PBM Executives Threatened With Fines And Jail Time For Alleged Perjury In House Hearing

The chair of the powerful House Committee on Oversight and Accountability is threatening the leaders of the three largest pharmacy benefit managers in the country with steep fines — or jail time — for allegedly lying in a recent congressional hearing.

Chairman James Comer, R-Ky., sent letters Wednesday to Patrick Conway, the CEO of UnitedHealth’s Optum Rx; Adam Kautzner, the president of Cigna’s Express Scripts; and David Joyner, the president of CVS’ Caremark arguing that statements they made in a July hearing contradicted committee findings and research by the Federal Trade Commission.

During the hearing, Conway, Kautzner and Joyner testified that their PBMs treat affiliated and unaffiliated pharmacies equally when setting rates, negotiating contracts and telling patients where to dispense their medications.

Those statements were lies, suggests Comer’s letters, which cite committee and FTC evidence to argue that PBMs increase revenue at their own pharmacies at the expense of other businesses.

Comer asked the executives to correct their statements by Sept. 11 or face possible legal action — including up to five years in jail, in addition to fines that could reach hundreds of thousands of dollars.

Express Scripts denied Comer’s allegations, while CVS said it was reviewing the letter. UnitedHealth did not respond to a request for comment.

“We stand firmly behind Dr. Kautzner’s testimony and strongly refute and disagree with this letter’s allegations,” an Express Scripts spokesperson said in a statement. 

Comer’s allegations

PBMs — influential middlemen in the pharmaceutical supply chain — are facing intense public ire for business practices that critics say contribute to the high cost of drugs in the U.S.

The House Oversight Committee held a hearing this summer that gave lawmakers a rare chance to quiz PBM executives directly about the business practices of their companies, which negotiate rebates on drugs with pharmaceutical companies in exchange for placement on health insurers’ formularies. PBMs also contract with pharmacies to dispense medication.

During the hearing, lawmakers on both sides of the aisle put Conway, Kautzner and Joyner on the defensive over PBMs’ role in rising costs and shrinking patient access to drugs.

Members of Congress — as well as antitrust regulators in the FTC — have expressed particular concerns about the considerable market power of Caremark, Express Scripts and Optum Rx, which jointly cover almost 80% of the U.S. prescriptions.

Their parent companies CVS, Cigna and UnitedHealth all include a major PBM, health insurer and pharmacy network. That vertical integration incentivizes and gives the conglomerates the ability to give owned pharmacies preferential treatment, including directing patients to those sites and paying them higher rates, according to a July report from the FTC.

Optum Rx, Caremark and Express Scripts also have enough leverage to strong-arm unaffiliated pharmacies into unfavorable contracts, the FTC found.

Yet Conway, Kautzner and Joyner testified during the July hearing that the PBMs do not steer patients to affiliated pharmacies for medications or pay affiliated pharmacies more than other pharmacies in their networks.

Conway also testified that Optum Rx doesn’t engage in opt-out contracting, where pharmacies can unknowingly have the terms of their contract changed. Express Scripts’ Kautzner said that the PBM allows independent pharmacies to negotiate their contracts, including reviewing and suggesting changes to a draft.

On Wednesday, Comer said each claim was nonsense.

Testimony of equitable pharmacy reimbursement “contradicts both the Committee’s and Federal Trade Commission’s (FTC) findings that CVS Caremark as well as Express Scripts and Optum Rx, reimburse PBM-owned pharmacies at a higher rate than non-affiliated pharmacies,” the chairman wrote in his letter to CVS’ Joyner.

Comer cited a whistleblower email received by the committee as well as the FTC’s staff report that found PBM reimbursement for their own pharmacies is notably higher than nonaffiliated pharmacies.

The committee also has evidence that Caremark, Express Scripts and Optum Rx steer patients to owned pharmacies, according to Comer. Express Scripts, for example, uses data it receives from competing pharmacies to encourage patients to move their prescriptions to its own mail-order pharmacy, Comer wrote in his letter to Kautzner.

Meanwhile, the committee and the FTC have reviewed evidence finding independent pharmacies don’t have the leverage to negotiate terms when enrolling in PBMs’ pharmacy networks, and PBMs can make changes without them knowing, the Kentucky congressman said.

Comer cited an instance where an independent pharmacy unwittingly accepted an amendment to their payment agreement with Optum Rx by simply submitting a claim.

PBMs maintain that they save employer and health plan clients money, while making it easier for consumers to access pricey drugs. The companies instead point to pharmaceutical companies, which set the list price of medication, as behind the the high cost of many drugs.

“We are proud of the work our clinicians and teams do every day to improve health and lower the cost of medications for the millions of Americans we serve,” the Express Scripts spokesperson said.

Pressure has been mounting on the federal government to act to curb the high drug prices, at a time when roughly one-third of Americans report not taking medication they need because of cost. The Inflation Reduction Act passed in 2022 gave Medicare the ability to negotiate the price of certain drugs, which is expected to reduce spending at the expense of pharmaceutical companies’ revenue.

PBMs are also unlikely to sidestep reform, given ongoing congressional scrutiny in the form of hearings and legislative proposals to rehabilitate the pharmacy supply chain. Most bills have centered around injecting more transparency into PBMs’ business practices, something that industry leaders have said they’re open to.

“There is intensified activity around transparency, and we are highly supportive of transparency so long as it is targeted and constructive,” Cigna CEO David Cordani said on a call with investors last fall.

However, more recently Cordani has promised to be more aggressive in defending Express Scripts from critics in Washington, a sentiment echoed by CVS CEO Karen Lynch in second-quarter earnings calls.

In shoring up the defenses around PBMs, executives are looking to shelter businesses from change that are major drivers of revenue and profit. Express Scripts, for example, brought in $26.6 billion in revenue in the second quarter — 44% of Cigna’s entire topline.