On April 10, the Senate Finance Committee held a full committee hearing, "Drug Pricing in America: A Prescription for Change, Part III." The hearing featured testimony from five pharmacy benefit manager (PBMs) executives from Cigna, CVS, Humana, OptumRX, and Prime Therapeutics. Throughout the hearing, the committee questioned PBM tactics such as spread pricing and formulary management, the proposed rule from the Trump administration to remove the rebate safe harbor, and their perspective on issues such as supply chain transparency and rising list prices. Several of the members called on the committee to look at the entire supply chain when considering solutions, with Sen. Sheldon Whitehouse (D-RI) noting that the drug manufacturers have outspent PBMs many fold on lobbying efforts to shift blame and Sen. Sherrod Brown (D-OH) noting that drug manufacturers have been unwilling to commit to lower list prices. Sen. Maggie Hassan (D-NH) also expressed concern about consolidation in the industry and noted an investigation by the Federal Trade Commission (FTC).

Regarding the Trump Administration's proposed rule, the PBMs said removing the safe harbor and passing through all rebates to the point-of-sale would undermine their negotiating power and likely lead to premium increases while only resulting in savings for a small percentage of the population. They also noted that while many are already moving to point-of-sale rebates, they often provide a choice to the plan sponsor based on what makes the most sense for their population. When pressed by Sen. Bill Cassidy (R-LA) on the increase in fees in lieu of rebates, they added that some fees are passed on while others are retained in lieu of charging the client. Most of the executives said they would be supportive of a spread pricing ban in Medicare and Medicaid, noted that co-pay caps would have to be part of a broader reform to the system, and said they are supportive of transparency measures for plan sponsors, patients, and MedPAC and MacPAC, but not making information publically available. The executives also discussed their value-add and clinical expertise, noting that the government does not have the expertise necessary to negotiate. They also touted other initiatives such as committing to passing on all rebates, reducing co-pays for things such as insulin, and providing $0 co-pays for preventative drugs that have downstream savings. They also noted that efforts to increase pharma competition and enabling them to hold manufacturers accountable for clinical outcomes, as well as other tactics, would be helpful in driving down prices. For more details, see the attached Tax Alert or click here.

———————————————

———————————————
ATTACHMENT

Senate Finance Drug Pricing Part III