RANKING MEMBER CORREA DELIVERS OPENING STATEMENT IN SUBCOMMITTEE HEARING: “The Role of Pharmacy Benefit Managers”

September 11, 2024

RANKING MEMBER CORREA DELIVERS OPENING STATEMENT IN SUBCOMMITTEE HEARING: "The Role of Pharmacy Benefit Managers"

Watch Today's Hearing HERE

WASHINGTON - Today, Ranking Member Correa (CA-46), the top Democrat on the House Administrative State, Regulatory Reform, and Antitrust Subcommittee, led his Democratic colleagues during a hearing entitled "The Role of Pharmacy Benefit Managers."

You can watch today's hearing HERE.

You will find below Ranking Member Correa's opening statement, as prepared for delivery:

Thank you, Mr. Chairman. And I want to thank the witnesses for joining us today.

Today, we will examine the role of Pharmacy Benefit Managers, or PBMs, and their impact on our healthcare system and the pharmaceutical drug delivery market. Nothing is simple about this topic, but one thing is certain - things just aren't right.

As the late great Justice Louis Brandeis once said, "Sunshine is the best disinfectant," so I hope that today the sun will shine brightly as we work to lift the veil on PBMs and their role in drug pricing and the drug delivery market. Until recently, most people didn't even know PBMs existed, now, we see their handiwork everywhere.

While some Americans with good health plans and low deductibles may secure their medications at reasonable rates, there are too many hard working Americans who can't afford their medications. There are too many heart-wrenching stories of families choosing between the medications they need to survive and food or housing. That is not right.

Decisions - life and death decisions - are being made for Americans in closed back rooms and not by their medical providers. That is not right.

We need to find solutions to these problems like we did when Congress and the Biden-Harris Administration passed the Inflation Reduction Act capping the monthly price of Insulin and other critical drugs for Medicare beneficiaries. We have a responsibility to all Americans to ensure they can fairly access the medications they need. I hope today we will learn more from the witnesses on how to achieve that goal.

Look at this chart, nothing is simple about this chart. And see here, it says payments from manufacturers to PBMs, well there isn't just one payment made that applies to everyone, there are many depending on the drug, the PBM, the manufacturer, and the deal that is reached. What each consumer pays for his medications is even more complicated, and this payment is only the first step. Understanding how this system works, partially because of the complexity and partially due to the lack of transparency requires an advanced degree in engineering design.

Which drugs are included on the PBM-created formularies, or the list of drugs in a healthcare plan, and how much people pay follows a convoluted process involving a myriad of entities -, the PBMs, the wholesalers, the Group Purchasing Organizations, Pharmacy Services Administrative Organizations, health plans, pharmaceutical companies, pharmacists, and even the employers. Everyday Americans are at their mercy - relying on them to do right.

The complexities appear integral to the design: an enigma, wrapped in a mystery, hidden in a riddle, and blanketed in a conundrum. The average American, and many smaller businesses, can't solve this alone.

On Main Street, I am concerned with the stories I am hearing about pharmacies closing, pharmacies receiving payments that don't cover their costs or pharmacies facing payments being clawed back by PBMs. If the stories are true, this is both unsustainable and unacceptable.

Let me be clear: PBMs have and continue to play an important role in this market and suggestions to do away with them are misplaced, but over the years their role in the marketplace has expanded dramatically from simply processing claims to having involvement in almost all aspects of the pharmaceutical drug market. In fact, there are numerous studies showing that PBMs have lowered the prices of drugs for their clients.

It should never be the case that a person with insurance should pay more at the pharmacy using insurance than off insurance, but that appears to be happening in some cases. That is not right.

As the NYTimes reported in its recent investigation, "The job of the PBMs is to reduce drug costs. Instead, they frequently do the opposite. They steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees."

Another mechanism PBMs may be utilizing to raise costs and reap profits are through mail-order pharmacies. As the Wall Street Journal reported, PBMs encouraged employers to use mail-order pharmacies with promises of cost savings, but instead they are increasing costs.

Specifically, the Wall Street Journal article explained, "Branded drugs filled by mail were marked up on average three to six times higher than the cost of medicines dispensed by chain and grocery-store pharmacies and roughly 35 times higher than those filled by independent pharmacies."

This Subcommittee has jurisdiction over antitrust matters, and we need to understand how this market operates. According to the FTC's recently released Interim Report on PBMs, the top three PBMs control nearly 80% of the prescription drug market, something that came into play over years of mergers of competitors. This chart shows the extent of how the number of large competitors consolidated over the last two decades. It appears now that the PBM market is overly concentrated, but is that causing anti-competitive results? The FTC seems to say yes.

The extent of vertical integration in the market is astonishing, quite frankly. As you see on this chart, every major health plan is connected to a PBM, specialty and mail-in pharmacies, and one owns retail pharmacies. Some are now producing their own drugs for the market. While vertical integration can yield important efficiency benefits for customers, it appears that these deep connections are harming independent pharmacists, driving up costs, and harming consumers while enriching the corporations.

The FTC's Interim Report included many worrisome allusions and conclusions that PBMs are harming competition and consumers including:

• The PBM market is highly concentrated.
• PBMs, due to consolidation and integration, exercise significant power over Americans' access to drugs and the prices they pay.
• PBMs may be steering patients to their own pharmacies and extracting additional profit while harming unaffiliated pharmacies.
• PBMs are using their market power to force pharmacies to enter unfair contracts; and
• PBMs are limiting access to more reasonably priced alternative drugs through contract terms benefiting them.

So, I say to the FTC it's time to fish or cut bait. If PBMs are engaging in the anticompetitive activities outlined in your report, do something. Either bring an action or explain why you aren't doing so.

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