Politics

Ire over pharmacy middlemen fuels lobbying blitz

While there is little agreement among PBM opponents about what actions Congress should take, industry lobbyists are offering a menu of options for Democrats to consider, such as requiring PBMs to pass on more of the rebates they negotiate with drugmakers to consumers or employers. They could also ban a common practice called spread pricing in which PBMs charge health plans more than they pay to the pharmacy dispensing a drug, and pocket the difference.

PBMs have responded with their own lobbying and advertising blitz, and insist they’re being scapegoated. JC Scott, who leads the Pharmaceutical Care Management Association, the trade group for PBMs, said targeting his members might be good politics and take the focus off drugmakers during a critical moment in the debate, but it would not lower drug costs.

Although dozens of PBMs exist, the industry is consolidated, with three of them — CVS Caremark, Express Scripts and OptumRx — controlling nearly 80 percent of the prescription market. Health insurers, employers and government hire PBMs to manage prescription benefits for their health plans — putting them at the center of a supply chain consisting of drugmakers, insurers and pharmacies.

Critics allege that PBMs’ role in negotiating rebates from pharmaceutical manufacturers and developing lists of prescription drugs that health insurers will cover encourages them to prioritize higher-cost medicines where they can reap larger rebates rather than focusing on drugs with lower costs.

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“Democrats are focused on lowering costs for patients — and that absolutely includes making sure pharmacy benefit managers are getting the best deal for patients not for themselves,” Sen. Patty Murray (D-Wa.) said in a statement.

The $1.7 trillion spending bill, which the House passed last month, includes provisions that require PBMs to disclose certain information to employer-based plans, aiming to help them negotiate better prices for drugs, but other industry lobbyists want Democrats to go much further, which could make Senate passage that much more complicated.

Independent pharmacists and their patients have sent Congress thousands of letters at the behest of the National Community Pharmacists Association, which in the coming days will unleash its own television ad campaign urging senators to rein in PBMs.

On Friday, the pharmaceutical industry launched a seven-figure national ad campaign urging lawmakers to compel PBMs to pass rebates directly to consumers at the pharmacy counter. Called point-of-sale rebates, PBMs and others argue that this would ultimately raise premiums.

“There is recognition on both sides of the aisle that PBMs play a significant role in a broken insurance system, but somehow a bill meant to lower drug costs does nothing to address the part these middlemen play in determining what patients pay out of pocket for medicines,” said Sarah Sutton, a spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA), which is running ads on television, radio and the Internet.

She would not reveal the price tag of the new ad spending, but PhRMA spent more than $2.5 million in its television ad buys during the summer opposing liberal efforts to have Medicare negotiate the price of drugs, according to AdAnalytics data analyzed by POLITICO. And the group spent upwards of $22 million on lobbying in the first nine months of 2021, a 10 percent increase from the same period in 2020.

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While pharmaceutical companies were the main target of Democrats’ efforts to reduce the cost of drugs, PBMs, which spent $5.9 million on lobbying in the first nine months of this year, a 20 percent increase over the same period in 2020, emerged largely unscathed in the House version.

Although the PBM industry still has concerns about transparency provisions, it successfully stopped Democrats from including a ban on spread pricing. The industry also supported a repeal of the Trump administration’s so-called rebate rule, which made it into the House’s version of the bill.

That’s forced lobbyists for drugmakers, pharmacies and employer groups to take their case to the Senate, where Sen. Ron Wyden (D-Ore.), the chair of the Senate Finance Committee, has already expressed interest in more closely scrutinizing the role PBMs play in the reconciliation package.

“Chairman Wyden is the champion on this issue,” said James Gelfand, the executive vice president of public affairs at the ERISA Industry Committee, which represents the employee benefits interests of the nation’s largest employers. “So it’d be crazy to think that he’s not right now considering, ‘What else can I do in this space?’”

“It’s the legislative opportunity of the century,” he added. “You don’t just give that up, right?”

In a statement to POLITICO, Wyden said that pharmacy benefit managers “are taking advantage of this dysfunctional system while families and local pharmacies foot the bill,” adding, “the status quo when it comes to PBMs needs to change as much as it does for Big Pharma.”

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Scott, the PCMA leader, says his industry is being unfairly maligned for two reasons: an attempt to get long-desired policies enacted through the massive spending bill that have nothing to do with drug costs, and misplaced anger at the industry.

“There is this sentiment around some stakeholders that they believe, ‘Well, gee, if one part of the drug supply chain is going to be impacted by this legislation, then the PBM industry needs to give its pound of flesh as well,’” he said. “And I don’t know that that’s a very thoughtful consideration to put into policy decisions.”

The group launched its own ad campaign last week, accusing its rivals of trying to shift the blame for rising drug prices.

“Ironically, the industry that controls the list price of prescription drugs has attempted to point the finger at those focused on reducing the cost of prescription drugs for patients and payers,” reads text from the digital campaign, which is targeted within the Beltway.

But Gelfand, of the employer group, said that continuing with the status quo is untenable for patients.

“Everybody involved in all this knows that the current system is completely unsustainable,” Gelfand said. “There are those trying to change it and then there are those trying to essentially get what they can out of it while they can.”

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