I wanted to put up the entire report. It is just too long. However, the link is there for addition reading to back up the Executive Summary. Angry Bear has been reporting on the rising costs of pharmaceuticals. Hopefully, the Executive Summary will add to Angry Bears knowledge base. PBM Report Final with Redactions House.gov Report Pharmacy Benefit Managers’ (PBMs) role as intermediaries between drug manufacturers and health insurance providers should have made them, in theory, the best positioned entities to decrease the cost of prescription drugs.1 Pharmacy benefit managers (PBMs) manage prescription drug plans for health insurance programs, including Medicare, and serve as intermediaries with pharmacies, employers and drugmakers.
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I wanted to put up the entire report. It is just too long. However, the link is there for addition reading to back up the Executive Summary. Angry Bear has been reporting on the rising costs of pharmaceuticals. Hopefully, the Executive Summary will add to Angry Bears knowledge base.
PBM Report Final with Redactions
House.gov Report
Pharmacy Benefit Managers’ (PBMs) role as intermediaries between drug manufacturers and health insurance providers should have made them, in theory, the best positioned entities to decrease the cost of prescription drugs.1 Pharmacy benefit managers (PBMs) manage prescription drug plans for health insurance programs, including Medicare, and serve as intermediaries with pharmacies, employers and drugmakers. Caremark, Express Scripts and Optum together administer roughly 80% of all prescriptions in the U.S., according to the FTC.2 As large health care conglomerates, some have argued that these PBMs’ vertical integration with insurers and pharmacies would better position them to improve patient access and decrease the cost of prescription drugs.3 Instead, the opposite has occurred: patients are seeing significantly higher costs with fewer choices and worse care. Americans spend more today on prescription drugs than any other country, and prescription drug prices in the U.S. are more than double the cost of identical drugs in other high-income nations.4
In 2023, the U.S. health care system spent $772.5 billion on prescription drugs, including $307.8 billion on retail drugs.5 This mammoth spending is largely driven by a small number of high-cost products; brand name drugs accounted for 80 percent of prescription drug spending, despite the fact that 80 percent of prescriptions in the U.S. are for generic drugs.6 Additionally, the cost of specialty drugs, which accounted for 54 percent of spending in 2023,7 has increased more than 40 percent since 2016.8 Patient out-of-pocket costs for prescriptions were $91 billion in 2023 alone.9 Higher drug utilization and new drugs are also contributing to higher costs, with Americans being prescribed more and paying for more prescription drugs.10
This report describes the Committee on Oversight and Accountability’s findings that PBMs inflate prescription drug costs and interfere with patient care for their own financial benefit.
Key Findings
– The three largest PBMs have used their position as middlemen and integration with health insurers, pharmacies, providers, and recently manufacturers, to enact anticompetitive policies and protect their bottom line.
The Committee found evidence that PBMs share patient information and data across their
many integrated companies for the specific and anticompetitive purpose of steering patients to pharmacies a PBM owns. Furthermore, the Committee found that PBMs have sought to use their position to artificially reduce reimbursement rates for competing pharmacies.
– PBMs frequently tout the savings they provide for payers and patients through negotiation, drug utilization programs, and spread pricing, even though evidence indicates that these schemes often increase costs for patients and payers.
The Committee identified numerous instances where the federal government, states, and private payers have found PBMs to have utilized opaque pricing and utilization schemes to overcharge plans and payers by hundreds of millions of dollars.
– The largest PBMs force drug manufacturers to pay rebates in exchange for the manufacturers’ drugs to be placed in a favorable tier on a PBM’s formulary, making it difficult for competing, lower-priced prescriptions (often generics or biosimilars) to get on formularies.
The Committee has found evidence that PBMs regularly place higher cost medications in more preferable positions based on their formularies, even when there are lower-cost and equally safe and effective competing options.
– As many states and the federal government weigh and implement PBM reforms, the three largest PBMs have begun creating foreign corporate entities and moving certain operations abroad to avoid transparency and proposed reforms.
The Committee found that these PBMs have created group purchasing organizations (GPOs) to centralize the negotiation of rebates and fees in Switzerland and Ireland. They have also created companies in Ireland and the Cayman Islands to manufacture and market certain highly profitable generics and biosimilars. The creation of entities in locations well known for their lack of financial transparency and movement of operations that would be subject to impending regulations only heightens concerns that PBMs will do anything to avoid transparency.
– The largest PBMs’ use of tools such as prior authorizations, fail first policies, and formulary manipulations have significant detrimental impacts on Americans’ health outcomes.
The Committee found that the use of these tools enables PBMs to slow the market uptake of cheaper generics and biosimilars. Furthermore, the Committee found that these tools often delay and negatively impact patient care.
– The anti-competitive policies of the largest PBMs have cost taxpayers and reduced patient choice.
The Committee found that PBMs have intentionally overcharged or withheld rebates and fees from many taxpayer-funded health programs. Additionally, the Committee found that in these taxpayer-funded health programs, PBMs use their position as middlemen to steer patients to the pharmacies they own rather than pharmacies that may have closer proximity or provide better care.
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1 U. S. FED. TRADE COMM’N, INTERIM STAFF REP., PHARMACY BENEFIT MANAGERS: THE POWERFUL MIDDLEMEN INFLATING DRUG COSTS AND SQUEEZING MAIN STREET PHARMACIES, 8 (Jul. 2024).
2 Drug middlemen illegally drive up the cost of insulin, FTC says – CBS News.
3 Matthew Fiedler, Loren Adler, and Richard G. Frank, A brief look at current debates about pharmacy benefit managers, THE BROOKINGS INSTITUTION (Sept. 7, 2023).
4 Andrew Mulcahy et al., International Prescription Drug Price Comparisons: Current Empirical Estimates and Comparisons with Previous Studies, RAND Corporation (2021).
5 Eric M. Tichy, et al., National Trends in Prescription Drug Expenditures and Projections for 2024, 81 AM. J. OF HEALTH-SYSTEM PHARMACY 583 (2024).
6 Sonal Parasrampuria & Stephen Murphy, Trends in Prescription Drug Spending, 2016-2021, Assistant Secretary for Planning and Evaluation Office of Science & Data Policy (Sept. 30, 2022).
7 IQVIA Inst. for Human Data Science, The Use of Medicines in the U.S. 2024: Usage and spending trends and outlook for 2028 (Apr. 2024).
8 Supra note 6
9 Supra note 7.
10 CONG. BUDGET OFF., 57050, PRESCRIPTION DRUGS: SPENDING, USE, AND PRICES, 9 (Jan. 2022); Supra note 5.