Senate Hearing Shines Spotlight on PBMs & Consumer Benefit

The Senate Committee on Commerce, Science and Transportation convened a hearing this week to discuss the need for better transparency and accountability of pharmacy benefit managers. This hearing stood out as the first major action on PBMs in the new Congress, echoing much of the scrutiny present in the FTC’s ongoing investigation of PBM practices and the impacts on patient access.

We echo much of the frustration expressed by the Congressmembers and expert witnesses: the PBM industry is rife with misaligned incentives and a complex and opaque web of bureaucracy that wields significant power over patient access and out-of-pocket costs.

One major theme of this hearing was vertical integration. Much of the PBM industry has shifted to a business model where one corporation houses an insurer, benefits manager, group purchasing organization, specialty pharmacy, and a handful of other related businesses. Within these systems, the PBMs hold much of the power to demand higher rebates and fees from drug manufacturers to gain access to their covered lives. In fact, nearly 80% of all prescription drug claims in the United States are processed by three vertically integrated companies : CVS Health, Express Scripts and OptumRx.

To quote Sen. Jon Tester of Montana: “This is a recipe where the only ones that win in health care costs are PBMs.”

These giant, multi-faceted PBMs are often incentivized to increase what patients pay at the pharmacy counter to enrich their revenue streams, often through practices that shift patients toward PBM-affiliated pharmacies. Care choices are compromised under this arrangement, at the expense of patients, independent pharmacies, and providers.

At present, the PBM industry still operates largely out of the view of regulators and consumers, despite their outsized role in medication access and affordability. Dr. Erin Trish, co-director of the Leonard D. Schaeffer Center for Health Policy & Economics, warned policymakers to avoid the game of health care “whack-a-mole” and to examine the whole PBM industry with new legislation.

“We need true transparency and a true understanding of where money is going across the board,” said Dr. Trish.

While we know the opaque PBM system isn’t working for those who need affordable care, there remains a need for high-quality research and analysis that helps ensure decision-makers are well-equipped to design high-value health benefits. As someone who leads a team of health policy researchers, we understand that to fix a problem, you first have to be able to study it. NPC is currently working on research on several areas related to the PBM and insurer issues, including the pitfalls of copay adjustment programs that lower the quality of care while unnecessarily shifting costs back onto patients.