Pharmacy Benefit Companies Negotiate with Big Drug Companies to Lower Prescription Drug Costs for Patients and Families
Last week, the U.S. Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing, “The Need to Make Insulin Affordable for All Americans,” where three pharmacy benefit companies testified on the critical role their companies and the services they provide play in making prescription drugs, such as insulin, more affordable for patients and families.
David Joyner, Executive Vice President and President of Pharmacy Services, CVS Health, described how pharmacy benefit companies encourage the use of more affordable prescription drug alternatives, such as generics, and encourage competition among drug companies, which is the most effective way to lower costs. Joyner also explained how rebates are not related to higher prescription drug costs. He said:
“Today, it’s important to note that more than 90 percent of all prescriptions dispensed are generic and they represent just a little bit more than 18 percent of the total spend. By using competition in the generic categories, generic prices have been deflationary over the last decade. So now we are securing affordability for the final 10 percent of the name-brand drugs, and that is our focus. Competition in the branded marketplace is critical. And we use this competition to deliver discounts to our customers. By negotiating rebates and discounts, we lower costs for our clients and their members where competition exists. Not surprisingly, many drugs without competition have high list price medications without discounts, and account for much of our client’s spending today…So drug manufacturers claim rebates are the reason for price increases, but the facts show otherwise. Government study after government study has concluded that price increases are not the result of rebates or discounts.”
Adam Kautzner, PharmD, President, Express Scripts, emphasized how drug companies’ abuse of the patent system keeps drug prices high, and the way pharmacy benefit companies are working with independent pharmacies to ensure all Americans can access the drugs they need. He said:
“None of this means the system cannot be improved. Drug manufacturers seek the highest price point possible and exploit the patent system and marketing practices to maintain monopoly status for their brands.”
“As a pharmacist and a rural American myself from Missouri, it’s extremely important for our organization to ensure that patients do have access, regardless of where they live in this country. Unfortunately, today, less than 10 percent of physicians live in rural America, even though over 20 percent of the population does. So, we’re working with independent pharmacies, in one, in improving overall reimbursement rates for rural pharmacies, on average of 10 percent. Secondly, we’re working with them to do things beyond pharmacy to provide improved access to care of other services, whether those be for diabetes testing, vaccines, doing components around behavioral health testing, opioids…We’re working to enable rural and independent pharmacies so that they can be much more of a health center, so patients have access to quality care regardless of what zip code they live in America.”
Heather Cianfrocco, Chief Executive Officer, OptumRx highlighted the role pharmacy benefit companies play in securing savings and how drug companies keep prices high. She said:
“Our team works every day to make prescription drugs more affordable. We do this by conducting evidence-based clinical review of medications, negotiating with manufacturers and pharmacies to bring down the cost of drugs. Providing tools to help consumers and their providers use their benefits and find the lowest cost options…Without our negotiations with manufacturers, the cost of drugs would be even higher. PBMs save the system $145 billion annually. People need consistent affordable access to insulin. In the centuries since insulin was discovered, it has saved and improved countless lives. But over the last decade, manufacturers’ list prices for insulin have nearly doubled.”
See how market forces and pharmacy benefit companies are working to lower insulin costs HERE.
Additionally, the HELP Committee held a legislative markup on S. 1339, the Pharmacy Benefit Manager Reform Act, which would create a one-size-fits-all contracting mandate that ignores the unique needs of employers to make decisions about how they choose to design their pharmacy benefits. Unfortunately, the Committee advanced legislation without allowing common sense amendments that would preserve options for employers.
During the markup, U.S. Senator Rand Paul (R-KY) raised concerns over S. 1339 taking away choice for employers. He said:
“We’re told that PBMs are middlemen who drive up drug prices but insurance companies hire PBMs to do the opposite: to negotiate with drug companies to lower prices. The drug company wants to sell high, the insurance company wants to buy low. PBMs use their bargaining power to drive prices down, not up. The real problem with drug prices is that consumers are removed from what their drugs cost so they aren’t price conscious. There’s no market signal for what consumers would willingly pay so the only downward pressure on what drug makers will charge comes from PBMs. This bill bans spread pricing which small businesses and startups often choose because the PBM’s take on the additional risk for themselves. The big three PBMs have a diversified business model but some smaller PBMs depend on spread pricing for over 90 percent of their business. Banning these contracts may actually put smaller PBMs out of business…”
“We want to lower prices, we want prices, and we all do but realize what this bill does. This bill takes away choices so there is a choice in the marketplace between spread pricing and pass through. Every company has it. You’re going to take this choice away and he’s exactly right. Some labor unions actually like this choice and choose this. Some small businesses do. In fact, the PBMs compete on this model. The smaller PBMs absorb more risk and offer a cheaper product which is the spread pricing. Small businesses choose it on price and the smaller PBMs do it to try to take away market share from the bigger PBMs. So what this bill should be called is the “Consolidation of the PBM Market to Enhance the Monopolization of the PBM Trade” because that may be what happens here so I don’t think we’re being thoughtful on this.”
U.S. Senator Mitt Romney (R-UT) also spoke on the importance of employers having choice when choosing their pharmacy benefits, something S. 1339 restricts. He said:
“As you know, this legislation prohibits spread price contracting. My amendment would preserve the option for employers to consider spread price contracts but would require PBMs to also present a plan sponsor with at least one non-spread price contract. A vast majority of small and middle sized employers prefer spread price contracting because it’s lower cost and more certainty for them. That’s why they choose it. Making that illegal is not going to help small or mid-sized businesses. Our understanding as well is that the majority of unions also prefer spread price contracting so my amendment allows spread price contracting to be offered to employers and unions but it also says that the PBM has to provide a non-spread price option as well. I would note, that when infused with transparency, that this amendment provides spread pricing will provide employers predictability, risk mitigation, and encourage broader access to low cost generics. Prohibiting spread pricing will not save sponsors money. The CBO reported that this amendment, by the way, does not add or reduce the deficit. Instead, it could well result in PBMs increase in the amount of service fees so as a result, I am very much in favor of allowing if you will, consenting entities: unions, employers, and PBMs to enter into the contracts they think provide them the lowest cost of the greatest degree of certainty. At the same time, insisting on more transparency such that the entities will see an option which is a non-spread pricing option will be able to choose between them.”
Read PCMA’s statement on S. 1339 HERE.
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Learn more about public policy solutions that would promote competition in the prescription drug market and effectively lower prices for patients HERE.
PCMA’s recent Policy Forum, held on April 25, 2023, featured policymakers – including key Administration officials and Congressional staffers – and PBM executives to discuss how the public and private sectors are tackling drug costs and improving both the affordability and quality of care for patients. View the PCMA Policy Forum HERE.
The Hill recently hosted and PCMA sponsored an event titled, “Prescription for Change: Improving Competition to Lower Drug Prices,” where lawmakers and a panel of drug pricing and economic experts discussed the importance of promoting competition as the most effective way to lower prescription drug costs. Watch the event HERE.
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PCMA is the national association representing America’s pharmacy benefit companies. Pharmacy benefit companies are working every day to secure savings, enable better health outcomes, and support access to quality prescription drug coverage for more than 275 million patients. Learn more at www.pcmanet.org
