WASHINGTON — The much-maligned pharmacy middlemen escaped largely unscathed during a high-profile congressional hearing Tuesday — but the powerful bipartisan duo behind the hearing now appears intent on legislating, and it looks like increasing transparency will be their primary goal.

Executives for the country’s five largest pharmacy benefit managers, the middlemen that negotiate with drug makers over the price of their drugs, were expected to face hard questions about their role in the ever rising price of prescription drugs from members of the Senate Finance Committee. But the PBM executives largely parried the senators’ questions, none of which shone too harsh a spotlight on the industry’s practices.

Both the committee’s Republican chairman, Chuck Grassley (Iowa), and his Democratic counterpart, ranking member Ron Wyden (Ore.), have long criticized the role of PBMs, and appear intent on passing some form of PBM legislation this Congress.


“Ranking member Wyden and I are committed to working on a bipartisan basis,” Grassley said. “Our next step is to work with committee members to develop policies to help Medicare and Medicaid patients and protect taxpayers.”

How hard that legislation hits PBMs, however, remains to be seen. And PBMs likely breathed a collective sigh of relief Tuesday when Grassley made abundantly clear that he is not intent on regulating PBMs out of business.

“This system of private entities negotiating is what I envisioned as an author of [the] Part D program,” Grassley said. “I still believe that this is absolutely the right approach. … However, as this hearing indicates, it’s our duty to understand how the system is working today and what we can do to improve it.”

Not every lawmaker was so willing to praise the industry’s business model, but even then, many of the most pointed questions at the hearing fell flat, such as Sen. Debbie Stabenow’s (D-Mich.) request that PBMs voluntarily identify “egregious anti-consumer PBM practices taking place anywhere in your industry.”

Other senators, like Sen. Sheldon Whitehouse (D-R.I.), took blame off the executives sitting before the Senate, and instead used their five minutes of questioning to slam drug makers. “I stand in awe of the pharmaceutical industry’s jujitsu magic to have gotten their prime antagonists to become the focus of the problem,” Whitehouse said.

Grassley has said the committee has no immediate plans to call other elements of the supply chain before his committee. And as his committee turns to legislating in earnest, it appears the committee will focus on increasing transparency in the PBM industry.

“Our goal is to end this secrecy, get to transparency,” Grassley told CNBC in an interview prior to the hearing.

PBMs have fiercely opposed full disclosure of the secretive rebates and discounts they negotiate, claiming such disclosures would hamper their ability to negotiate drug prices.

PBMs, however, expressed support Tuesday for a more incremental transparency measure — a bill from Sen. Tom Carter (D-Del.) that would let Medicare advisers see the secret rebates PBMs negotiate so they could better suggest policies for Congress to pursue.

“Let’s hope we can at least get that piece of legislation moving,” said Whitehouse.

Wyden, however, appeared dead set on doing more than tinkering around the edges.

In the final moments of the hearing, Wyden asked the five executives whether they would support a law banning spread pricing in Medicare and Medicaid, the practice by which PBMs are paid partially based on the difference between the sticker price and the negotiated price. The practice has been lambasted by states around the country, even prompting some states to cut PBMs out of their state health plans altogether, or totally rewrite their PBM contracts.

While such a ban would largely upend the PBM business model, the executives all said they would support the ban. Executives from CVS (CVS), Prime Therapeutics, and Humana (HUM) said so emphatically; Steve Miller from Cigna (CI) maintained that the company would support such a ban “if that becomes the market standard.” Optum’s John Prince said the company is neutral on the idea, but emphasized that it already does not use spread pricing in Medicare.

“Good, making some headway,” Wyden responded. “Going to save taxpayers some money.”

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  • These hearings were quite disappointing. True, elimination of D.I.R fees were were not discussed . Many subjects were not discussed. You would think this congressional committee would have grilled these guys on the secrecy of the PBM’s pricing tactics . How about the intentional underpayments to independent pharmacies. Why weren’t they asked , Who keeps these D.I.R fees that are clawed back from independent pharmacies? (Duhh ! what do you think ?). Why weren’t they asked if they would be willing to “Level the playing field”. Agree to the “Any Willing Pharmacy” proposal where a consumer has the right to have their prescription filled by any willing pharmacy that will fill the prescription. Consumers should not be mandated to have their Rx’s filled by a PBM owned mail order house.
    Why didn’t this committee ask to see how much CVS pharmacy was reimbursed for the top 100 most popular drugs for the last year.In addition, how much each one of the PBM’s mail order pharmacies were reimbursed, and then how much independent pharmacies were reimbursed. I guarantee you not one of those PBM’s would have agreed to this request.
    Are the PBM’s retail pharmacy operations, weather it be CVS pharmacies , or any of the PBM’s mail order houses CHARGED ANY D.I.R FEES????? (Anyone out there want to bet me ??).
    What was missing from yesterday’s hearings was someone from NCPA or someone from any of the dozen or so states (to date),that were fleeced for billions of dollars (in total) independent pharmacy organizations to ask some questions .
    Until PBM’s are forced to open their books for everyone to see , The Mafia bullying of the PBM’s will continue. And as the world turns every day, We’ll all wake up tomorrow, the sun will rise, we’ll all go to work, and there will be independent mom & pop pharmacies closing every day. All because of the greed of the PBM’s and the inability of our government to change it . How sad is that ……..

  • The key now is to watch who the PBM’s lobbiests talk to. Bet some promises for future campaign contributions get made in the next week.

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