House Judiciary Witnesses From Academia Highlight Critical Role PBMs Play

This week, the U.S. House Committee on the Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust held a hearing on pharmacy benefit managers (PBMs), where expert witnesses and members of the committee highlighted the critical role of PBMs in the prescription drug marketplace to lower health care costs and how restricting PBMs would reward drug companies.

Notably, when asked about proposals that ban spread pricing and rebates, the witnesses all agreed they would be a mistake.

U.S. Rep. Lou Correa (D-CA-46), Ranking Member, Subcommittee on the Administrative State, Regulatory Reform, and Antitrust: "There are a lot, a lot of legislative proposals out there right now, too many of us to look at in this brief time period, but I'm going to talk about three of them right now, and if I can get some very quick opinions from the four of you as to some of these proposals. Banning rebates, Dr. Van Nuys, good or bad?

Dr. Karen Van Nuys, Executive Director, Value of Life Sciences Innovation, USC Schaeffer Center: "It's complicated … Involves the whole industry."

U.S. Rep. Correa (D-CA-46): "Dr. Frank? Banning rebates?"

Dr. Richard Frank, Director, Health Program, Brookings Institution: "I think rebates serve a useful purpose. I think they have strong incentives."

U.S. Rep. Correa (D-CA-46): "Banning rebates. Yes, no?"

Dr. Frank: "No."

U.S. Rep. Correa (D-CA-46): "Dr. Mattingly, banning rebates?"

Dr. Joey Mattingly, Vice Chair of Research, College of Pharmacy, University of Utah: "No. I do think that rebates allow an opportunity to … you want the person negotiating the lower price to have some skin in the game too …"

U.S. Rep. Correa (D-CA-46): "So there's an incentive, skin in the game. Don't ban them, is what you're saying. Dr. LoSasso?"

Dr. Anthony LoSasso, Professor and Chair, Department of Economics, DePaul University: "Short answer, no."

U.S.Rep. Correa (D-CA-46): "Okay, easier said than done. Second, spread pricing, Dr. Van Nuys. Eliminated? Yes or no."

Dr. Van Nuys: "Don't eliminate, but I think introduce transparency."

U.S. Rep. Correa (D-CA-46): "Was that a yes or no on spread pricing eliminated? Yes, no?"

Dr. Frank: "No."

U.S. Rep. Correa (D-CA-46): "Ok, Dr. Mattingly, spread pricing?"

Dr. Mattingly: "No, same thing. I think there needs to be incentives along the supply chain."

Misguided pharma-backed proposals designed to undermine the cost-saving role of PBMs, such as the so-called "delinking" scheme which aims to ban market-based incentives for PBMs successfully securing rebates from drug companies, would increase health care premiums by more than $39 billion annually for patients, seniors, families, and taxpayers, and reward drug companies with a more than $32 billion financial windfall.

See more highlights from what the expert witnesses and lawmakers had to say:

Dr. LoSasso: "PBMs are an important but widely misunderstood, and I believe wrongfully maligned, part of the pharmaceutical supply chain … At heart, what PBMs do is force pharmaceutical companies to compete on price. And competing on price, generally speaking, is the last thing that pharmaceutical companies want to do. I find it somewhat amazing that rebates have been made into some sort of nefarious practice. This to me is testimony to apparently a reality distortion that the pharmaceutical industry is capable of pulling off. Rebates are a good thing because they represent price decreases. And price competition is a good thing for consumers … So the effort to regulate, and I fear neuter, the impact of PBMs only plays into the hands of the pharmaceutical industry and strengthens their bargaining power … And so I just simply urge this committee to carefully consider the broader implications and potential for unintended consequences of any legislation or regulatory efforts that might weaken the role of PBMs."

Dr. Mattingly: "If you remove the PBM from the equation today, who or what steps in to fill that void? PBMs have been around since the 1960s and while they have substantially evolved, many of their core functions have remained constant for the past 60 years. PBMs typically gain customers from a process where they respond to competitive bids, requests for proposals from plan sponsors and employers and governments who are requesting for help developing formularies, managing a pharmacy network. So when we remove the PBM, we just have to know, okay, then what?"

U.S. Rep. Nathanial Moran (R-TX-01): "I do want to say I think there's space for us to have discussion on the patent reform as well, in particular, as it regards pharmaceuticals because I think that could be a driving factor to bring down costs as well … We need to work together on both ends of this spectrum to find a good solution for the consumers and the United States and preserve the free market."

Watch the full hearing HERE.

See PCMA's statement on the hearing 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.

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