‘Big black box called PBMs’ draws attention from lawmakers trying to solve drug prices

DATE: December 13, 2017

Published by STAT News

WASHINGTON — As lawmakers are puzzling over the question of why so many patients are paying so much money for prescription drugs — and what to do about it — Republicans are focusing increasing scrutiny on the middlemen: pharmacy benefit managers.

“What I’m seeing, and what the public sees, is that we’ve got this big black box called PBMs,” said Rep. Morgan Griffith, a Virginia Republican, at a Wednesday House subcommittee hearing.

On Tuesday, Sen. Lamar Alexander wondered why we need rebates — payments from drug companies to insurers, negotiated by PBMs, that reduce the price of a drug for the insurer — which is a question the Tennessee Republican has raised since October.

This focus cuts against the narrative that profit-hungry drug companies are responsible for patients’ suffering because they single-handedly increase the list price of drugs. On this topic, a Kentucky Republican asked what appeared to be a simple question but set off a scuffle between representatives of drugmakers and PBMs.

“Who sets the list price?” Rep. Brett Guthrie asked at Wednesday’s hearing, directing the question first at representatives of pharmaceutical companies.

The easy answer would be: drug companies. But Lori Reilly, executive vice president for policy, research, and membership at PhRMA, the pharmaceutical industry’s interest group, said that it’s more complicated.

“[PBMs] say to a company — if you don’t give me a price I want, you’re off my formulary,” Reilly said, referring to a list of drugs covered by insurance plans that is designed by PBMs. In her statement, she said she was referring to the example of insulin.

But the PBMs disputed this account.

“It would be an antitrust violation for those discussions to happen,” said Mark Merritt, president and CEO of the Pharmaceutical Care Management Association, which represents PBMs in Washington. “Those discussions don’t happen.”

Wednesday’s hearing, a meeting of the health subcommittee of the House Energy and Commerce committee, was the latest in a series of inquiries into the high cost of prescription drugs.

Lawmakers threatened that, if the industry didn’t clean up their act, then the government would do something — but stopped short of saying what that something would be.

“I would submit to you that [your] solutions may well be better than anything we or a federal agency can impose,” said Rep. Michael Burgess, the Texas Republican who chairs the subcommittee. But, he added, “if you’re not moving toward some solution to this problem, then there will likely be some type of action.”

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