▶ 0:04:38Chair Grassley: Good morning and welcome everybody to this hearing. We are examining competition in the prescriptive drug supply chain. Pharmacy benefit managers, pbms as we call them, play a significant role in drug supply chain. Initially, pbms primarily served in the administrative capacity.
▶ 0:05:06Chair Grassley: But their role has evolved and they now exercise growing influence in prescription drug supply chain and as the middleman, they determine what medications a patient can use and how much the patient pays at the pharmacy counter. Pbms have also become more consolidated.
▶ 0:05:33Chair Grassley: The three major ones control roughly 80% of the market and many are vertically integrated with insurance, providers and more. This power drives up prescription drug costs at the pharmacy counter. Indeed, a recent report found patient out-of-pocket drug costs reached $98 billion in 2024, a 20 5% increase in just five years.
▶ 0:06:04Chair Grassley: Pbm's claim on the contrary that they help lower cost. Yet their business practices are opaque. We don't even know what they do. We know their impact, though. They do everything in their power to steer business away from the competition toward their own entity. I'm committed to bringing sunshine and accountability.
▶ 0:06:37Chair Grassley: I've learned firsthand from patients and pharmacists the powerful role that pbm's play in our prescription drug supply chain. To name one example, last summer and I would toby her prescription medication that increased from $300 for $100 per month.
▶ 0:07:01Chair Grassley: Another wrote to me recently saying she is scared, that is her word, about her local pharmacy closing which will leave a void in her community. Buyer often about the vital services they perform for their community. We have one iowa independent pharmacy with us today, but they don't know how much longer they can stay open.
▶ 0:07:30Chair Grassley: Pbm's are steering more patients away from their local pharmacist to reimburse of requirement and limiting patient choice. Iowans are fed up with the skyrocketing costs of prescription drugs and reduced access. Americans are fed up as well. They are eager for congress to act to put a stop to the shady pbm practices.
▶ 0:07:58Chair Grassley: So I've taken a multifaceted approach to lowering drug costs, holding dpms -- pbm's accountable. I partnered with senator wyden on a two-year investigation in insulin price gouging. Investigation found that pbm's encouraged drugmakers to spike the drug list price in order to offer a greater rebate.
▶ 0:08:25Chair Grassley: This in turn allows manufacturers to secure priority placement uncovered meds, all at the expense of the patient. I pressed the ftc to study them and their impact on competition and drug prices. The ftc's two interim staff reports are helpful, but I'm eager to get a full study from the ftc complete with legislative recommendations.
▶ 0:08:55Chair Grassley: That's why this committee recently passed a bill entitled prescription drug pricing for the people act, which would hold ftc accountable in producing their pbm study in a timely manner. A timely report on pbm's is critical if we are to stop some anti-competitive pbm behavior this very day.
▶ 0:09:23Chair Grassley: Arbitrary clawbacks and spread pricings are documented tactics of pbm's, deploying those to fill their pockets at the expense of patients and pharmacies. This has to stop. Senator cantwell and I have worked on a bill that we entitled the pbm transparency act.
▶ 0:09:47Chair Grassley: Through the commerce committee to direct the ftc to stop deceptive and unfair pricing schemes by pbm's as well as to require more transparency. I've also worked on and supported the finance committee pbm legislation from the last congress and I talked to senator crapo and after we get done with some important reconciliation legislation, he indicated he'd like to move on in that area.
▶ 0:10:15Chair Grassley: For too long, pbm's have played a powerful role in deterring a patient access to prescription drugs and their cost. Pbm's heavily expanded that role in recent years, but their pocketbooks have expanded in ways that don't add up based on the services provided. While they get richer, we pay more and more for medications. Local pharmacies are shuttering.
▶ 0:10:47Chair Grassley: I'm hopeful that this hearing will shed light on how we can rebalance the power and hold them accountable. I look forward to the testimony of our witnesses today. Senator durbin.
▶ 0:10:59Senator Durbin: Thank very much, chairman grassley. If charges were leveled against the members of the U.S. senate when they were accused of legislating, there no evidence to show it. This is our fifth month of session this year. We had five bills on the floor of the senate. Five. I want to thank chairman grassley for this hearing. This is a bipartisan issue. This is one were democrats and republicans through your leadership, Mr.
▶ 0:11:27Senator Durbin: Chairman, and others, can really bring an issue that americans give a damn about. It is a real worry for people as to how they are going to pay for things that they need to keep themselves healthy and to aid some terrible outcomes. People in the U.S. pay the highest prescription drug prices in the world. The highest in the world. On average, four times more than people in similar countries pay for brand-name medications.
▶ 0:11:58Senator Durbin: Democrats took the first step to address this issue three years ago by passing inflation reduction act. It wasn't popular on that side of the aisle, but we passed it. This law cap the price of insulin at $35 a month. Instead -- it's at a $2000 limit on annual out-of-pocket expenses for seniors. Still a lot of money for a person on a limited income, but at least it is a figure that they can think about and budget for.
▶ 0:12:26Senator Durbin: And let the executive branch to negotiate with big pharma to lower prices under medicare, something president biden used to reduce selected drug prices by up to 79%. All that without a single vote from the other side of the aisle. Between those critical reform there is much more work we can do on a bipartisan basis.
▶ 0:12:50Senator Durbin: Wouldn't it be something if we announce we were going to take one whole week and invite all the good bills you've mentioned and others to come to the floor, let's debate them and vote them up or down. Almost like legislating. One place to start, big pharma spends billions of dollars to flood the airwaves with advertisements. You can't miss them. Patients tell their doctors they need drugs that they can hardly pronounce.
▶ 0:13:15Senator Durbin: Congratulations, america and being able to pronounce the name of that drug so they can go skiing, golfing, and white water rafting. I'm looking forward to it. Only one other developed country in the world permits these outrageous advertisements to fuel demand for high cost of drugs. You know what it is, new zealand. Chairman grassley and I have a simple bill to require direct to consumer drug ads to disclose the price charged by the drug company. It's basic.
▶ 0:13:43Senator Durbin: Basic transparency to inform america and it's been supported by president trump and the vice president as well. We ought to pass it this year. Another area is a topic of today's hearing. Pharmacy benefit managers or pbm's. Taking -- take any american on the street at random and ask them what the hell a pbm is. Do they make the drugs? No. Do they prescribe the drugs?
▶ 0:14:13Senator Durbin: No. But they are a key part of pricing the drugs in america to extract colossal profits. The big three pbm's, cvs, express scripts, and optimum rx dominate the market, controlling the flow of prescriptions for more than 200 million americans and people on the street can't even identify who they are.
▶ 0:14:37Senator Durbin: Over the years several large insurers have merged, creating vast conglomerates with more conflict of interest at the expense of the patient pocketbook and health. They engage in self-dealing to steer patients to a preferred pharmacy, and they squeeze out small rural pharmacies not just in iowa, but illinois, with lowball payments.
▶ 0:15:01Senator Durbin: They also reduce rebates and fees to manipulate, ensuring that they, not the doctors, decide which drugs you receive. Have you ever had your cancer treatment delayed while you waited for prior authorization on your medication? Thank the pbm's. Have you been told you've reached a limit for the epipen you rely on to keep your child safe? Thank a pbm. So who is the cop on the v? Isn't there a federal agency that can address these abuses?
▶ 0:15:32Senator Durbin: As it turns out, there is. It's called the federal trade commission. Under the last chairman they led the effort to investigate these abusive practices. The ftc even filed suit against the big three for their anticompetitive and unfair practices on insulin pricing. But in a brazen and plainly illegal move before this ministration, they fired the two democratic commissioners in this case.
▶ 0:16:00Senator Durbin: If this committee cares about addressing pbm abuses, that every member should speak out against these illegal firings. But unfortunately that's not the only answer. We need legislation. We need a solution to address these tactics. Better yet, we need a bipartisan, broad support for it. Congress came together, house and senate democrats and republicans to craft a package to reform the pbm industry.
▶ 0:16:30Senator Durbin: Who would stop such a package? Finally getting prices? Elon musk. Last december largely for a vote on this agreement as part of the year and continuing resolution, elon musk with his chainsaw unleashed a barrage of tweets opposing the package. The house republicans caved. That was it. Relief from the struggling independent pharmacy in burrell illinois or rural iowa was delayed because the world's richest man didn't like the bill.
▶ 0:17:02Senator Durbin: Never mind that five days after taking pbm reform, health policy expert elon musk treated -- tweeted what is a pharmacy benefit manager? That was his tweet. I hope today's hearing builds on the bipartisan package of patent and temperature should reform bills this year. But if we want to deliver real relief at the pharmacy counter, it's going to require republicans and democrats to stand up to elon musk and his chainsaw looking to cut anything in sight.
▶ 0:17:33Senator Durbin: I want to thank the chairman for calling this hearing. The turnout shows the level of interest and the opportunity for republicans in the majority and democrats in the minority to finally get to work and legislate. You want to introduce her illinois witness?
▶ 0:17:54Senator Durbin: Happy to do that. Dr. kircher, at northwestern university school of medicine in chicago. In 2024, Dr. kircher was honored with recognition for her sustained contribution to the field. Thank you for being here.
▶ 0:18:19Chair Grassley: Dr. sharon faust holds a doctorate in pharmacy and mba. She's chief pharmacy officer of navitus health solutions.
▶ 0:18:36Chair Grassley: She oversees health strategies come provider services and lumicera health services overseeing the pharmacy network and procurement strategies across retail, mail and specialty channels. She's a licensed pharmacist in wisconsin, serves on the board of directors of the national association of specialty pharmacy and drug selection advisory committee. Our next witness, Dr.
▶ 0:19:03Chair Grassley: Randy mcdonough, a constituent of mine. A professor of pharmacy management and innovation. Dr.
▶ 0:19:21Chair Grassley: Mcdonough is published and presented nationally and internationally on pharmaceutical care, medication therapy management and implementing patient care services and community. He's recognized for his role in developing and implementing new pharmacy business models. He's a president for the american pharmacist association 2025 to 2026.
▶ 0:19:55Chair Grassley: Mr. jc scott, president and ceo of pharmaceutical care management association. Prior to joining the association, he served as chief and get this -- advocacy officer for advanced medical technology association where he oversaw government affairs and external relations prior to his present position.
▶ 0:20:23Chair Grassley: He served as senior vice president of federal relations of the american consul of life insurers. Mr. scott has an undergraduate degree in public policy studies, duke university and jd university law center. Professor, Dr.
▶ 0:20:42Chair Grassley: Sood where he also served as vice dean of affairs and research.
▶ 0:20:56Chair Grassley: He holds joint appointments at usc school of medicine and usc marshall school of business he is a founding member and senior fellow at the usc schaefer center for health policy and economics. His research encompasses epidemiology, pharmaceutical markets, health insurance, medical innovation, medicare and global health.
▶ 0:21:25Chair Grassley: He has offered over 100 peer-reviewed publications in leading journals such as -- I won't name all those journals. His work has been featured in major media outlets including times, new york times, washington post, scientific american. With that I would like you to rise and we swear our witnesses.
▶ 0:22:00Chair Grassley: Do you swear or affirm that the statements you're about to giphy for this committee will be the truth, the whole truth, and nothing but the truth, so help you god? I see all of them affirming that. Thank you very much. We start with you, Dr. faust.
▶ 0:22:17Dr. Faust: Thank you. Chairman grassley, ranking member durbin, and members of the committee, my name is sharon faust, chief pharmacy officer for navitist health solutions. Thank you for inviting me here to discuss competition in the drug supply chain. We support many of the pbm reforms that you've been working on over the past several years and I want to thank those of you who have met with us to achieve positive results. We are a transparent pastor pbm.
▶ 0:22:49Dr. Faust: We are different from the rest. We were far more than 20 years ago when the state of wisconsin employee trust demanded a pbm partner that was passed through all rebates, didn't engage and spread pricing and provided access to other data. No such pbm existed, so a couple got together informed nava test.
▶ 0:23:13Dr. Faust: We are now owned by a nonprofit system and costco, who became an owner following a significant amount of savings when they had navitus as a client. We operate in all 50 states, all lines of business accounting for almost 19 million lives. Our model hasn't changed in the last 20 years.
▶ 0:23:41Dr. Faust: We still pass through all our rebates, focused on the lowest cost approach. Quality of care. We contract with our own pharmacies and support burrell and charge clients for the pharmacy has paid, we give full access and auditability to our clients and we have auditable and disclosed administrative fees, no hidden fees. We are successful because our partners innovate with us. Our clients are our innovators. We provide high-quality care.
▶ 0:24:11Dr. Faust: A decade ago, our clients came to us and asked for specialty pharmacy that had the same morals and pastor model as navitus. We created lumicera, charging clients based on a flat fee. The model is not tied to the drug cost, so it's incentives are aligned and patients are cared for with the highest of quality.
▶ 0:24:38Dr. Faust: We also provide access to an innovator in the insulin cost space, and we provide point-of-sale discounts that are passed through for manufacturers. For example, a recent announcement provide a bio similar at a 97% discount at point-of-sale. This $29,000 off list price per pill.
▶ 0:25:03Dr. Faust: That's a partnership that we feel disrupts rebates altogether and delivers immediate savings to the sponsor and the patient. We feel that is meaningful. Navitus never forces a client to use lumicera, nor do we financially penalize them for that. The majority of our business is actually not from navitus. While I certainly understand the frustrations of pbm's, pbm's when properly aligned served as a counterbalance to drug manufacturers and facilitate access to pharmacy networks to meet the needs of patients.
▶ 0:25:37Dr. Faust: I respectfully recommend to this committee, continue to support increased transparency, it's absolutely critical to disrupting business as usual and ensuring competition to make sure we know where the dollars are flowing in the system. Consider reviewing the entire supply chain. Americans could benefit from all parts of transparency in the drug supply chain including wholesalers and rebate gpo.
▶ 0:26:04Dr. Faust: The cautious about legislation that would prohibit certain business models, as any other industry investing in business adjacencies can help improve cost and streamline care. We must encourage competition in the reduction of cost throughout the drug supply chain. Consider language that focuses on behaviors and not broad prohibitions on ownership models.
▶ 0:26:29Dr. Faust: I thank you for inviting me to testify and for looking out for american families, businesses and patients as the cost of health care continues to rise. I look forward to your questions.
▶ 0:26:42Chair Grassley: Thank you. Dr. kircher.
▶ 0:26:47Dr. Kircher: Thank you for the opportunity for me to be here today. I am a medical oncologist at northwestern medicine in chicago where I specialized in treatment of g.I. Cancer, so pancreas, colorectal cancer. Like senator durbin mentioned, when I asked my colleagues or patients what a pbm is, they have no idea.
▶ 0:27:13Dr. Kircher: If you ask about their experience with obtaining specialty drugs, you will get a strong response, and likely a story of a patient who had a delay in their care or cannot afford their medication. While I'm speaking from the perspective of an oncologist, patients with other complex conditions like rheumatology, gastroenterology, other specialties faced similar challenges. So a few weeks ago I met a 46-year-old high school math teacher from the suburbs.
▶ 0:27:41Dr. Kircher: He was the kind of guy that you would want teaching your kids. Energetic, engaged, added to kids of his own. He had been dealing with what he thought was constipation. Too much junk food, not enough water. Unfortunately what he was dealing with was much more serious. He has a locally advanced rectal cancer that was nearly blocking his bowels.
▶ 0:28:03Dr. Kircher: So within 48 hours my team including surgery, radiation oncology, we had met him, reviewed his labs, his scans, his biopsy, and we had developed a treatment plan with curative intent. Time was absolutely critical. I entered his oral chemotherapy prescription into our emr, directed toward our in-house hospital-based specialty pharmacy that is accredited, designed to work with my team.
▶ 0:28:33Dr. Kircher: But just as happens with about 60% of the medications that we prescribe, the pbm redirected my prescription to a different specialty pharmacy, one that they owned. We had no say in the matter. Then we waited. Two weeks past. We submitted documentation. Clinic notes, pathology reports justifying a treatment plan that followed every national guideline.
▶ 0:29:02Dr. Kircher: During that wait, his bowel symptoms worsened and he desperately wondered why he had not started treatment yet. That is what we're are up against. First, pbm's do not offer the specialized expertise and support that patients with complex conditions need. Cancer therapy requires precise handling, close monitoring and a deep knowledge of the disease.
▶ 0:29:31Dr. Kircher: Our pharmacy is staffed by oncology-trained clinicians who do not just fill prescriptions, they educate patients, track adherence, manage side effects and communicate directly with my team. This tight communication keeps patients safe, out of the hospital, and keeps them on their treatment when appropriate.
▶ 0:29:55Dr. Kircher: Our team finds financial assistance, charitable foundations, co-pay programs, grants to help reduce the out-of-pocket costs for patients, which often times is what is standing between them taking the medicine for not. This is something that the pd ends the typically do and second, pbm's impose utilization management practices and medication switches that can delay care.
▶ 0:30:21Dr. Kircher: So clinicians and patients, we recognize that there needs to be some level of utilization management like prior authorizations in order to ensure that these expensive, potentially toxic medications are used appropriately. We get that. But when pbm-own pharmacies are the only option, these safeguards turn into major roadblocks.
▶ 0:30:49Dr. Kircher: Complex approval processes, prior authorizations will delay us for days or weeks because of a lack of integration with our care. I specialty pharmacy can accelerate these approvals because they have direct access to clinical records and it avoids this back-and-forth that literally is sometimes with a fax machine which delays treatment. So pbm policies can also have unilateral drug substitution.
▶ 0:31:17Dr. Kircher: So for my patient, I prescribed a low-cost bio similar, and the pdm replaced it with a brand name, likely due to rebate incentives. So while we are trying to do the right thing prescribing bio similar for cost, we have substitutions that are done without consulting me. It is unclear who benefits from those savings. Does the payer benefit, and most importantly, to my patients benefit?
▶ 0:31:46Dr. Kircher: Finally, pbm-own specialty pharmacies contribute to waste. When therapies change, as they do a lot, my pharmacist knows immediately and pauses the prescription. Because of the disconnect of pbm's, oftentimes my patients will live extra medications that we are literally throwing away. These are tens of thousands of dollars that we are throwing away.
▶ 0:32:10Dr. Kircher: So caring for patients with cancer is demanding, often times heartbreaking, and a true privilege. Nothing is more difficult for the patient or for me at that Dr. as telling them that they have cancer. It marks the start of the journey that is defined by urgency, uncertainty and a desperate need for coordinated care.
▶ 0:32:36Dr. Kircher: This committee has a meaningful opportunity to help reform the policies and practices that are causing delays, confusion and burden. Thank you for the opportunity. Happy to take any questions.
▶ 0:32:54Dr. Mcdonough: Good morning. Thank you for inviting me to testify this morning on behalf of my patient. I'd also like to express my gratitude to chairman grassley for your years of leadership on pharmacy ben is management or pbm reform. Miami is raining mcdonough. I live in iowa city, iowa nine: her and ceo for the past 19 years.
▶ 0:33:20Dr. Mcdonough: Since march of this year, I've served as president of the american pharmacies association or a pha, representing our nation's over 300,000 pharmacists in every set of care. I want to begin my testimony by providing a real patient case that provides an example of the egregious business practices of pbm's. And the time, effort and risk I endured to help a patient. The patient is a young man in his early 20's.
▶ 0:33:48Dr. Mcdonough: He has struggled with obsessive-compulsive disorder, or ocd to the point where it was so debilitating he had to be hospitalized. Finding the right medication for this patient took time and effort, and we worked very closely with his physician during that time. Unfortunately, the medication that finally worked cost us $728.35. Our reimbursement from the pbm -- excuse me.
▶ 0:34:19Dr. Mcdonough: Our reimbursement was only $10.33. I followed all the appropriate processes of the pdm to dispute the reimbursement amount, but it resulted in no change and a lack of response from the pbm. I took more drastic measures and went against my contract with the pdm to contact the help plant directly to see if they could help me with this dire situation. I told the health plan that I'm being put into an ethical dilemma.
▶ 0:34:49Dr. Mcdonough: As a business owner, I cannot afford to fill this medication. But as a caring, of care provider, I recognize that this patient was benefiting greatly from this treatment. It was only because of my tenacious persistence that I got a partial resolution. Due to the health plan pressures, the pbm relented and finally increase the amount of reimbursement, but never to the level where the reimbursement exceeded my cost.
▶ 0:35:16Dr. Mcdonough: Now perhaps you are thinking that this is just an extreme example, but I challenge you that it is not. Community pharmacists and their staff across this country are being forced into this ethical dilemma multiple times a day with multiple patients to the point where decisions are being made to even carry or stock medications, especially name brands. And this is not just a brand medication problem.
▶ 0:35:42Dr. Mcdonough: As a reimbursement is based on this, nontransparent and supposedly proprietary maximum allowable cost pricing in which the reimbursement of the drug is many times the lower cost and there is minimal or no professional fee to offset the cost of this medicine. In essence, it has become the rule that there is a net negative reimbursement from a large percentage of medications filled in pharmacies across this country.
▶ 0:36:08Dr. Mcdonough: So what does this business model due to the infrastructure of community pharmacies? To be candid, closures. This brings me to my own practice challenges. Pharmacy corporation which is been in existence since 1963 is comprised of five community pharmacies in a closed-door, long-term care policy. Last year our total net income for these six policies was over -$150,000. This has forced us to make some hard decisions.
▶ 0:36:40Dr. Mcdonough: At the beginning of the year we were excited to close a pharmacy in one of our rural communities because of its financial challenges. Still, we were also concerned another ethical dilemma, but it was the only pharmacy within a 50 mile radius. Which is also an issue for access for some of our older and sicker patients who may have physical limitations in transportation challenges. Instead of closing, we converted into a hybrid tele-pharmacy in which pharmacists are present two days a week.
▶ 0:37:11Dr. Mcdonough: The other three days it is managed by a technician to provide clinical services. Even in this model, our net income for the first quarter this year was -$80,000. Challenging our decision not to close. More recently on may 1, we decided to close another one of our rural pharmacies because there was no viable financial path for us to keep the pharmacy open.
▶ 0:37:39Dr. Mcdonough: So now my corporation has become one of the statistics, and in iowa alone more than 200 pharmacies have closed since 2014 and a record erdogan pharmacies closed in 2024. Dar fees, clawbacks, rebate opacity. Take it or leave it contracts, generic effective rates and patients have terms we been familiar with or heard about when talking about pdm's and their harmful business practices.
▶ 0:38:07Dr. Mcdonough: Many of these issues stem from a lack of competition and transparency. At the end of the day, I just call it a broken system. A system or I want to provide care but it has become financially infeasible. A system work in unity pharmacies are an access point for patients and more and more pharmacy deserts are emerging. A system in which profits are emphasized over patients. A system that is about ready to implode upon itself.
▶ 0:38:34Dr. Mcdonough: The race to the bottom has ended and I along with my community pharmacy colleagues can no longer survive. Thank you again for this opportunity to testify at this very important hearing. A pha is committed to working with the committee to enact meaningful reforms that will safeguard community pharmacies and ensure patient access to essential care. Particularly in rural and underserved areas like mine in iowa, which need it most. I'm happy to answer any questions.
▶ 0:39:07Dr. Mcdonough: >> thank you. I appreciate the opportunity to join today's hearing on behalf of the pcm a, which negotiate and minister prescription drug benefits through 289 million insured americans. Do relates back to our mission of lowering drug costs and creating affordable access for patients. No employer, union or other sponsor is under any obligation to hire a pbm.
▶ 0:39:37Dr. Mcdonough: Nearly all choose to hire one because our companies lower cost. Pbm's negotiate with manufacturers, apartment pharmacies and deliver $148 billion in savings annually for employers unions, retiree plans, government programs and patients. Employers and other sponsors not only choose whether to use a pbm, but also have the final say in the pharmacy benefit design that best meets the needs of the population.
▶ 0:40:05Dr. Mcdonough: They choose how to set their contract and how to pay for the services and they choose how best to use the savings delivered by the pdm. And there is a lot of choice. The pdm market is competitive and evolving rapidly. Today we have more than 70 full-service pdm's operating nationwide new entrants are continually emerging and winning market share with an 18% increase in the total number of businesses over five years.
▶ 0:40:31Dr. Mcdonough: Pdm business models are structured in a variety of ways, adding to the choice in optimality for employers and sponsors. Some are standalone companies. Some standalone companies focus only on certain therapeutic areas and categories of medications. Others may have an affiliated mail, specialty or retail pharmacy or be part of a larger health care company which can add to the ability to offer a total care package to patients enrolled in a plan.
▶ 0:40:58Dr. Mcdonough: Restrictions on this business model diversity and affiliation with pharmacies would reduce pharmacy access and availability, not improve it. It would produce competition in the pharmacy market and could raise costs, not lower them. The choice of what type of pdm to hire is up to the employer to determine what assistance they want and administering their health care benefits and what will deliver the highest quality, best health outcomes and lowest costs for the employees they serve.
▶ 0:41:27Dr. Mcdonough: Pbms compete in a rigorous request for proposal process on a regular basis that requires them to constantly innovate through the customers and grow new business. Reported employers and health insurers changing pbms only underscores the competitiveness of the market and the importance of choice. We hope to use today's discussion to clarify any misunderstanding about how they work.
▶ 0:41:53Dr. Mcdonough: Our industry supports choice inflexibly for clients, attending robust competition in market and providing transparent, actionable information to employers, sponsors, patients, prescribers, policymakers and maintaining a healthy pharmacy market to be there to serve patients. In addition and to be clear, our companies support and advocate for lower list prices on all prescription drugs. Our mission is to negotiate for lower net cost for employers and clients, which means lower cost for patients.
▶ 0:42:23Dr. Mcdonough: A lower list price means a better starting point for those negotiations, and we've been actively calling on drug companies to lower their prices. I do not dispute that there is an affordability challenge for many patients and a need to continue to improve how the system serves consumers.
▶ 0:42:41Dr. Mcdonough: Understanding drug costs must include a look at the entire supply chain, including drug companies and wholesalers, pharmacies and other stakeholders, and that is why we support chairman grassley's prescription pricing for the people at to take a holistic approach to addressing prescription drug affordability. I will tell you, pbm's are not waiting for government intervention or mandates to address with the market is asking for.
▶ 0:43:03Dr. Mcdonough: Our companies are already adapting, evolving and innovating to meet demand of the market, to lower out-of-pocket cost for patients and improve transparency for plan sponsors and consumers. Pbm's are putting in place new options for partnering with and reimbursing pharmacies, focusing on programs that increase reimbursements in berlin areas in particular, and expand the scope of services that pharmacies can provide for patients.
▶ 0:43:26Dr. Mcdonough: We urge policymakers to recognize these innovations happening in the market with three drug pricing legislation, and we also encourage the committee to address the underlying price of prescription drugs, which are uniquely high in this country. We applaud and strongly support the bipartisan work of this committee to address back -- patent abuse in advertising so that we can have more competition and lower costs. Congress is focused on lowering drug costs and improving care for patients, so are we.
▶ 0:43:57Dr. Mcdonough: Pcma looks forward to working collaterally with the committee and other stake holders to address prescription drug affordability and route the system for patients. Thank you for including me today, I look forward to your questions.
▶ 0:44:13Dr. Sood: Committee, thank you for the opportunity to testify today in that competition issues in the prescription drug supply my name is neeraj sood and I am a senior scholar and professor at the university of southern california. The opinions I offer today are my own.
▶ 0:44:38Dr. Sood: I've been studying the economics of the prescription drug administrative and put a focus on the supply chain for about a decade. Today I will share key findings from my research that highlight the need for reform and also suggest reforms that can make the markets work better for the american patient. In 2017, my colleagues and I conducted one of the first comprehensive studies of the supply chain.
▶ 0:45:07Dr. Sood: Our research revealed that out of every $100 in prescription drug spending, about $40 went to the supply chain. This finding was striking because it challenged the conventional narrative that manufacturers were solely responsible for high prescription drug costs. When I presented these findings, I often got the question ok, but are these making too much money?
▶ 0:45:35Dr. Sood: To answer that, we analyzed the financial performance of publicly traded firms in the supply chain and compare their returns to the average return for the s&p 500 companies. We found that pbm's and pharmacies that are often consolidated in one corporate entity earned significantly higher excess returns compared to the s&p 500.
▶ 0:46:04Dr. Sood: This finding suggests that the prescription drug supply chain is not competitive and they are well beyond those enjoyed by other firms in the U.S. economy. My research on insulin markets suggests that pbm's seemed to be leveraging their market power and extracting profits at the expense of patients.
▶ 0:46:27Dr. Sood: We found that between 2014 and 2018, net prices received by manufacturers decreased by 33%. However, at the same time, the share of insulin expenditures captured by pbm's increased nearly threefold. And at the same time, overall expenditures on insulin increased modestly. So put simply, pbm's are doing part of their job.
▶ 0:46:57Dr. Sood: Negotiating lower prices from manufacturers, but failing at another crucial aspect, ensuring that the savings benefit patients and the health care system more broadly. My recent research focuses on vertical integration in the supply chain. That is different stages of the supply chain. Insurers, pbm's, pharmacies are consolidated under one single corporate entity.
▶ 0:47:22Dr. Sood: I believe such vertical integration races significant antitrust concerns by creating incentives to disadvantage pharmacies and plans that compete with the pbm's own pharmacies and plans as also noted by chairman grassley.
▶ 0:47:40Dr. Sood: In a recent study on the medicare part d market, we find evidence suggesting that vertically integrated pbms raise the cost of rival plans and increase premiums for medicare beneficiaries. I want to conclude by offering some policy recommendations. First, establish fiduciary responsibility.
▶ 0:48:02Dr. Sood: Require the pdm to act as fiduciaries for the client so that they are legally obligated to act in the best interest of health plans and their members. Second, increase price transparency. This will promote more competition in the market and it will allow payers and policymakers to the value pbm performance, whether they are delivering the value they say they are delivering. Third, perform the rebate system.
▶ 0:48:33Dr. Sood: Patients should take caution sharing based on the actual post rebate price and not the list price. The current system of rebates inflates these prices. In fact, my research finds there is a one-for-one relationship between rebates and list prices. Fourth, ask ftc and doj to scrutinize vertical integration on antitrust grounds.
▶ 0:49:01Dr. Sood: And fifth, get rid of information asymmetry which is have all pbm clients with unfettered access to their pharmacy claims data so that they can evaluate the efficiency of the drug benefit. In conclusion, our pharmaceutical distribution system should work for patients, not against them. Thank you for the opportunity to testify today. I will be happy to answer any questions.
▶ 0:49:30Chair Grassley: And we will start with my iowa constituent. Last year, 29 iowa pharmacies closed, many of which were in berlin areas and have served their communities for decades. You own a small group of rural pharmacies and recently had to close some.
▶ 0:49:52Chair Grassley: What legislation would you like to see congress passed to help rural pharmacies like yourself and the patients you serve, and since bureaucracy can work faster than congress, is there anything that hhs can be doing that would help along this line?
▶ 0:50:09Dr. Mcdonough: I appreciate the question. Before answering your question I do have a couple of points. One is I want to be clear that pharmacy deserts occur not only in verbal areas but also urban areas. Particularly affecting the most vulnerable patients. Community pharmacies are much more than a place were prescription their field. It is a place where patients have access to a trusted health care partner.
▶ 0:50:35Dr. Mcdonough: It is a place where patients receive health care services ranging from medication management, point-of-care testing and immunizations to health promotion and chronic disease management. It's a place where care coordination and medication management service help patients achieve optimal outcomes. It is a place where pharmacists and their staff work closely and collaboratively with physicians, other providers and community-based organizations to optimize patient care.
▶ 0:51:05Dr. Mcdonough: To answer the question as far as the first part of your question in legislation, I think a good place to start is your bill, the pbm transparency act. Where it bans deceptive and unfair pricing schemes, prohibits pbm clawbacks and payments that have been made to pharmacies. It improves transparency about spread pricing. Next, I'd like to address the fair reimbursement medicare part d.
▶ 0:51:35Dr. Mcdonough: Senate bill the patients before middlemen act that enhances the pbm transparency and accountability to reduce prescription cost seniors. It also ensures all treatments are fair treatment for all pharmacies as it relates to medicare part d contracts. What is missing is again addressing reasonable and relevant part d reimbursement to make pharmacies whole.
▶ 0:52:07Dr. Mcdonough: Lastly, I talked about the services that would provide beyond prescription dispensing. I do think we have to develop some kind of a payment model for those services that are having an impact not only on patient clinical outcomes, but also on total cost of care. The second part of your question is about hhs and what they could do.
▶ 0:52:28Dr. Mcdonough: Is it possible to provide an authority for the secretary of hhs to fix medicare payments to community pharmacies to ensure fair and reasonable reimbursement so we can continue to provide care to our senior patients?
▶ 0:52:41Chair Grassley: My pbm transparency act would require pbm's to be fully transparent about how much money they make. What kind of transparency do you provide to your clients, and what is real transparency look like?
▶ 0:53:03Dr. Faust: Thank you. We provide full transparency. We provide access to all the data, all the client data, and access to pharmacies and auditability of that. As a fiduciary representative for our sponsors. I think you're bill does a great job of introducing transparency and that is really needed in this industry.
▶ 0:53:30Chair Grassley: Next, I have a question for professor sood. The primary responsibility of a fiduciary is to run a health plan solely in the interests of participants and beneficiaries for the exclusive purpose of providing benefits. At least five states have imposed fiduciary or care requirements.
▶ 0:53:58Chair Grassley: I think you said this in your statement. You want to expand on what you said about your statement about fiduciary responsibilities?
▶ 0:54:08Dr. Sood: Sure, thank you for the question. I think the price transparency bill complements fiduciary responsibility. So the idea of price transparency is to figure out if you are getting good value for your money or not. If your pbm is acting in the interest of your members or not. And what fiduciary responsibility does is it legally obligates the pdm to act in the interest of the members.
▶ 0:54:36Dr. Sood: So if you find out that the pdm is not acting in the interest of your members, you have some recourse to address that issue. So I think fiduciary responsibility combined with transparency can really make the markets work better for the american patient.
▶ 0:54:55Senator Durbin: I may be mistaken, but I suspect that we have a federal issue that has been disclosed to us this morning at this hearing. I suspect that our witnesses have given us a challenge as to whether we are going to do something about it. I suspect there is a possibility that we may even have to legislate, as a bill, make a law.
▶ 0:55:23Senator Durbin: And they think you spelled out in graphic terms why this is essential. My challenge to colleagues on my side of the aisle and the other is that's not walk away from this hearing and say that is --. Let's do something that we were elected to do and legislate. The chairman has some legislation. Each of us has an idea, I'm sure. He wouldn't have run for office if we didn't. And we have the challenge given to us by this panel. Dr.
▶ 0:55:52Senator Durbin: Kircher, I try to imagine you walking into that patient room day after day after day and explaining that the therapy he needed to stop the cancer in his body was being held up because of a fight, a jurisdictional fight about how to get the drug to the hospital. How in the world do you possibly explain that to a patient?
▶ 0:56:17Dr. Kircher: It's interesting because as an oncologist we are very well trained to deliver bad news. I can tell patients that they have a cancer that has progressed, that made the ultimately deep -- need to be transitioned to hospice care. But what I've noticed since practicing in 2011 is increasing conversations that I am not prepared for.
▶ 0:56:42Dr. Kircher: It's interesting that I can have a conversation about end-of-life, but I'm having more and more about affording our medications. In making these difficult decisions that are well beyond the walls of our clinic and involve just obtaining the medications. So as fast as we are hustling in clinics to see the patient and get them what they need, we hit this roadblock that is really difficult to deal with.
▶ 0:57:12Senator Durbin: What if this was a member of your family? That really brings it home. Dr. mcdonough, what you and Dr. kircher have told us about your belief in your professional response abilities to the patient really rings true to me. You care. And because you care, that patient is going to get better treatment. And the bottom line is you've gone through and analyzed the is an economics viewpoint.
▶ 0:57:43Senator Durbin: I'm really impressed with what you found. Mr. scott, the bottom line is this. You argue that pbms give us competition, choice and flexibility in the evidence is absolutely to the contrary. What you just heard the illustrations on both sides are proof positive that is not your goal.
▶ 0:58:03Senator Durbin: I could go into vertical integration, the opioid crisis, spell out what pdm's have done over and over again, but how in the hell do you answer to this stuff? To give her patient the medicine he needs to get well and get into a battle over pricing? You say they go into involuntarily. Clearly that's not exactly the case. Voluntarily she had a pharmacy in her hospital that she wanted to use.
▶ 0:58:33Senator Durbin: But you didn't give her that choice. I don't see how a pbm in the example that we for today have done the right thing for the patient. They've done the right thing for their bottom line. Please.
▶ 0:58:45Mr. Scott: Thank you for the opportunity to comment on some of the issues that they raised. I wanted to start first by just expressing my sympathy for the experience that Dr. kircher shared.
▶ 0:59:00Mr. Scott: My father also suffer from cancer at the end of his life in that alzheimer's disease the coverage that he had from his health care benefits, the way that that system worked in both instances to make sure that he was getting the drugs he needs, that requires constant changes and dosage adjustments. The way that that work properly allowed my mom and I to spend time focusing on him at the end of his life instead of having to focus on some of those administrator challenges. And that is the way we believe the system should work for all patients.
▶ 0:59:30Mr. Scott: We want to make sure that is working better. As has been said before, those steps can be important. In order to make sure we are getting the right medicine and the right patient at the right cost, and at the same time, in a 2025 the way that the system, we should not be using fax machines. We should be at a place where that exchange with the physician can happen anymore instantaneous place so that we don't have those unnecessary delays, especially in the case of pharmaceutical like cancer treatments.
▶ 0:59:59Senator Durbin: If this isn't a call to action, I don't know what is. Imagine a member of your own family that you love going through this because we failed to change the law. I hope we do. >> thank you very much, Mr. chairman. Mr.
▶ 1:00:18Senator Durbin: Mcdonough, with pbm's controlling formulary design and drug access, what prevents a pbm from steering patients toward their own pharmacies, even if cheaper alternatives exist?
▶ 1:00:34Mr. Scott: It doesn't, that is one of the issues. Patients are being steered to a lot of times the brick and mortar pharmacies that they own. So we don't even have that choice. What is also concerning to me is the confusion that they bring into the marketplace, especially for older patients who receive letters and they are not sure if they are supposed to go mail order, they don't know they have a choice, and they feel like if they don't do it they're going to lose the benefit. So they feel like they're being forced to do that.
▶ 1:01:05Mr. Scott: We see all kinds of letters that come to the patients that come to us to indicate patches and for the confusion.
▶ 1:01:13Sen. Lee: I can imagine this at the potential to harm independent competitors and consumers to pay higher prices. Have you seen that?
▶ 1:01:22Dr. Mcdonough: Absolutely.
▶ 1:01:25Sen. Lee: Mr. scott, in the negotiation with drug manufacturers, the scale appears to be really important to pdms. One can understand why. Of the top three, they are vertically integrated. They control, as I understand it, about 80% of the market.
▶ 1:01:48Sen. Lee: So in light of that, how do smaller pbm's compete without the scale and the vertical integration that the big three who control 80% of the market have?
▶ 1:02:01Mr. Scott: I'll try to be quick. I went to long for Mr. durbin's question. To address your question, pbm's and their design networks, when an employer hires them, they are looking at three considerations. It comes to retail geography, and then quality for the patient and cost.
▶ 1:02:22Mr. Scott: Whether it is an affiliated pharmacy or not, those are your considerations, and the data would tell us that there are not higher reimbursements through affiliated pharmacies and unaffiliated pharmacies. If there were and it was costing the employer more money, then the employer would not use them anymore. Your point about integration at the marketplace at scale, yes, scale matters in terms of being able to use purchasing economics to achieve discount from drug companies. That is an important thesis of what they do.
▶ 1:02:54Mr. Scott: Smaller ones in addition to trying to provide discounts can offer a more tailored, unique level of service, benefit, patient experience, other considerations that an employer may have in mind when choosing who they want to partner with. So it really gives some option out in the market and the smaller ones compete by doing things in a different way than some of the established companies.
▶ 1:03:16Senator Lee: Your insisting they can compete. Dr. sood, integration, spread pricing, and the somewhat inherently opaque nature of rebate negotiations, how is pricing impeding competition?
▶ 1:03:39Dr. Sood: Vertical integration creates conflicts of interest. For example, if I am competing with you and if I have your -- my brother who owns a pbm, and he is providing services to you, how do you feel about that? That creates a complete of interest because you are like, he is my brother.
▶ 1:04:06Dr. Sood: He is not to provide services to you because you are competing with me. There is that conflict of interest that arises in dealing with health plans. As randy mentioned, it arises in steering patients to their old pharmacies rather than independent pharmacies.
▶ 1:04:23Dr. Sood: As you said, since these plans are all vertically integrated, if I want to enter this market, it is a big hill for me to climb because now I need to be a pharmacy, insurer, all at the same time. That is tough to enter in this market. So what you'll be left with is two or three big firms the controlling majority.
▶ 1:04:47Sen. Lee: Are those two or three big firms using their scale and market advantage so as to impede entry, to serve as a restriction on entry into the marketplace such that others cannot get into that marketplace?
▶ 1:05:04Dr. Sood: I think so. I think these conflict of interest create this incentive to help your own pharmacies and plans, which hurts entry of other pharmacies and plans, which reduces competition and increases cost.
▶ 1:05:23Sen. Lee: Thank you.
▶ 1:05:29Sen. Whitehouse: Good to have you for the hearing. Seems to me that pharmaceutical pricing is the decision of the pharmaceutical companies and big pharma would like nothing more than a world in which they control the prices, they have huge sway in this building, and their opposition, if you want to call it that, concerns on price come from individuals who have
▶ 1:06:01Sen. Whitehouse: Essentially no market power. We have seen really significant pricing abuses by big pharma. We pay the highest prices in the world for a great many pharmaceuticals. President trump is responding to how sick americans are by proposing his executive order to lower it and set U.S.
▶ 1:06:36Sen. Whitehouse: Pharmaceutical pricing and international standards. I think that is a signal of how things are going out there. In that environment, a pbm done right is the only institutionally powerful correction to pharma's hegemony over prices.
▶ 1:07:04Sen. Whitehouse: We got a little bit of help by letting medicare do some negotiation. That is a start. Other than that, it is just an open field advantage for big pharma to roll over individual patients with no structural opposition, so a pbm done right is a counterforce to pharma's exotic pricing structures, because they are able to buy at scale and can apply leverage,
▶ 1:07:35Sen. Whitehouse: Because there is excess profit baked into the parsing -- pricing model. They actually can provide a pretty important service. When I turn on my ipad, I pretty much always now see an ad paid for by pharma trying to throw pbm's under the bus for pharma's pricing policies.
▶ 1:08:00Sen. Whitehouse: If you are big pharma and people are mad about the way you price your drugs and why americans have to pay more than essentially any other country for pharmaceutical costs, then, as president trump noticed, by announcing this next executive order, there is a pretty fed up public out there and pharma's response is not to lower prices but to move pbm's in the line of fire and try to make them the
▶ 1:08:31Sen. Whitehouse: Source of the blame. So I am watching what looks like a bit of a political strategy by big pharma to point the finger at pbm's. There are clearly problems with pbm's and the worst problem is if the pbm's and big pharma are colluding.
▶ 1:08:49Sen. Whitehouse: If the pbm's and pharma are colluding to make the underlying pharmaceutical prices even higher and not complain about the basic pharmaceutical prices, so they have a bigger margin they can negotiate for their clients amount so that they can get a bigger fee, then you have pharma and pbm's engaged in a collusive enterprise to cheat
▶ 1:09:20Sen. Whitehouse: The american consumer. That behavior we need to get rid of. But the idea that we need to get rid of pbm's when they are the only significant structural pushback on pharma's pricing I think would be a mistake. What I am seeing, knowing everybody's mad at them, running all these ads, throwing pbm's in the way of public irritation as if pharma does not control its own pricing.
▶ 1:09:52Sen. Whitehouse: I worry about this. Mr. scott, who sets the prices for pharmaceutical products?
▶ 1:10:01Mr. Scott: Drug companies.
▶ 1:10:03Sen. Whitehouse: And you would agree that if drug companies and pbm's are colluding to keep prices high, just to get pbm's a bigger share and a general truce , so that consumers do not get screwed, that would be an abuse of the model.
▶ 1:10:18Mr. Scott: And that is not happening. Pointing to the advertisements is good evidence there is no truce. We have been calling for drug companies to lower list prices on all prescription drugs.
▶ 1:10:30Sen. Whitehouse: My time is expired. But I think there is a role for pbm's here. I think the most import signal we are seeing now is pharma's ad campaign trying to defend his exotic pricing techniques by putting somebody else in the line of political fire.
▶ 1:10:49Chair Grassley: You raise a lot of questions. Of bills in the last congress, one of the house at three in the senate, none of them did away with pbm's but they all called for transparency and it seems the answer to all the questions you raised would be solved at least partly by transparency.
▶ 1:11:10Sen. Whitehouse: We worked on those bills together. We look forward to continuing to work with you on those bills. I think we just have to understand what the problem is here to get the correct solutions. Thank you for that observation.
▶ 1:11:24Sen. Tillis: Thanks to all the witnesses for being here. As senator durbin was making opening comments, I think we are probably going to leave this meeting and say, what a mess. One of the reasons I think we are as we talk past each other and we are not talking about the entire value chain. Until we do, we are going to pick our favorite target, whether it is pharma, pbm's, and keep spending our wills.
▶ 1:11:55Sen. Tillis: -- keeps spinning our wheels. I think in the aca everyone was high-fiving because pharma took a haircut. No one is talking about how wonderful it was that we had a 60% reduction in small molecule research, which is one of the most promising fields for therapies and cures going forward, so you have to understand the consequences.
▶ 1:12:17Sen. Tillis: If some of these companies were so flush with cash and can manage the risk, why are they publicly saying they have a 60% reduction in small molecule research? Just one point. I think everybody needs to get into the barbershop. A haircut should be coming. But everybody has to be in the barbershop. Are we going to end up with a haircut like mike lee's or one like john kennedy's?
▶ 1:12:49Sen. Tillis: No offense, mike. I like your new haircut. But the point is we keep talking past each other. I cannot even get tricare met the biggest pbm, for federal employees cut one that I am on -- I cannot even get transparency from them. I want to audit the tricare pbm. At least we can audit our pbm, but what I get back in response is a heavily redacted report.
▶ 1:13:19Sen. Tillis: This administration, I am going to try again. I tried it with the biden administration. Can we at least audit our own pbm? And figure out what is in the black box? If we start doing that systematically, I think some of your insights specifically into pbm's are probably correct.
▶ 1:13:43Sen. Tillis: We are probably going to find out -- one thing we have to recognize is the pbm mission has varied dramatically since it was first established. Is the mission creep necessary or not necessary? Is it value added or adding cost?
▶ 1:14:01Sen. Tillis: Until we get into a structured analysis and get everybody in the barbershop versus using this forum to demonize a link in the value chain, we are going to end up with the same old hearing I have been to for 10 years now. We do it every year. It is great. We hear insightful comments and get nothing done.
▶ 1:14:24Sen. Tillis: So I think today -- I have to disagree in the same way that I have criticized my colleagues and the former president for 60% reduction in small molecule research, for using weavers and everything else to solve this problem, I think they are wrong minded.
▶ 1:14:43Sen. Tillis: What is right minded is to modernize pbm's cannot figure out what their value added is, determine how we implement price transparency, and then we will create something that has enduring value for the only person I care about, the patient. So I have a quick question for you, Mr. scott. What is wrong with the suggestion that pbm's should operate as a fiduciary?
▶ 1:15:14Mr. Scott: The definition of a fiduciary is a person or entity in a position of control and decision-making authority over another person's property or finances or the role of the pbm when hired by an employer or others is to recommend and administer benefits at their direction. They do not make decisions.
▶ 1:15:33Sen. Tillis: What else we need to change to make it reasonable?
▶ 1:15:37Mr. Scott: I think what number if you have been pushing at around transparency is an important thing to comment on. We have leaned in as an industry to try and engage with the committee, both sides of the congress, on embracing transparency. If congress says you want to set a floor, we will work with you to set that floor in terms of data.
▶ 1:16:02Sen. Tillis: Senator grassley, I think one the things we should do outside of the structure of committee, is to have a workgroup for those of us willing to participate, get all the players at the table so we can have a good old-fashioned debate club versus the limited question and answer we have here. That would be something. I would like to follow your lead.
▶ 1:16:29Sen. Tillis: If not, I'm likely to convene it myself so I can get everybody in the room and we can have a transparent discussion about how we fix the value chain and how we address the problem. The most favored nation coming out of the administration and other things are shortsighted, unsustainable measures that will not produce the result. I believe all of us on this committee want to achieve. We have a wide range of differences on how.
▶ 1:17:00Sen. Tillis: Thank you, Mr. chair.
▶ 1:17:09Chair Grassley: And health. And I think we have to get those chairman to agree. Senator coons?
▶ 1:17:17Sen. Coons: Thank you for convening this and thank you to the panel for your important work. Let me ask a few questions, if I might. In my small state of delaware, from 2018 to 2020, delaware and footed the bill for over 24 million in unnecessary prescription drug payments largely due to practices that have been the focus of this hearing.
▶ 1:17:42Sen. Coons: As a state, we have enacted a series of pbm reform laws, notably all passed unanimously. To our state legislature. I do not think that happens often in any state, so I'm glad that pbm reform has bipartisan support in congress, including bills led by chairman grassley. A ban on spread pricing was one of the provisions I was glad to see in the reconciliation bill.
▶ 1:18:12Sen. Coons: I would have chosen to use the savings to fund community health centers, but I'm glad for the opportunity. If I could, thank you for your work on pancreatic cancer disease.
▶ 1:18:37Sen. Coons: I received substantial outreach about the need for pbm reform from clergy and breast cancer survivors. How to pbm's make it harder for patients to access life-saving medications?
▶ 1:18:53Dr. Kircher: There are a couple ways and patients do not know a pbm is even involved, but where they -- where the rubber hits the road for them is the disconnect between my prescription pad in them receiving the drug. Like some black box happens sometimes when we cannot fill it in our specialty pharmacies. That might be different within different specialties, so these are for highly complex chemotherapy drugs.
▶ 1:19:22Dr. Kircher: So patients when we cannot use our own pharmacy really negatively are impacted.
▶ 1:19:33Sen. Coons: I have seen that with family members who had died of cancer. If I could, I have seen reports as high as 80% of rural and independent pharmacies receiving reimbursement below the cost of procuring a dispensing. The owner told me it became unaffordable to stock certain expensive treatments.
▶ 1:20:02Sen. Coons: His reimbursements after pbm fees are unpredictable and he cannot afford to lose money every time he dispenses one of these. Why is into their greater transparency -- why isn't there greater transparency into the reimbursement process?
▶ 1:20:24Mr. Scott: Understand the mechanics of how this works. There is transparency when a pharmacy is choosing a contract to be part of a recommended network. More than 85% of those independent pharmacies are empowering a wholesaler through their pharmacy services administrative organization to negotiate on their behalf.
▶ 1:20:46Mr. Scott: You have big wholesalers controlling the market, selling drugs to the pharmacy and negotiate a contract on their behalf and that is a starting point.
▶ 1:21:00Dr. Mcdonough: I think transparency is key. When you think about the end user being the patient, there is a lot of stuff that happens in between where things are siphoned off and everything else and I think spread pricing is real. As an independent pharmacy, we had a local employer who asked us if we would be willing to do direct contracting with them.
▶ 1:21:31Dr. Mcdonough: I was lucky the ceo had experience in the insurance agency area and he said that I want to see if you give us a direct price, what that would do. That was five years ago. They have saved a lot of money. Patients are happy because they get to go to a pharmacist who can provide services for them and we actually make some money or can stay open. I think transparency is on the line to find out what is going on. I think when we talk about rebates, that is opaque.
▶ 1:22:03Dr. Mcdonough: What we have to do to understand about rebates? Do we need rebates? Let's start from scratch and say can we do something where we know our actual cost? I could not tell you what my actual cost is because of rebates, so I think we have to have more transparency.
▶ 1:22:26Sen. Coons: Should all pbm's be required to operate with the same level of transparency as yours when it comes to selecting drugs and obtaining rebates? What other practices could pbm's learn? >> we believe in transparency and passing through rebates, especially as it relates to passing savings to the client.
▶ 1:22:52Sen. Coons: All pbm's should have transparency across the drug supply chain, so that would be a great first step around rebates.
▶ 1:23:01Sen. Coons: Thank you to all the witnesses today.
▶ 1:23:05Chair Grassley: Senator kennedy.
▶ 1:23:10Sen. Kennedy: As I understand, 80% of the pbm market is controlled by three companies, three pbm's that are vertically integrated. Is that right?
▶ 1:23:25Dr. Sood: Correct.
▶ 1:23:27Sen. Kennedy: Does your research show that the prices that consumers pay are higher than they would be if those companies were not vertically integrated?
▶ 1:23:39Dr. Sood: My research on medicare -- partially.
▶ 1:23:47Sen. Kennedy: What you mean, partially? They are either higher or lower.
▶ 1:23:54Dr. Sood: Medicare part d premiums are higher as a result of vertical integration.
▶ 1:24:02Sen. Kennedy: Ok. I'm all for transparency. I want to say that. Why don't we skip the four play and go right to the sex and get rid -- outlaw vertical integration for part d? Would you accept an amendment to our bill like that?
▶ 1:24:26Chair Grassley: I do not want to answer that question right now because I want to study that.
▶ 1:24:32Sen. Kennedy: Would you support that, Mr. scott? Let me guess what your answer is.
▶ 1:24:39Mr. Scott: No. I can explain why.
▶ 1:24:41Sen. Kennedy: Know you speak sanskrit. I am sorry. You are good at it. I know your job is to protect pbm's. I do not think pbm's are the only ones at fault but you do not have unclean hands. Professor sood, you say pbm sought to be fiduciaries. To whom?
▶ 1:25:07Dr. Sood: To the plan and their members.
▶ 1:25:12Sen. Kennedy: What if the plan and member interests diverge?
▶ 1:25:19Dr. Sood: In principle, they should be fiduciaries to the members. For example there is -- Sen.
▶ 1:25:27Kennedy: I get it. Mr. chairman, why don't we skip the foreplay and go right to the sex? Why don't we amend your bill to require that they have an obligation to members?
▶ 1:25:49Chair Grassley: That has been suggested and there is part of that in our legislation, but probably not enough to satisfy you. Let me look at what you -- at what you want to add to it.
▶ 1:26:01Sen. Kennedy: I am not criticizing your bill. I do not want my office to end up in bethesda. I like transparency, but we are just nibbling around the edges here. And with respect your definition of a fiduciary is wrong. A fiduciary is not somebody that controls a decision. You know that and I know that.
▶ 1:26:24Sen. Kennedy: A fiduciary is somebody who has legal obligation to give his clients the best advice and do what is best for his client. It does not replace agent with principal or vice versa. You know that and I know that. You need to talk to her lawyers. I may be wrong, but I doubt it. Let me go back to professor sood.
▶ 1:26:53Sen. Kennedy: Tell me two things you would do tomorrow to fix pbm's and result in lower prices for consumers.
▶ 1:27:07Dr. Sood: The two things I would do is I would implement price transparency so everyone knows what they are paying.
▶ 1:27:18Sen. Kennedy: Price transparency just tells us who is screwing them.
▶ 1:27:24Dr. Sood: And the view sherry responsibility says if you are getting screwed I can take you to court. So I would do those things and those are better than banning particular practices because otherwise been spread pricing and something else will show up.
▶ 1:27:39Sen. Kennedy: I got 29 seconds. Do you have other suggestions?
▶ 1:27:44Dr. Sood: The other thing we can do is what I recommended, passed through rebates to patients. Pass-through of rebates to patients. So for example the list price of a drug is $50,000 but the rebate is $40,000, so when a patient is doing cost-sharing, they should be paying on the post rebate price, which is $50,000 less.
▶ 1:28:16Dr. Sood: Right now, what is happening is patients are paying cost-sharing of $50,000, so this would immediately lower patient out-of-pocket costs. For the cancer patients.
▶ 1:28:30Sen. Kennedy: So the pbm's are encouraging manufacturers to jack up the list price so they can jack up their rebates. Is that right? That is illegal.
▶ 1:28:42Dr. Sood: I do not know about
▶ 1:28:46That -- Chair Grassley: I want to remind my members that they are enforcing the 30 minute rule so I'm going to let you take over while I am gone and then I will be back before you finish. Senator hirono.
▶ 1:29:05Sen. Hirono: I think all the panelists for being here. Prescription drugs supply chain is not competitive. I think that is clear, based on not just today's testimony but in our hearings. One of the reasons is vertical integration. You are asked by my colleague just now what things you would do.
▶ 1:29:31Sen. Hirono: Can you expand why we should not try to break up the vertical situation? The vertical integration situation? We do have a bill that would require the divestiture of pbm zoning pharmacies, so I will that not be a structural change that we should be contemplating?
▶ 1:30:00Dr. Sood: We can contemplate the change, but I'm not sure how disruptive the change would be. I would encourage doj and ftc to look at antitrust issues related to vertical integration and try to address them. If that can address these issues, then we do not need to take the more heavy-handed approach, which would be forcing pbm's today best pharmacies, etc.
▶ 1:30:28Dr. Sood: -- to divest pharmacies, etc. I recognize there are antitrust issues that doj and ftc should address.
▶ 1:30:39Sen. Hirono: We are not expecting much from either entity because the ftc had open to some investigation along the lines that you suggest. There are some markets that just are not given to competition. I would say this is one of them and I am not leaving pbm's over drug companies.
▶ 1:31:02Sen. Hirono: This is not a matter of whose fault it is, but there are structural changes and I would say a vertically integrated entity -- a conflict situation. So one of the ways that antitrust comes in is by requiring divestiture. By having practice in the space as an amateur lawyer.
▶ 1:31:27Sen. Hirono: I think some markets are not given to the kind of reforms you are talking about so we can have price transparency, but if you do not have power, so what? Even if the largest pbm's control 80% plus, even if they are -- if there's transparency in pricing, if there is a lack of power on the part of the entities they are working with, the question becomes so what?
▶ 1:31:59Sen. Hirono: I am also at a loss as to why we permit spread pricing. Yours is a pass-through. Why should we not require all pbm's to be pastor and not engage in the kind of pricing that certain entities such as I would say the iowa ag is -- spread pricing enables pbm's to
▶ 1:32:30Sen. Hirono: Retain millions in undue profits. What would you say about illuminating spread pricing? Some states have done that.
▶ 1:32:45Dr. Faust: We support transparency, including to what pharmacies are being paid, which is why our model aligns with clients paying what pharmacies are paying and no spread or capture in the middle. That supports both pharmacies and plans, which should be the gold standard to support patient care.
▶ 1:33:07Sen. Hirono: Professor sood?
▶ 1:33:09Dr. Sood: I agree. I would support eliminating spread pricing. I do not see how it serves patients.
▶ 1:33:20Sen. Hirono: You have real-life experience and are a cancer patient and cancer treatments are, I know from my own experience, very complicated and you have medications and impacts of medications, so you have had patients who have been at that store because you're not able to get pbm's to move fast enough and they do not have expertise to decide which medication is most efficacious, so what is the
▶ 1:33:51Sen. Hirono: Kind of reform we need to do with prior approval by pbm's?
▶ 1:33:57Dr. Faust: --
▶ 1:34:00Dr. Kircher: It is probably not just the pbm's. I think every line in the chain coming from the manufacturers, payer, payer solutions as well as we saw, but I think we need to -- I got lost in the question. >> prior approval.
▶ 1:34:29Dr. Kircher: We just need them resolved quickly and effortlessly. I think that is the main thing we are asking, not that they do not exist but that we can resolve them quickly.
▶ 1:34:44Sen. Hirono: Pbm's do not have the expertise from understanding of making these determinations quickly.
▶ 1:34:54Sen. Hawley: You represent the largest association of pbm companies.
▶ 1:35:00Mr. Scott: I believe the only.
▶ 1:35:02Sen. Hawley: The largest and only. Help me understand what it is your business is supposed to be doing. You're supposed to be making drugs cheaper for patients. Is that right?
▶ 1:35:14Mr. Scott: Supposed to help employers and sponsors administer benefits at a more affordable point for consumers.
▶ 1:35:22Sen. Hawley: Would you say that you are succeeding?
▶ 1:35:25Mr. Scott: We have had success managing the net cost of drugs and we have the challenge of ever escalating drug company list prices.
▶ 1:35:41Sen. Hawley: The answer you're looking for is now. You are not succeeding. Let's look at that. This shows the percentage that americans pay more than other countries for brand-name drugs. In canada, we pay more than canadians pay, more than friends and so on. On average, altogether, we pay 422% more than all these other countries.
▶ 1:36:10Sen. Hawley: Either you are the worst negotiators in the history of the world or something is wrong with your business model. Which is it?
▶ 1:36:20Mr. Scott: Those are comparisons of list prices. Drug companies set the list price. The pbm is negotiating down the cost.
▶ 1:36:30Sen. Hawley: You're not telling me that consumers are not paying more the united states than overseas.
▶ 1:36:37Mr. Scott: The data would tell us they are exposed to higher pressures -- price points. The plan decides what your
▶ 1:36:45Company -- Sen. Hawley: The design of the plan benefits the insurance companies and you manatt patients. Patients are getting screwed, if I may. We are paying four times more for drugs. People in my state count for insulin or the most basic drugs. That is when they have plans managed by you and you guys are getting rich off of it, filthy rich.
▶ 1:37:13Company -- Sen. Hawley: The ftc report found the top three pbm companies generated $7.3 billion in profits between 2017 and 2022. 7.3 billion dollars. That is a lot of money. Why is it nobody can afford their drugs but you are making $7.3 billion?
▶ 1:37:36Mr. Scott: If I may, at two points. One, you are not wrong that we need more competition among drug companies. The reforms you have -- the more we have competition, we can leverage that.
▶ 1:37:50Sen. Hawley: I'm glad you say we need competition. Don't you think the competition we need is to break up this? The biggest three pbm's are owned by the biggest insurance companies. You are like one giant pharma industry, a giant pharma series of monopolies. Why is it a good idea for the biggest pbm's to be owned by the biggest insurers and now you are buying up pharmacies as well? Why should we allow that? Why should pbm's own pharmacies?
▶ 1:38:24Sen. Hawley: How is that good for patients?
▶ 1:38:26Mr. Scott: Because it is creating option alta in the market.
▶ 1:38:30Sen. Hawley: In missouri last year, we lost 73 independent pharmacies across my state in 19 different counties. Two entire counties in the state of missouri now have zero pharmacies, a. You are making $7.3 billion, you and the companies you represent, yet two counties in missouri have no pharmacies. 73 closed last year.
▶ 1:39:01Sen. Hawley: Why should we not be breaking you guys up? This looks like classic monopolist behavior. You are getting rich.
▶ 1:39:12Mr. Scott: You keep citing a gross revenue number. Profits are in the low single digits.
▶ 1:39:19Sen. Hawley: For-profits are not better than they have ever been?
▶ 1:39:22Mr. Scott: I do not know the trend over the years.
▶ 1:39:25Sen. Hawley: You know exactly. It is in the ftc report. You know the answer. Your profits have increased and now you are buying up pharmacies and you are putting independent pharmacies out of business. You are doing it deliberately because you are giving special rebates and lower costs to pharmacies you own and directing patients to the pharmacies you own, such that if they do not go to a pharmacy that you own they have to pay higher costs.
▶ 1:39:55Sen. Hawley: You are nodding your head. You have looked this.
▶ 1:39:58Dr. Mcdonough: Every day. That is exactly what is happening.
▶ 1:40:03Sen. Hawley: Why don't we break you guys up? You said we need more competition. Let's do it. Let's pass a law that says pbm's cannot own pharmacies.
▶ 1:40:16Mr. Scott: We have seen that competition grow in the pbm market.
▶ 1:40:21Sen. Hawley: You have seen the number of pharmacies grow in this country?
▶ 1:40:26Mr. Scott: The number of pbm's, meaning it is a competitive marketplace.
▶ 1:40:31Sen. Hawley: The biggest pbm's own 80% of the business. 80 percent. And you are owned by the biggest insurance companies. The problem is there is no competition. It is a racket and the people who lose are the patient's who cannot afford prescription drugs. It is time for congress to do something about it. Senator welch.
▶ 1:40:53Sen. Welch: We only have 126 independent pharmacies in vermont. They have been going out of business left and right. In my view, they are critical to the community. Main street is getting devastated.
▶ 1:41:16Sen. Welch: This is especially true in rural america and the head of our independent pharmacy group showed me the dir returns and you have the same problem that I think all into bennett pharmacies have.
▶ 1:41:39Sen. Welch: You get paid less for filling a prescription and you do not even know you're going to get a clawback from the pbm until after the fact. Is that true?
▶ 1:41:53Dr. Mcdonough: It is true. Because of our --
▶ 1:41:59Sen. Welch: But it was thousands of dollars. I want to knowledge my first wife had cancer. The pharmacist was so crucial to us. You are getting cancer related drugs and you get the prescription and you know this. It is not exactly the way -- it is trial and error as you go on and the person -- the person we could talk to was our local pharmacists. God bless you for the work you do for our community.
▶ 1:42:27Sen. Welch: I want to ask you, how can a business survive if they sell the product at what is an agreed-upon price and then you reimburse them at a lower price? How is that a fair business model?
▶ 1:42:50Mr. Scott: Two quick holding statements --
▶ 1:42:53Sen. Welch: I do not want holding statements. You agree on a price and they give you a clawback.
▶ 1:43:00Mr. Scott: We all have the same goal. We need a healthier retail pharmacy market. If we cannot serve patients --
▶ 1:43:07Sen. Welch: We do not have a healthy retail pharmacy market. They are under incredible pressure. We can be blind to it, but you are suggesting -- I want an answer of how we deal with Mr. mcdonough and all these community pharmacies in our small towns through the country.
▶ 1:43:27Mr. Scott: Those reimbursement are part of the agreed-upon contract we negotiate on behalf of pharmacies.
▶ 1:43:38Sen. Welch: You're telling me 40% of the cost of pharmaceutical drugs is in the supply chain, so that is people reaching in who have access to this market, which individual consumers have no access to. They did have to get the drug for a person they love.
▶ 1:43:56Sen. Welch: They will mortgage their house, celie can't do whatever it takes to take care of the well-being of the person they love, so this question of clawback -- is that one of the aspects of how this is getting to be such a ripoff?
▶ 1:44:10Dr. Sood: Completely. I agree for a business, if you do not know the price you are getting for the services you provide -- I do not think it is a choice for independent pharmacies because if the big three pbm's control 80% of the market they control 80% of patients, so if they do not sign a contract with the pbm they lose 80% of the market so I do not think there is a choice.
▶ 1:44:34Sen. Welch: And is often not what you do. It is how you do it. I think we need pharmaceutical companies to help us with drugs, but the pricing they do is terrible. We may need pbm's, but how they do it makes a difference. I was impressed at the transparency and your pbm and the information you provide is different than information other pbm's provide.
▶ 1:45:08Dr. Faust: Our practices focus on lowest net cost. We believe that was not --
▶ 1:45:19Sen. Welch: It is clear what happens. We squeeze and crush independent pharmacies. You share information with your vendors that is not shared with the people who sign up with Mr. scott's organizations.
▶ 1:45:34Dr. Faust: Pricing for the plan sponsors is available. Patients get pricing through any sort of applications which are also at standard.
▶ 1:45:46Sen. Welch: What is the transparency you have that is different the transparency for Mr. scott's organization?
▶ 1:45:58Dr. Faust: We have Mr. scott: our fees disclosed.
▶ 1:46:01Mr. Scott: Many of our member companies offer the same.
▶ 1:46:06Sen. Welch: Are your fees disclosed? Could I look up your >> fees right now? They're in association with the number of independent company members and many of them structure at the same way.
▶ 1:46:23Sen. Welch: My time is up. Thank you for your testimony.
▶ 1:46:30Sen. Blackburn: I recognize myself or questions. This is an issue that our health care marketplace has struggled with. For many years. And Dr. mcdonough, I want to come to you first because in tennessee, where I represent, since 2010 we have had 120 of our independent pharmacies close and this is tragic.
▶ 1:46:59Sen. Blackburn: Any times that pharmacy is the only access point for health care in these communities and to a pharmacy, when I go in and talk with these individuals, and I am in each of our 95 counties every year, they will talk about how horribly they were treated by the pbm's, so I would like for you to talk about, for 30 seconds, about how growth and
▶ 1:47:30Sen. Blackburn: Consolidation around this pbm model has strangled not only you but other independent pharmacies.
▶ 1:47:38Dr. Mcdonough: We saw the chart that showed profits the pbm industry is making. During the same time, 2017 to 2022, we just saw our profits go down to the point where we have no profits. We are being squeezed and that is concerning to me. Because when we lose that community pharmacy, whether in an urban area where they might be in the pharmacy for that area -- they are not coming back.
▶ 1:48:09Dr. Mcdonough: I have had so many mayors and city managers and towns come to me saying, will you open a pharmacy? We cannot. We cannot afford to, so it has had dramatic impact on us to the point where we have closed a pharmacy and converted another one to a hybrid pharmacy and it is still struggling and I want to make clear it is not because we are bad business people. I want to make that clear.
▶ 1:48:37Dr. Mcdonough: It is because we are not making any money on the drug, let alone the services we provide to the patient to ensure the patient is achieving a therapeutic outcome with that medication, so we are losing it twice, on the drug side and the service side. There is no way.
▶ 1:48:59Sen. Blackburn: I want to talk about bad actors for a few moments. We recently had the department of commerce and insurance in tennessee do a report they gave us disturbing information on one pbm in tennessee and what they found was they were forcing these independent pharmacies, than nonaffiliated, to pay a
▶ 1:49:30Sen. Blackburn: Higher inflated rate on over 550 drugs and they profited more than $30 million through spread pricing. This gets to my first point about those 120 independent pharmacies that we have lost in tennessee.
▶ 1:49:54Sen. Blackburn: This same pbm failed to reimburse 200 65 pharmacy claims within the legally set seven-day business day period and that impacted 40 separate pharmacies in the state.
▶ 1:50:16Sen. Blackburn: It does not take a lot to connect the dots on this and there are -- there are so many examples of these egregious practices. For the purpose of this hearing, I have given you one finding from this report and what we have seen is you talk about transparency -- we do not have it.
▶ 1:50:43Sen. Blackburn: It is in salting -- it is insulting to patients and pharmacies and pharmacists and to these independent pharmacies, so talk to me about how a $30 million spread and delayed reimbursement for pharmacy claims meets the transparency standards you claim the pbm's are putting in place.
▶ 1:51:10Mr. Scott: I cannot speak specifically to the individual example, but I can cite another report recently produced by the university chicago. Looking at these questions and using the same dataset summit into the ftc for the ongoing study, the conclusion was unaffiliated pharmacies are not being paid less than affiliated pharmacies.
▶ 1:51:34Sen. Blackburn: In tennessee, that is not the case. If you would like to see the study, I would be happy to submit it.
▶ 1:51:45Mr. Scott: The practice of affiliation is not unique. Hospitals, grocery stores, amazon are all partnering with pharmacies to provide that efficiency of care and the other is the same point has been made a couple times. Paying pharmacists to do more services for patients is something we support and there's legislation.
▶ 1:52:08Sen. Blackburn: Do you support that like you support the hike in a ministry to fees work -- your pharmacies have put in place? Have doubled. You had ministry to fees for prescriber education, medication adherence, data analytics, and these have increased 51% in a two year period of time. If I had my way, I would do away with pbm's.
▶ 1:52:46Sen. Blumenthal: I want to come back to the rebates issue. We all know that pharmacy but if it managers negotiate with drug manufacturers on rebates and theoretically they can save money for consumers if the pbm's pass along the benefit of those rebates to their clients and others and then can use the money to reduce the plan cost.
▶ 1:53:16Sen. Blumenthal: There has been debate and discrepancies on the largest pbm's testified in congress, that 95 to 98% of rebates the collected from their own manufacturers go back to employers.
▶ 1:53:33Sen. Blumenthal: Last year, the kaiser foundation conducted a survey, I think 2100 42 randomly selected companies, and found only one in five of those employers actually received the rebates. The other four and five did not know what percentage of the rebate they received or reported receiving. Only some or a little of the rebate.
▶ 1:54:01Sen. Blumenthal: I know pbm's have argued rebates help employers by providing flexibility in benefit designs and in other ways, but if the employers are not getting most of the rebates or do not know what they are getting, tell me how there is merit to the pbm arguments.
▶ 1:54:32Sen. Blumenthal: Could you explain -- there has been some discussion of it here, how you reconcile the argument that the benefits go to the employers when the employers are not getting those benefits or do not know they are getting them.
▶ 1:54:43Mr. Scott: Thank you for the question. I believe they are getting them and have the option alateen to choose to get 100% of them.
▶ 1:54:53Sen. Blumenthal: By the kaiser foundation found they are not.
▶ 1:54:57Mr. Scott: The discrepancy of the data at some of it is not reflective of the trend. We have seen more of the pass-through model in the last year to 18 months and that is a pots that were employer's are saying we want them all. We have had one of the big three say we are going to do only 100%.
▶ 1:55:15Sen. Blumenthal: You are saying the survey is outdated?
▶ 1:55:18Mr. Scott: I'm making a supposition that that may be why it is not lined up with other studies. Employers are making a different choice, using their ability to design their contract to say they want 100% pass-through.
▶ 1:55:36Chair Grassley: And you are saying --
▶ 1:55:39Sen. Blumenthal: And you are saying that has made a radical difference in whether they are getting rebates?
▶ 1:55:48Mr. Scott: We are for transparency to make sure employers are getting information when they are making that decision and letting them choose whether they want to receive the rebate.
▶ 1:55:57Sen. Blumenthal: What is the latest credible study?
▶ 1:56:03Mr. Scott: By Dr. carlton from the university chicago that was updated in the last month shows we are at almost a hundred percent pass-through. We would be happy to share that with you.
▶ 1:56:19Sen. Blumenthal: Let me ask all the witnesses on patent laws. You're all familiar with drug money fracture misuse of patent laws to retain monopolistic control. Do all of you agree that would enable lower costs for consumers?
▶ 1:56:48Mr. Scott: Yes.
▶ 1:56:53Sen. Blumenthal: My time is about to expire. I take it that we do.
▶ 1:57:02Sen. Britt: Mr. mcdonough, Dr. mcdonough, as an independent pharmacist in a community setting, you are not just a health care provider and part of that ecosystem. You're also running a small business. We have seen over 6005 hundred independent pharmacies close their doors since 2010 and in alabama we looked at the reliable data between 2015 and 2018. We had over 225 close their doors.
▶ 1:57:32Sen. Britt: That goes to a rate of about one per month. When you are dealing with a state like alabama, when rural communities and pharmacies are often the only health care provider within 20 or 30 miles, this is unacceptable. When pbm's impose retroactive clawbacks and below cost reimbursement rates, they are not just squeezing your bottom line. They are pushing out entire communities towards pharmacy deserts.
▶ 1:58:02Sen. Britt: Based on what you have seen, our current pbm practices accelerating the law several pharmacies and what does that mean for basic access to medications and clinical services in places like rural alabama?
▶ 1:58:19Dr. Mcdonough: It has been accelerating. If you look at the past information we have had and how much we lost and use the pharmacy that we just closed, two years ago we were at 95 thousand dollars as our net amount that we paid. Last year it was -$75,000. He dug into the data.
▶ 1:58:44Dr. Mcdonough: 25% of prescription claims that we filled were lower than zero, so it is negative. A third of prescriptions were zero dollars to five dollars. What does that mean? If we look at because of dispensing, you talk about being a small business. I hire people in my corporation. We have 70 to 80 employees.
▶ 1:59:12Dr. Mcdonough: We take it seriously when we have to think about closing something because I'm affecting people's livelihoods. I have seen how community pharmacies, when they close, how the community misses them because they may be the only health care provider, as you said, that they have access to, and these are not just community pharmacies. These are people trusted in the community, who contribute back to the community.
▶ 1:59:38Dr. Mcdonough: These are people who get calls after hours and take the drug to a patient at their home. That is what is missing and we are going to be losing more and more. As long as we keep debating about this, people have asked me do you think we are going to see more closures, absolutely.
▶ 1:59:55Sen. Britt: There is a relationship aspect in rural communities that cannot be matched. When you are looking at creating opportunity for the american dream, you cannot draw that without access to care and pharmacies. No one is going to locate a plant and create good paying jobs or decide to expand in a place that has a pharmacy desert. We know that.
▶ 2:00:17Sen. Britt: Looking at this in a place like alabama where 67 of our communities are rural communities, they deserve better. I think Mr. scott made clear most employers do rely on pbm's to manage costs, but still, as the pbm debate rolls on, I'm struck by how patient and employers who are actually paying bills seem to be the least empowered voices in the system.
▶ 2:00:48Sen. Britt: Employer sponsor health care remains the primary source in america, some or the hundred 64 million americans obtain coverage through an employer. Why do most employers except a model where intermediaries are incentivized by the size of the rebate rather than the value of the drug to the patient?
▶ 2:01:13Dr. Sood: Employers do not have a lot of that skill is important in leveraging our discounts from manufacturers. I think employers would prefer a model where there was a direct price reduction. Then I can be sure I have the money.
▶ 2:01:45Sen. Britt: What else do you think is needed for more visibility and bargaining power for our dollar?
▶ 2:01:57Dr. Sood: Greater transparency so employers can know whether they are getting a good deal and we need fiduciary responsibility that if they do not act in the best interest of members or employees we can address that.
▶ 2:02:13Sen. Britt: Do you believe rebate driven formula design reflects sound clinical judgment?
▶ 2:02:25Dr. Kircher: Often know. Often we are trying to fight for medications that are guideline accepted.
▶ 2:02:37Sen. Britt: Thank you.
▶ 2:02:40Chair Grassley: Stay here until the end of the meeting, but in case something happens I want to say to all the panelists, as chairman of this committee, thank you for your time and hard work. Senator booker.
▶ 2:02:54Sen. Booker: What happens when a person with a life their earnings these cannot get access to a life-saving drug?
▶ 2:03:06Dr. Mcdonough: Not a good outcome. If it is a life-threatening situation and they are not getting access to that medication, the life is in danger.
▶ 2:03:17Sen. Booker: And you know situations.
▶ 2:03:20Dr. Mcdonough: I do know situations.
▶ 2:03:22Sen. Booker: Work and tripping to the death of an american was inability to access over time the life-saving drugs they need.
▶ 2:03:29Dr. Mcdonough: Or because of process such as par authorizations that was not done timely and a person stroke and died, yes.
▶ 2:03:40Sen. Booker: Why aren't we calling this what it is? My friends across the aisle have called this a scam. Multilevel marketing is a scam. Internet people that prey on senior citizens, that is scammers.
▶ 2:03:58Sen. Booker: This is a level of corporate violence that is costing american lives, a level of colossal greed at the expense of patient well-being. Am I overstating the fact?
▶ 2:04:13Dr. Mcdonough: No there are situations like that with every pharmacy.
▶ 2:04:19Sen. Booker: I have been in your state and sat around a table of senior citizens who told me stories, that they rationed their drugs against doctor orders cannot cut pills in half. What kind of peril does that put people in?
▶ 2:04:37Dr. Mcdonough: They are not going the medication they are supposed to be getting. It is going to be endangering their lives.
▶ 2:04:46Sen. Booker: Endangering their lives because desperate people in our country who have drugs for cancers, for heart conditions, for conditions that are threatened their lives are put in the moral dystopia of having to make a decision that is not left to them.
▶ 2:05:10Sen. Booker: To rationed drugs are not have them at all when they fulfill the prescription -- when they cannot fulfill the prescription. This is not a scam. It is corporate violence.
▶ 2:05:31Sen. Booker: The former ftc chair lee syndrome staff report that found the three biggest pbm's, cvs, express scripts, marked up numerous life-saving drugs thousands of percents and others by hundreds of presents that dispensed at their affiliated pharmacies. These drugs include treatment for cancer, hiv, pulmonary hypertension, and more.
▶ 2:06:00Sen. Booker: Shockingly, hundreds of times the cost of people just over the canadian border. They made more than $7.3 billion in revenue from dispensing drugs and hyping up -- hiking up prices over six years.
▶ 2:06:17Sen. Booker: The idea of breaking a big medicine is not just about dealing with anti-awful trust, and there are a lot of industries where corporate concentration has caused consumers to pay more, but in this case it is not just causing consumers to pay more. It is threatening lives of americans.
▶ 2:06:40Sen. Booker: Pbm's are not the only contributor to high drug prices, but the vertical integration that has allowed power -- powerful market players to buy other entities and steer patients toward drugs with higher out of -- out-of-pocket costs is causing harm in a country -- in the country and cannot be allowed to go on. According to the research of the american economic liberties project, at least 326 U.S.
▶ 2:07:05Sen. Booker: Pharmacies have closed since december 19, 2024 when congress abandoned a bipartisan pbm reform as part of the stopgap spending bill. We know how to solve the problem. -- we know how to solve this problem. In action is complicity.
▶ 2:07:30Sen. Booker: There is nothing short of an evil going on in this country that allows millions of americans to suffer under an unjust system that is hurting small business people that have a larger focus in life not only running your business but helping rural communities. I have been in your community, helping people get access to drugs even when you deliver them in the middle of the night.
▶ 2:07:52Sen. Booker: This is wrong, this is unjust, this is violence, this is moral obscenity going on in our nation. We know the solution and this committee has got to fix them. >> thank you for holding this hearing in the work you have done to try to perform -- reform the practices of pbms. I have a long family history in this area.
▶ 2:08:20Sen. Booker: My grandfather was a pharmacist, my great uncle who turns 100 this week was a pharmacist and I have at the same experience so many of my constituents have had . Dr., thank you for coming all the way from california.
▶ 2:08:40Sen. Booker: My experience has left me wondering what player in the scheme of things was responsible for my experience which was minor compared to what others experienced which was I was on a medication prescribed by my physician which was working well without side effects -- >> when you are gone will you adjourn the meeting?
▶ 2:09:00Sen. Schiff: Yes, and I have to get out in time to vote. I got a letter for my insurers saying we are taking you off that medicine and putting you on another one and I called my physician and said why are we changing my medication that is working perfect? Well probably someone is going to get paid more money by moving it to something else and I said, is there an appeal? And he said yes, but you will lose.
▶ 2:09:31Sen. Schiff: We appealed and he was right, I lost. He said you could appeal one more time but you would lose again. It was not my physician that made the decision, but who decided I was better off on a better medication?
▶ 2:09:48Dr. Sood: It was the pbm. I had a similar situation where my university changed their pbm. There is a generic medicine, fda approved, and the market 30 years, well-established, suddenly no longer covered because of the change in pbm.
▶ 2:10:05Sen. Schiff: California experienced a 56% increase in its department of managed health care and health plan spending and prescription drugs from 2017 to 2023. How much of that is because of consolidation in the industry? Where would you apportion the increase costs?
▶ 2:10:26Dr. Sood: I was one of the experts who back in 2017 opposed the cvs merger because I thought it would reduce competition in the pharmacy market, reduce competition in the insurance market, and lead to higher costs. I have not seen the study but agree with the general hypothesis that vertical integration could be responsible for higher costs.
▶ 2:10:53Sen. Schiff: I wish I had more time to ask westerns but I would likely not have any time to vote without adjourning. Thank you all for your hearing -- testimony. That will conclude this hearing. Thank you for sharing your experience. Written questions can be submitted for the record until may 20. We ask witnesses to answer questions from the committee as soon as possible. This hearing is adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]