House Hearing on PBMs a Tale of Two Discussions

A House hearing on a topic that both Republicans and Democrats agree on — the need to more heavily regulate pharmacy benefit managers (PBMs) — nonetheless devolved into two separate discussions: one on PBM reform and the other on stopping potential cuts to the Medicaid program.

Rep. Buddy Carter, BSPharm (R-Ga.), chair of the House Energy and Commerce Health Subcommittee, introduced Wednesday’s hearing on “An Examination of How Reining in PBMs Will Drive Competition and Lower Costs for Patients” with the story of Mattie McCoy, a 16-year-old Georgia resident who suffers from a rare genetic disorder.

“CVS Caremark denied Mattie’s access to a lifesaving drug that he had been on for 2 years,” Carter said, referring to one of the three PBMs that control more than 80% of the market. “As a result, Mattie was forced back into the hospital. Let me be clear: PBMs’ greed sent a 16-year-old back to the hospital, in critical condition. While tragic, this story is far from unique.”

Independent Pharmacies Are Paid Less

“We’ve heard a constant stream of reports that some PBMs are reimbursing independent pharmacies less than the pharmacies they own,” continued Carter, a former pharmacist. “For example, a Mississippi audit revealed that Optum pays its own stores up to 22 times — 22 times — what it pays independent pharmacies for the same drug. How are you supposed to stay in business when your competitor makes 2,200% more than you for the same exact service?” He noted that in 2023, there were over 300 independent pharmacy net closures and “unfortunately, that trend continued in 2024.”

Rep. Diana DeGette (D-Colo.), the subcommittee’s ranking member, pointed out that the full committee passed a PBM reform bill last year. “We took the work this committee did and folded it into December’s government funding bill. We were on the brink of passing historic reforms, and then, at the behest of Elon Musk, Republicans balked … Donald Trump and Elon Musk ordering congressional Republicans to renege on a bipartisan, bicameral agreement is the reason PBM reforms are not law today.”

Reforms in that bill included a ban on “spread pricing” — in which the PBM charges employers and insurers more for the drug than it pays to the pharmacy. The legislation also required that PBMs provide detailed data on drug spending to group health plans, and also that they pass along 100% of drug rebates and discounts to the employer or health plan they negotiate on behalf of. And it required the Centers for Medicare & Medicaid Services (CMS) to define “reasonable” contract terms for Medicare Part D drug plans, and to allow “any willing pharmacy” to serve Medicare patients. It also barred PBMs from tying their compensation to a drug’s Medicare price.

Are Medicaid Cuts on the Table?

Rep. Frank Pallone (D-N.J.), ranking member of the full Energy and Commerce Committee, said that although he agreed with the need for PBM regulation, it was pointless to discuss it at a time when a bill passed Tuesday by the House would cut $880 billion from federal spending in order to finance tax cuts for wealthy Americans, with many of the spending reductions likely to come from the Medicaid program.

“The bottom line is, if people don’t have healthcare, they’re not going to get drugs at all, and PBM reform won’t even matter,” he said. “Once again, Republicans are showing they are willing to rip healthcare coverage out of the hands of everyday Americans to provide tax cuts to Elon Musk and his billionaire friends. The people who will suffer are children, seniors and people with disabilities, pregnant women, and families trying to get by.”

But committee Republicans pushed back on Pallone’s assertions. “While the budget bill does set a goal of $880 billion for the Energy and Commerce Committee to find its savings, it does not say that it has to come out of Medicaid,” said Rep. Morgan Griffith (R-Va.). “We have thousands and thousands of options in which to look for savings in the federal budget.” DeGette countered by referring to a New York Times article saying that even if the committee cut everything else unrelated to healthcare under its jurisdiction, it would still come up more than $600 billion short.

Delinking a Drug’s List Price

On the PBM side of the discussion, Rep. Neal Dunn, MD (R-Fla.), brought up the issue of PBMs’ linking of drug prices paid by insurers to the list price of a drug. He gave the example of imatinib (Gleevec), a cancer drug. “The generic for Gleevec became available in 2016 and according to [publicly available] data, in 2022 CMS spent over $90 million on the branded version of Gleevec in the Part D program,” he said. “That’s 6 years after the generic was available. In 2022, CMS purchased over 455,000 doses of branded Gleevec and spent $249.58 per dose. However, a 1-month supply — 30 pills of the generic — can be purchased online for $34.50. That’s $1.15 per dose, compared to the $250 per dose CMS was paying.”

He asked Shawn Gremminger, MPH, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, how a bill that would delink list prices of drugs from what Medicare Part D was paying would help commercial insurance plans. “The delinking policy does not directly apply to the commercial market,” Gremminger responded. “I think that was done intentionally to maintain the ability to have some flexibility in the commercial market.”

However, he added, “I do think that often we will see better policy will flow down to … commercial markets. So what I’m hopeful is that we’ll see a trend against linking fees to the price of drugs in the commercial market — particularly with the better transparency that’s built into your bill, we would be able to demand and try to change the way that we are paying” for drugs.

Rep. Debbie Dingell (D-Mich.) asked witness Matthew Fiedler, senior fellow at the Brookings Institution’s Center on Health Policy, what reforms could be undertaken to make the PBM market more competitive. “It’s a challenging problem,” Fiedler said. “If you really want this market to be more competitive, you need more PBMs. The question is, how do you get there?” Breaking up the big PBMs would likely be difficult, “but I do think there’s some room for antitrust regulators to be looking at new entry PBMs and making sure that those PBMs aren’t being acquired by incumbent PBMs,” he said.

Dingell seemed surprised by that response. “I didn’t think the creation of more PBMs would be an answer to anything,” she said.

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