Originally appeared on the Wall Street Journal website
The drug middlemen that promise to control costs have instead steered patients toward higher-priced medicines and affiliated pharmacies—steps that increase spending and reduce patient choice, a House investigation found.
The pharmacy-benefit managers, or PBMs, have devised formularies of preferred medicines that encouraged use of higher-priced drugs over lower-priced alternatives, the Republican-led House Committee on Oversight and Accountability found.
The PBMs have also made patients pay more to use their local pharmacy rather than a mail-order pharmacy affiliated with the manager, according to a committee report reviewed by The Wall Street Journal.
“There’s a credibility issue with the PBMs. There’s a transparency issue with the PBMs,” said Oversight Chairman James Comer (R., Ky.) at a hearing with PBM executives Tuesday. “You have anticompetitive policies.”
Among the evidence cited by the committee were emails from staff at Cigna Group’s Express Scripts discouraging discussion of using lower-priced alternatives to the arthritis drug Humira. At the time, Humira listed for around $90,000 a year, while at least one alternative drug was about half that price.
Express Scripts also sent messages to patients saying they would pay more for a prescription if it was filled by their local pharmacy but less for a three-month supply from the PBM’s affiliated mail-order pharmacy, the report said.
“While this is made to appear to benefit the patient, what it is instead doing in practice is limiting a patient’s ability to choose their own pharmacy,” the committee wrote.
A spokesman for the Pharmaceutical Care Management Association, a trade association that represents PBMs, said the firms save patients and health plans $1,040 per person per year on drug costs.
“Too many recent conversations addressing drug costs narrowly focus only on PBMs and reflect a one-sided view informed directly by the pharmaceutical industry’s blame game,” he said. “The committee is missing the big picture.”
An Express Scripts spokeswoman said pharmaceutical companies set and raise drug prices.
“We work every day to lower them for patients and their health plans,” she said. “Express Scripts customers spent less out of pocket on their medicines in 2023 than in 2022, despite significant rising list prices set by manufacturers, because of our work to negotiate discounts.”
A PBM-sponsored analysis, released Monday, said prices of drugs subject to PBM negotiations don’t increase as much as other drugs and PBMs save their customers money.
The committee issued its report following a 32-month investigation and ahead of the hearing on PBMs Tuesday. Executives leading the three largest PBMs testified before the House committee today.
“We negotiate with drug manufacturers to secure the lowest possible net cost for our customers,” OptumRx Chief Executive Patrick Conway said.
Both Republicans and Democrats pressed the executives for answers about their business model. Rep. Jamie Raskin (D., Md.), the committee’s ranking member, asked why some patients find it cheaper to pay out-of-pocket for drugs than to use their insurance benefit managed by the PBMs.
“Even if this system works for some patients, it’s clear that many served by your companies are falling through the cracks,” Raskin said.
PBMs play an important but behind-the-scenes role in the drug supply chain. Not only do they negotiate with pharmaceutical companies how much a health plan will pay for a drug, PBMs also help set the amount a patient pays out of pocket and process the prescriptions.
The three largest PBMs—Express Scripts, UnitedHealth Group’s OptumRx and CVS Health’s Caremark—handle roughly 80% of U.S. prescriptions. Each shares a parent with a large health insurer.
Their business practices have drawn the ire of many doctors, patients and employers, which have complained the firms have failed to control rising drug spending and instead have profited from higher prices. Independent pharmacies have also complained that the PBMs make it difficult to stay in business.
The Federal Trade Commission, which has also been investigating PBM business practices, is preparing to sue the largest firms over tactics negotiating the cost of insulin and other drugs, the Journal has reported.
Both Republican and Democratic lawmakers have been discussing ways to rein in PBM business practices. Legislation aimed at PBM practices passed the House and a Senate committee last year but failed to clear Congress as part of a spending deal in March.
One of a PBM’s primary functions is to decide which drugs will get preferred status on health-plan formularies. Patients usually have lower copays for preferred drugs and don’t face the paperwork and other hurdles to getting access.
A PBM can save its clients money by preferring a less-expensive drug. Sometimes a PBM brings down the cost of a drug by negotiating a partial discount, or a rebate, with the drug’s maker.
The House report said that PBMs often favor brand-name medicines, with higher prices and likely heftier rebates that can benefit the PBM, over lower-cost alternatives, costing patients, PBM clients and taxpayers money.
When Abbvie’s Humira therapy faced competition from lower-priced biosimilar medicines, the PBM’s staff discouraged their account teams from discussing the biosimilars with clients “due to rebate impact,” according to Express Scripts emails cited by the House report.
In addition, PBMs have forced cancer and arthritis patients to get their drugs from PBM-affiliated pharmacies before they can be shipped to the doctors’ offices where they will be administered, delaying treatment for weeks, the report said.
CVS Caremark brings down drug costs, offers clients a variety of pharmacy networks and saves its clients about 5% on brand-name and generic drugs through its CVS-affiliated pharmacies, a spokesman said.
CVS Caremark President David Joyner said in prepared remarks for the House hearing that the company dropped Humira from its formularies in April, leading to half a billion dollars in savings for its clients.
The House committee also criticized the largest three PBMs for lack of transparency. Each of the largest PBMs sent the House investigators only a handful of pages regarding groups they had established to buy drugs, according to a person familiar with the House investigation.
Express Scripts and OptumRx located their buying groups in Switzerland and Ireland, respectively, which the committee said was likely done to “limit transparency and avoid regulations on rebates.”
Express Scripts has said it created its group purchasing organization to join forces with other buyers and negotiate more savings from drugmakers. CVS, which created a drug buying group based in Minneapolis, said it uses the group to drive down prices charged by manufacturers.
Jared S. Hopkins contributed to this article.
Write to Liz Essley Whyte at liz.whyte@wsj.com
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