[[link removed]]

PHARMA’S SECRET MIDDLEMEN ARE POISONING HEALTH CARE  
[[link removed]]


 

Helen Santoro
March 8, 2024
Lever News
[[link removed]]


*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

_ Following a lobbying blitz, Congress might punt all efforts to stop
shadowy pharmacy benefit managers from inflating drug prices and
killing small pharmacies. _

, (AP Photo/J. Walter Green)

 

Lawmakers from both parties and 39 state attorneys general joined
forces to stop the shadowy corporate middlemen behind rising drug
prices and the death of independent pharmacies. Now these reform
efforts are in peril, following nearly $50 million in industry
lobbying — including tens of thousands to Congress members who
sponsored reform legislation.

These largely unregulated middlemen, called pharmacy benefit managers,
serve as intermediaries between insurers and pharmaceutical
manufacturers, determining which drugs insurers will cover and how
much they cost. But they are incentivized to opt for the most
expensive medicines and slash drug reimbursement rates to maximize
profit, hurting both patients and small pharmacies.  

As Federal Trade Commission Chair Lina Khan just declared
[[link removed]]
at a White House roundtable on the matter, these “dominant
gatekeepers” have “outsized power to decide how people do or
don’t receive the life-saving prescription drugs they depend
on.” 

Concerns about pharmacy benefit managers, or PBMs, have reached such a
level that lawmakers from both parties have introduced more than 20
federal bills
[[link removed]]
to curb these companies’ power, and late last month, more than three
quarters of the nation’s state attorneys general sent a letter to
Congress
[[link removed]]
urging action on them. 

But days after the letter, it was revealed that Congress may not
include any of the reforms in the next federal funding package
[[link removed]],
which allocates money to health programs and services including
Medicare and Medicaid. This comes after PBMs spent a combined $47
million on lobbying in 2023.

Meanwhile, these companies are actively stonewalling
[[link removed]]
state and federal investigations into their practices.

“It is disheartening that Congress is as dysfunctional as they are
and the stakes [of PBM reform] rests on what gets put into federal
spending bills,” said Colorado Attorney General Phil Weiser, one of
the attorneys general who signed the letter to Congress. “There is
strong bipartisan support for this reform, and if this can’t get
into a bipartisan spending package, I don’t know what can.” 

While big pharmacies, insurers, and PBMs often like to blame each
other for high drug prices, in reality, they’re all part of the same
corporate scheme. The three major PBMs are owned by health care
behemoths — CVS Health, Cigna, and UnitedHealth — that together
have considerable control over both the pharmacy and insurance
markets. This means these conglomerates run nearly every stage of the
pricing process with hardly any checks on prescription drug costs. 

The proposed laws would combat high drug prices by requiring PBMs to
charge flat service fees under Medicare plans; increase transparency
around pharmaceutical payments to PBMs; and ban PBMs from charging
Medicaid and other providers more than they pay pharmacies for drugs
and pocketing the difference, a practice known as spread pricing
[[link removed]].

Lobbying on the bills came primarily from the three major pharmacy and
insurance companies that dominate the PBM industry. The Pharmaceutical
Care Management Association, a lobbying group that represents PBMs,
also spent $15.4 million lobbying on PBM legislation and other matters
last year, according to lobbying records. 

“It was a gut punch, I was sick, I was speechless,” said Brandi
Chane, who owns a local pharmacy outside of Fort Worth, Texas, of
Congress’ potential inaction on PBM reform efforts. “You’ve got
to be kidding me. We’ve shown [Congress] over and over and over
about the danger of PBMs and we’re not going to do anything
now?” 

In response to a request for comment, Greg Lopes, vice president of
public affairs and communications at the Pharmaceutical Care
Management Association, wrote in an email to _The Lever_, “This
year, Congress has held an unprecedented number of hearings focused on
PBMs as Big Pharma continues its extraordinarily high advertising
spending to blame-game others for high drug costs. It is imperative to
educate lawmakers on the value PBMs provide to the health care system
by lowering prescription drug costs and helping improve health
outcomes.” 

CVS Health, Cigna, and UnitedHealth did not respond to requests for
comment. 

Profits For The Middleman 

PBMs were created in the 1960s to negotiate drug prices and coverage
with pharmaceutical manufacturers and insurers. In theory, these
negotiations should help individuals enrolled in health insurance
plans save money by finding the best prices for consumers. In reality,
these middlemen often do the opposite.

That’s because PBMs are incentivized to deter insurers from covering
generic and cheaper medicines
[[link removed]],
as they are paid based on the discount they arrange with
pharmaceutical manufacturers, otherwise called a rebate, which critics
say is effectively a legalized kickback. Consequently, the more
expensive the drug, the larger the rebate, the more money that ends up
in PBMs’ pockets.  

“PBMs have an incentive to pick a drug that comes with a larger
rebate, so that they get a larger cut, even if the drug is more
expensive overall,” Zach Freed, advocacy and outreach manager at the
nonprofit advocacy group American Economic Liberties Project wrote in
a 2022 analysis
[[link removed]]. 

Freed cited a 2021 Senate investigation
[[link removed]]
that discovered PBMs use their aggressive negotiating tactics to
“extract more generous rebates, discounts, and fees from insulin
manufacturers,” which, Freed noted, contributed to “skyrocketing
insulin prices and discouraged price decreases for the drug.”

The problem with PBMs goes all the way to the top.

The three largest PBMs, which control 80 percent of the prescription
drug market
[[link removed]],
are owned by the country’s biggest health care companies. CVS
Caremark is owned by pharmacy colossus CVS Health, which also owns the
insurer Aetna. Express Scripts, meanwhile, is owned by the massive
insurer Cigna; while OptumRx is owned by insurance giant
UnitedHealthcare. 

With so much power, PBMs have evolved from “cost savers” to
companies that profit at nearly every stage of the drug supply
chain. 

Such integration also hurts smaller independent pharmacies by jacking
up fees
[[link removed]]
and cutting back on drug reimbursements that PBMs pay out for
prescriptions, which these stores depend on to stay afloat. For Chane,
the local pharmacy owner in Texas, the reimbursements she receives
often don’t even cover the cost of purchasing and dispensing
medications.

Thanks to these companies’ power, pharmacies are unable to negotiate
better reimbursement rates. When a pharmacist in rural Minnesota, who
requested to remain anonymous, asked for higher reimbursement rates
from Aetna Medicare, the company responded in an email that they had
to sign the contract as is in order to stay in-network. 

“Unfortunately, the terms of this agreement are non-negotiable,”
noted an Aetna representative in an email reviewed by _The Lever_.
“Please note refusal to sign the amendment will result in
termination from the P3 network.”  

Overall, the drug pricing system is “perversely incentivized to pay
off the middlemen while squeezing profits out of every single other
part of the supply chain,” said Monique Whitney, executive director
of the advocacy group Pharmacists United for Truth & Transparency. 

Although most states
[[link removed]]
have passed legislation to regulate PBMs, these companies often argue
that a lack of federal regulation “limit[s] states’ authority to
regulate PBMs,” the attorneys general wrote in their recent letter
to Congress
[[link removed]].
In some cases, these companies have purposefully obstructed state laws
by withholding information from state regulators. 

Last May, the Federal Trade Commission expanded an investigation
[[link removed]]
into how PBMs are jacking up prescription drug prices and hurting
local pharmacies by steering patients away from independent
pharmacies, charging arbitrary fees, and decreasing reimbursements.
This comes after years of agency support
[[link removed]]
for PBMs. 

Despite federal orders to cooperate, the agency now says that the PBMs
have refused to turn over key documents and data
[[link removed]]. 

“Reaching A Breaking Point”
Alongside the federal government’s investigation, a total of 24
bills
[[link removed]]
related to PBMs have been introduced in the House and the Senate
during the 2023-2024 Congressional session. 

Four of them passed
[[link removed]]
Senate committees last year, including the Pharmacy Benefit Manager
Transparency Act of 2023
[[link removed]]
that would require PBMs to pass all of their rebates to the insurance
plan or payer, and provide full disclosure of drug costs and pharmacy
and health plan reimbursements. The Pharmacy Benefit Manager Reform
Act, which
[[link removed]] passed
the Senate Committee on Health, Education, Labor, and Pensions, would
prohibit PBMs from charging insurance plans more than they reimburse
pharmacies.  

Seven bills passed House committees, including the Lower Costs, More
Transparency Act
[[link removed]],
which would require PBMs to disclose their spending, drug rebates, and
pharmacy fees associated with covered drugs.   

But at the same time, CVS Health, Cigna, UnitedHealth, and the
lobbying group Pharmaceutical Care Management Association were
lobbying on PBM-reform efforts, including “issues related to drug
pricing transparency
[[link removed]]”
and “drug pricing reforms
[[link removed]].”
They also sent money directly to lawmakers. 

Rep. Cathy McMorris Rodgers (R-Wash.), who led the Lower Costs, More
Transparency Act, received a total of $13,500 in lobbying
contributions from the political action committees of CVS Health,
Cigna, UnitedHealth, and the Pharmaceutical Care Management
Association, according to data from OpenSecrets. She received the most
contributions of any House member from the health service industry
[[link removed]]
during the 2023-2024 session. 

Reps. Frank Pallone (D-N.J.) and Jason Smith (R-Mo.), two of the
bill’s cosponsors, received $15,000 and $25,000, respectively. Rep.
Gus Bilirakis (R-Fla.) who wrote two measures
[[link removed]] that
were included in the legislation, received $10,000. All three
legislators were among the top 20 representatives who received
contributions from the health services industry. 

Sen. Bob Casey (D-Pa.) introduced the Protecting Seniors from High
Drug Costs
[[link removed]]
last year, which sought to prohibit health plans and PBMs from
overcharging Medicare beneficiaries for prescription drugs. He
received $15,000 from CVS Health, Cigna, and UnitedHealth, via their
political action committees. 

Rep. Ann Kuster (D-N.H.), who led the Pharmacy Benefits Manager
Accountability Act
[[link removed]]
that would increase oversight and regulation of PBMs, received $11,000
last year from the same companies’ political action committees and
the Pharmaceutical Care Management Association. She was also among the
top 20 recipients of health service industry contributions. 

Other legislators who have spoken out against targeting PBMs to reduce
drug costs, including Sens. Rand Paul
[[link removed]]
(R-Ky.) and Kyrsten Sinema
[[link removed]]
(I-Ariz.), along with Reps. Kevin Hern
[[link removed]]
(R-Okla.) and Eric Burlison
[[link removed]]
(R-Mo.) received a combined $56,500 from these political action
committees during the 2023-2024 session.  

Reps. Pallone, Smith, Bilirakis, Kuster, and Sen. Casey did not
respond to a request for comment. Rep. Rodgers’ legislative aide
responded but did not provide a comment. 

Following this lobbying blitz, and disagreements about PBM reforms
that sources say have arisen between the House and the Senate, news
outlets
[[link removed]]
reported that Congress may abandon efforts
[[link removed]]
to include any of these reforms in the upcoming federal funding
package, which now must be passed
[[link removed]]
by March 22 to avert a federal shutdown. 

“We cannot understate the urgency or the need to enact immediate PBM
reforms,” Pharmacists United for Truth and Transparency wrote in a
letter to Congress
[[link removed]]
a day after lawmakers showed signs of punting PBM reform. “We speak
plainly and without hyperbole when we say community pharmacies are
collectively reaching a breaking point. Numerous small business
pharmacies are running out of time and will be forced to permanently
close their doors if relief is not forthcoming soon.” 

The number of independent pharmacies dropped by nearly 50 percent from
1980 to 2022
[[link removed]]
— and industry experts predict that if nothing is done to address
the problem, even more local pharmacies will close by the end of 2024
[[link removed]]. 

Chane, for one, doesn’t know how much longer she can keep her
pharmacy’s doors open. 

“How do I pay my staff?” said Chane. “How do I keep the lights
on? How do I continue to service these people in my community that
have depended on us for generations? If I close my doors, where are
they going to go?”

Helen Santoro is a Colorado-based reporter focused on health care. She
has been published in KFF Health News, Scientific American, the New
York Times, and more.

_The Lever_ is a nonpartisan, reader-supported investigative news
outlet that holds accountable the people and corporations manipulating
the levers of power. The organization was founded in 2020 by David
Sirota, an award-winning journalist and Oscar-nominated writer who
served as the presidential campaign speechwriter for Bernie Sanders.

* Healthcare
[[link removed]]
* campaign contributions
[[link removed]]

*
[[link removed]]
*
[[link removed]]
*
*
[[link removed]]

 

 

 

INTERPRET THE WORLD AND CHANGE IT

 

 

Submit via web
[[link removed]]

Submit via email
Frequently asked questions
[[link removed]]
Manage subscription
[[link removed]]
Visit xxxxxx.org
[[link removed]]

Twitter [[link removed]]

Facebook [[link removed]]

 




[link removed]

To unsubscribe, click the following link:
[link removed]