumers and the Medicare program,” Wyden said. “I believe this is an industry that is going in the wrong direction, and that’s having a big impact on the prices Americans are paying at the pharmacy counter.”
The hearing sought to “modernize the for the road” for PBMs, Wyden said, adding that he and ranking member Sen. Mike Crapo (R-Ind.) have long been concerned about the impact of drug prices on seniors, especially federal health programs, particularly involving PBMs and their hidden pricing structures.
“We need an all-of-the above approach to transparency” to PBMs and drug prices, Crapo said.
With the expansion of Medicare Part D in 2006, PBMs contributed to rising drug prices by helping drive up costs and offering “rebates” to customers, then pocketing the difference, according to Robin Feldman of the University of California’s School of Law."It’s like a store that raises the price of a coat before putting it on sale,” she told the committee.
Prescription prices for 65 common medicines have tripled in the past 15 years, Feldman said, and PBMs don’t disclose details of the deals they make with manufacturers to the health plans, Feldman said, and since three benefit management companies control most of the market, it’s an effective monopoly. “It is not a free or fair market,” she said.
Karen Van Nuys, of the University of Southern California, said drugs are often sold at a lower rate to cash buyers in stores such as Costco over Medicare patients using PBMs on 184 comparable generic drugs.
“Medicare could have saved $2.6 billion in 2018 on just those 184 drugs if they had been purchased without insurance at Costco,” Van Nuys said to the committee.
Attorney Jonathan E. Levitt, who has overseen numerous lawsuits involving PBMs, said that co-pays are generally based on list price, not net price, or the cost the drug management company incurs after its fees.
More transparency could already be in the works for PBMs, however.
Matthew Gibbs, president of the PBM company Capitol RX, said companies began reporting their revenues to the Labor Department in January, but he added that it’s too soon to tell what the department will do with the data. Gibbs said that most PBMs use a strategy of driving up prices, both to drug companies and pharmacies, while keeping pricing data hidden until the point of sale.
“We have all been conditioned that ‘this is how it is and has to be,’” he told the committee. “It’s simply not true.”
Another factor in drug prices is availability.
The Senate Committee on Homeland Security and Governmental Affairs recently commissioned a report on drug shortages, titled "Short Supply: The Health and National Security Risks of Drug Shortages," which reports that at the end of 2022 there were 295 active drug shortages, including drugs used in hospitals and to treat cancer, as well as more common medicine.
CNN reported that one cause of drug shortages was the closure of a Shanghai pharmaceutical plant which produced material used in radiological scans, causing 50% of the U.S.'s supply of the material to become immediately unavailable. Dr. Andrew Shuman, a surgeon with the U.S. Department of Veterans Affairs, told the committee that the plant closure forced health care providers to decide which patients could get the tests they needed and which could not.
"This impacted veterans literally overnight, where we needed to make decisions about whether we were going to allow some scans to be done to evaluate someone’s cancer or treat someone’s heart disease,” Shuman said. “Veterans deserve better, and we should not be reliant on a supply chain that’s that tenuous.”
The U.S. China Business Council reported there is insufficient data to determine the extent to which the U.S. pharmaceutical supply chain is dependent on China, but cited a report that estimated 7% of active pharmaceutical ingredients used to manufacture drugs are sourced from China. The council estimated that China accounts for approximately 12% of foreign-sourced APIs, either directly or through a third country.
In increasing instances, PBMs are buying out pharmacies, meaning they get paid twice for drugs, in rebates from manufacturers and when the patient buys the drug. Levitt said that often times, when drug prices have been lowered or the profits to PBMs have been limited, PBMs will simply close the pharmacies, “creating pharmacy deserts, particularly in rural areas,” Shuman said.
