Bipartisan Senate committee targets drug industry intermediaries

by Nathaniel Weixel - 04/20/23 8:00 AM ET

Chairman Sen. Ron Wyden, D-Ore., and Ranking Member Mike Crapo, R-Idaho, arrive to hear testimony from Health and Human Services Secretary Xavier Becerra at a Senate Finance hearing on Capitol Hill in Washington, Tuesday, April 5, 2022, to examine the President’s proposed budget request for fiscal year 2023 for the Dept. of Health and Human Services. (AP Photo/Andrew Harnik)

Bipartisan leaders of the Senate Finance Committee are working on legislation targeting pharmacy benefit managers (PBMs), the intermediaries in the prescription drug supply chain who negotiate discounts with drug companies on behalf of insurance plans.

Finance Committee Chairman Ron Wyden (D-Ore.) and his GOP counterpart Sen. Mike Crapo (R-Idaho) on Thursday released an outline of the issues they aim to tackle as they craft a bill this summer.

The senators indicated they are concerned about the lack of transparency in the supply chain, business practices by large, concentrated PBM firms that drive up out-of-pocket costs for seniors, and “misaligned incentives” that make higher drug list prices often translate into higher compensation for intermediaries.

Lawmakers have long been critical of PBMs, and Wyden previously introduced legislation seeking to reform the industry in 2019.

PBMs decide which drugs will be on a covered list of drugs, called a “formulary,” and how much a patient will have to pay for them. Three PBMs dominate the U.S. market: CVS Health’s Caremark, UnitedHealth’s OptumRx and Cigna’s Express Scripts.

“For years, drug pricing middlemen like pharmacy benefit managers have been engaging in practices that are driving up the cost of prescription drugs and clobbering American families at the pharmacy counter,” Wyden said in a statement.

Drugmakers blame PBMs for the high costs of prescription drugs, though the PBM industry says their role is misunderstood and executives point fingers at the manufacturers.

PBMs collect rebates from drug manufacturers in exchange for coverage by a health plan.

The PBMs argue they can negotiate with insurers and manufacturers for lower drug costs and larger discounts for medications. They pass savings on to insurance plans, resulting in lower premiums for consumers.

But with the Inflation Reduction Act targeting manufacturers, lawmakers see PBMs are ripe for reform.

“Some of the most life-saving medications remain out of reach for far too many working families and seniors,” Crapo said. “We need a bipartisan, all-of-the-above approach to modernization and transparency that empowers consumers, plans, providers and pharmacies to make informed, cost-effective and clinically appropriate decisions.”