- As rising drug prices continue to draw lawmaker scrutiny, the industry remains deeply divided over which section of the supply chain is most at fault — a state of affairs showcased by a Senate hearing yesterday heavy on finger pointing and light on potential solutions.
- PhRMA, the powerful lobby representing drugmakers, blamed pharmaceutical benefit managers (PBMs), insurers and hospitals for failing to pass along savings from discounts negotiated with manufacturers and marking up the cost of drugs.
- PBMs, in return, accused drug companies of jacking up prices. "Pricing decisions are made unilaterally by manufacturers," wrote Mark Merritt, CEO of the Pharmaceutical Care Management Association, in prepared testimony submitted to the Senate Committee on Health, Education, Labor & Pensions (HELP).
The Senate hearing was aimed at exploring how the current makeup of the drug delivery system affects prescription drug costs, and called on top officials from trade groups representing drug manufacturers, PBMs, distributors and pharmacists.
"My goal for these hearings is to continue in a bipartisan way, and learn the facts about what goes into the price patients pay when picking up their prescriptions and what, if any, steps this committee could agree on and take to lower that price," said Senator Lamar Alexander, R-TN, in his opening remarks.
While Alexander and his Republican colleagues have been less publicly critical of drugmakers than Democrats such as HELP ranking member Patty Murray, D-WA, the series of hearings being held by the committee highlight how members of both parties are under pressure from constituents to show action on drug prices.
At particular issue was the complex and opaque system governing how drugs are paid for and how costs are determined. While list prices get the most attention and headlines, rebates and discounts negotiated by drugmakers and PBMs can dramatically alter the net cost paid by health plans for the drugs their members receive.
This is a point PhRMA and drug manufacturers love to hammer home, using the lack of transparency into rebates as an opportunity to attack PBMs as middlemen profiting off of the discounts given away by drugmakers.
"Multiple data sources indicate that growth in manufacturer rebates and discounts has been substantial and that an increasing share of these discounts and rebates are retained by middlemen involved in distributing and paying for prescription medicines," said Lori Reilly, head of policy, research and membership at PhRMA.
PBMs say this isn't true. "There’s no correlation between manufacturer price increases and the rebates and discounts they negotiate with PBMs," PCMA's Merrit said in his testimony to the committee.
"By negotiating price concessions from drug companies and recommending strategies that promote generics and more affordable pharmacies, PBMs have played a key role in retraining the rise of overall drug costs to low single-digit increases over the past few years."
Each side has brandished sponsored research supporting their respective positions, further muddying the waters.
The complexity prompted Senator Alexander to ask why rebates are even necessary — a question the industry officials gathered didn't appear to have a good answer for.
Despite the continued attention from lawmakers on prices, there has been little momentum on any legislative or executive actions to curb drugmakers' pricing power. President Donald Trump, who castigated the industry earlier in the year, did return to that theme this week, saying prices are "out of control."
Still, an executive order rumored to be in the works over the summer hasn't surfaced and the administration's attention has so far centered on the Affordable Care Act and tax reform.
Investors in the industry now seem to be largely dismissive of Trump's threats. Biotech stock indices, which nose-dived in January on comments from the president that the industry was getting away with murder, were little affected by his recent remarks.