Pharmacy benefit managers emerged as public enemy No. 1 in a congressional hearing Tuesday, underscoring growing bipartisan sympathy for advancing any of the many measures that target drug industry middlemen.
While lawmakers often praised the intent of PBMs to bring down drug costs, most argued that PBMs are either failing to achieve that goal or doing more to boost their own bottom lines.
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"I think we all have the goal of lowering the cost of prescription drugs for consumers, and that's what PBMs were supposed to do, but we don't believe that that is happening," House Oversight Committee Chair Rep. James Comer (R-Ky.) said at the hearing on the role of PBMs.
"When you have Republicans complaining about excessive profits, it's pretty bad because most Republicans are for the free market," Comer said.
The prime criticisms raised at the hearing were that PBMs lack transparency, that their system of extracting rebates actually raises prices and that they've increasingly turned to opaque fees. Another complaint voiced was that since they have become increasingly vertically integrated with insurers and pharmacies, PBMs are able to warp the pharmaceutical market in their own favor while extracting larger and larger profits.
"I don't think when PBMs were created, anyone ever envisioned the PBMs to become such massive, vertically integrated companies, and that is a problem," Comer said. "That's a problem that I think there's overwhelming bipartisan support to solve."
JC Scott, CEO of Pharmaceutical Care Management Association, a PBM industry trade group, repeatedly batted back at such characterizations, often noting that PBMs exist to serve the diverse needs of insurance plan sponsors that decide how to use the savings that PBM secure, whether it's keeping insurance premiums lower or passing lower costs along directly in the form of cheaper prescriptions.
Asked how much profit PBMs pocket each year by Rep. Andy Biggs (R-Ariz.), Scott suggested PBMs were barely surviving. "I don't have a dollar figure. But I can tell you it's about a 2% margin on average," Scott said.
Numerous bills are floating around on Capitol Hill that target PBMs, though many are sitting on backburners while Congress argues over how to keep the government funded.
Lawmakers in the House are prepared to advance one package of bills that includes PBM provisions called the Lower Costs, More Transparency Act. While it focuses on much more than pharmacy benefits, it includes measures that would require PBMs to provide employers with extensive data, ban spread pricing in Medicaid, and boost disclosures of fees and PBM compensation.
The bill had been set to get a vote in the House on Monday, but it was delayed amid negotiations over the broader budget. Rep. Virginia Foxx (R-N.C.) said at Tuesday's hearing she hoped the bill could get a vote this week.
Lori Reilly, chief operating officer of the pharmaceutical trade group PhRMA, whose organization is more often in the hot seat, used her time to highlight what she saw as the growing problems of PBMs, pointing to a report that PhRMA unveiled Monday by Nephron Research. The trade group funded the report.
"Fees that are paid to PBMs have more than doubled in the last five years," Riley said.
"That same study found that 42 cents out of every health care dollar goes to PBMs, not 6 cents, as was just stated by JC," she added, singling out Scott.
She said his low-ball figure leaves out "profits that they receive from specialty pharmacies, which is one of the largest drivers of profit that they receive."
According to the Nephron report, rebates and price reductions would amount to an estimated 13% of PBM gross profits in 2023, while earnings from specialty pharmacies that they own would be 39%.
About 80% of the prescription market is controlled by three PBMs: CVS Caremark, Optum Rx, and Express Scripts.
Scott insisted that PBMs are still beneficial. "PBMs, as has been recognized, I think have a very strong track record of delivering about $145 billion in value for the system every year through that work of negotiating discounts," he said.
He pointed to drugmakers' setting high list prices and manipulation of patents as problems for lawmakers to target. Indeed, members of the committee didn't entirely let the pharmaceutical industry off the hook.
Rep. Robert Garcia (D-Calif.) noted the top eight pharmaceutical companies—AbbVie, Amgen, Bristol Myers Squibb, Eli Lily, Gilead, Johnson & Johnson, Merck and Pfizer—earned $110 billion in profits in 2022 while paying 2% in taxes.
He compared the situation to a popular Spider-Man meme where two versions of the superhero are pointing at each other. "We have our pharmacy benefit managers pointing at Big Pharma and Big Pharma pointing back at our pharmacy benefit managers," Garcia said. "There's also a reason why pharma is spending millions of dollars over here to trash PBMs."
It seems unlikely Congress will target drug companies in the near future, a year after passing the Inflation Reduction Act, which allows Medicare to negotiate some drug prices. PhRMA is suing to block that law.
