PBMs Battle Bipartisan Scrutiny As Lawmakers Eye Industry Reform

In a House Committee on Oversight and Accountability hearing Tuesday, representatives from across the aisle pressed executives from the largest pharmacy benefit managers in the nation — CVS Caremark, UnitedHealth Group’s Optum Rx and Cigna’s Express Scripts — on their role in rising prescription drug costs.

While congressional hearings on PBMs have ticked up in frequency, it is rare for lawmakers to hear directly from top decision-makers at the companies. The last time was in 2019, when a different group of executives appeared before the Senate Finance Committee.

That changed yesterday when Adam Kautzner, president of Express Scripts; David Joyner, president of CVS Caremark; and Patrick Conway, CEO of Optum Rx, testified. Collectively, their companies control approximately 80% of the U.S. prescription market.

The hearing was the third in a string of congressional hearings targeting PBMs and began just hours after committee Chairman James Comer, R-Ky., released a new report summarizing a 32-month investigation into how PBMs raise prices and reduce consumer choice.

PBMs are middlemen in the pharmaceutical supply chain that negotiate drug prices with pharmaceutical managers on behalf of insurers and employers, and reimburse pharmacies for dispensing prescriptions.

The companies maintain they lower drug costs for their clients. However, they’ve found themselves at the center of mounting public criticism, with about one-third of people reporting in a recent KFF survey they did not take a medication they need because of high costs.

PBMs are also facing a number of lawsuits over their business practices from state attorneys general and independent pharmacies, as well as pressure from the federal government.

The Federal Trade Commission is reportedly preparing to sue CVS Caremark, Express Scripts and Optum Rx over how they negotiate drugs with pharmaceutical manufacturers, according to the Wall Street Journal. The lawsuit follows the FTC’s scathing report earlier this month about how PBMs’ business practices contribute to higher costs and less consumer choice.

The Pharmaceutical Care Management Association, the PBM industry lobby, decried the report as one-sided and based too heavily on anecdotes.

Tuesday’s House committee report adds fuel to the fire, slamming the industry for steering patients to pharmacies the PBM owns and favoring more expensive brand-name drugs on their formularies, or list of covered drugs, which result in higher rebates paid to them by drugmakers.

The report found 300 examples of the three PBMs preferring medications that cost at least $500 more per claim than a safe alternative medication excluded from their formularies.

The executives arrived on the Hill armed with a report of their own, published by economic consulting firm Compass Lexecon, seeking to refute the narrative painted by the committee. The executives argued PBMs pass through almost all rebates to plan sponsors and have operating margins below 5% in recent years.

Representatives weren’t buying it.

“On one hand we have PBMs claiming to reduce prescription drug prices, and on the other hand we have the Federal Trade Commission, we have major media outlets like the New York Times and we have at least eight different attorneys generals, Democrats and Republicans, who all say PBMs are inflating drug costs,” said Rep. Raja Krishnamoorthi, D-Ill. 

“This is why just about every state now is taking up PBM reform,” Comer said. “There’s a credibility issue.”

Executives maintained their services provided cost savings for consumers.

Optum Rx offered more than $2,000 in average savings per consumer annually, according to Conway.

Kautzner said Express Scripts saved its clients $64 billion last year and kept out-of-pocket costs on a per-prescription basis at $15, “despite brand manufacturers raising drug prices on 60% of those products.” 

Joyner sought to place blame on the pharmaceutical industry, stating “little or no competition” for brand-name drugs spurred high prices.

He said PBMs serve as a necessary tool to help lower costs, offering the example of AbbVie’s autoimmune drug Humira. CVS dropped Humira from its major formularies in April and now only covers cheaper biosimilars, Joyner said, resulting in $500 million in savings for employers and health plans.

“Let me be clear, we do not contribute to the rising list prices,” Joyner said. “Hampering our ability to negotiate lower drug cost only benefits the pharmaceutical manufacturers. These drug manufacturers who testified on Capitol Hill said they would not lower the list prices if rebates were eliminated. It would only remove an essential tool and our ability to deliver lower cost for medications.”

Representatives also pressed executives on whether they routinely steered patients toward pharmacies they owned, citing concerns from independent pharmacists who say PBMs are running them out of business.

Krishnamoorthi cited CMS figures showing price concession fees pharmacies pay to PBMs increased 107,400% between 2010 and 2020 — a rate of increase she said “literally staggers the imagination.”

The executives all maintained they do not steer patients toward preferred pharmacies and would not commit to altering policies.

“We do provide patient options, including home delivery, and will continue to provide those options for patients,” Optum’s Conway said.

“We carry out the benefit designs that our clients choose,” said Kautzner.

During the hearing, multiple representatives called for PBM reform. 

Congress has seemed poised to take up the issue in recent months and introduced several bills last year tackling the issue. However, lawmakers have yet to take concrete action.

Most recently, the House Oversight Committee advanced bipartisan legislation in February that would require PBMs to unlink the fees they charge insurers from the price of drugs, among other changes.