SCPC Outlines PBM Reforms Needed to Protect Consumers, Elderly Patients, LTC Pharmacies

DATE: December 13, 2017

Tells House Energy and Commerce Health Panel Medicare Part D Has Become Oligopolistic Market Benefitting Only PBMs and Their Conglomerates

Washington, DC — In thanking House Energy and Commerce Health Subcommittee Chairman Mike Burgess, M.D. (R-TX), Ranking Member Gene Green (D-TX) and the entire panel for conducting its hearing examining the drug supply chain, Alan G. Rosenbloom, President and CEO of Senior Care Pharmacy Coalition (SCPC) said in a detailed statement for the record that, “Pharmacy benefit managers (PBMs) harm competition and are today exacting billions of dollars from the drug supply chain without providing any value for consumers or the federal government. Moreover, their consolidation and vertical integration exacerbate the harm to consumers, government payment programs, pharmacies and free market competition.”

Rosenbloom outlined several legislative reforms directed at PBMs necessary to protect consumers, elderly patients and long term care (LTC) pharmacies from increasingly anti-competitive practices in the ostensibly free market Medicare Part D program. “Three PBMs – Caremark, ExpressScripts and Optum – process nearly 75 percent of all prescriptions dispensed in America,” he says in the statement. “For LTC pharmacies, these three PBMs process more than 90 percent of all prescriptions. Such a high degree of market concentration is the very definition of an oligopolistic marketplace.”

The three major PBMs, he continues, “are part of a corporate conglomerate that has gained significant control over multiple, interdependent markets in the drug distribution chain – not just the PBM market, but also the health insurance, wholesale and pharmacy (retail, LTC, specialty, home infusion and mail order) markets — through acquisitions both horizontal and vertical, and through exclusionary conduct — all of which has accelerated dramatically over the past three years.”

Says the SCPC President and CEO: “PBM representatives claim that their role in the drug distribution chain is one of negotiating drug discounts on behalf of purchasers (large employers, health plans and others) to drive efficiency into the drug distribution system. While that claim may have been true 10 or 20 years ago, it is no longer the case. Rather, PBMs today are a destructive force in the drug distribution system, taking profits for themselves at a cost to patients, pharmacies and the federal government.”

PBMs, he says, do this through two principle practices:

First, they negotiate “rebates” from drug manufacturers, but rather than passing those rebates on to consumers (as they claim they do), they retain the vast majority of those rebates for themselves. Second, PBMs have developed a series of opaque and unjustified “fees” that they charge pharmacies (which in turn effectively are required to “pay to be paid”). The Medicare program defines some of these fees as “Direct and Indirect Remuneration” or “DIR.”

Rosenbloom said the issues and concerns raised at today’s hearing and in SCPC’s statement for the record, “justify Congress taking a hard look at the PBM sector, and revisiting some of the assumptions that Congress has made over the past decades when enacting Medicaid reforms and the Part D program.”

SCPC details four legislative reforms directed at PBMs to prevent continued abuse of their market position to the detriment of consumers, LTC and other pharmacy groups, and the Medicare Part D program itself.

First — “Congress should consider legislation requiring PBMs to pass through all rebates. On Nov 16, 2017, CMS issued a Proposed Rule that sought public input on several suggested approaches to compelling PBMs to pass all rebates on to Part D beneficiaries. The Subcommittee could accelerate development and consideration of such legislation by holding a hearing specifically focused on these issues.”

Second — “Congress should enact pending legislation designed to eliminate or severely restrict the use of DIR fees and to require greater transparency regarding prescription drug plan (PDP) and PBM pricing and practices. See, e.g. H.R. 1038 (addressing DIR fees); H.R. 1316 (addressing PBM transparency). Once again, the Subcommittee could accelerate consideration of pending legislation with a hearing focused specifically on these concerns.”

Third — “The Subcommittee should hold a follow up hearing to evaluate how PBMs and the corporate conglomerates of which they are a part exploit undue market power to the detriment of consumers (including Part D beneficiaries), the Medicare program and the free market. As part of that hearing, we recommend the Committee closely scrutinize the proposed CVS Health acquisition of Aetna in the context of the market power and leverage the corporate conglomerates – particularly CVS Health – have been able to develop.”

Fourth — “The Subcommittee should refer related issues to the House Judiciary Committee for further investigation and evaluation from the perspective of the adverse impact on competition and the shocking degree to which the Medicare Part D program, and America’s health care system, has become a creature of ever-larger oligopolistic corporate conglomerates rather than a free and fair marketplace.”

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The SCPC is the national association for independent LTC pharmacies. Our member pharmacies provide care and services to patients in LTC facilities across the country occupying approximately 675,000 beds. Visit seniorcarepharmacies.org  to learn more.