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Bipartisan Anger Over Pharmacy Benefit Manager Power at Hearing

By Jad Chamseddine, CQ Roll Call

November 18, 2015 -- Republicans and Democrats showed rare unity in a hearing over competition among pharmacy benefit managers (PBMs), combining their attacks against companies for contributing to soaring drug prices and trampling independent pharmacies.

The House Judiciary Regulatory Reform, Commercial and Antitrust Law Subcommittee, which has maintained a focus on a rapidly consolidating health care industry, turned its attention on Tuesday to these specialized companies that typically negotiate discounts and rebates with drug manufacturers for their clients.

The subcommittee's members singled out the three major players—Express Scripts Holding Co., CVS Health Corp, and UnitedHealth Group Inc.'s OptumRx division — for wielding too much power.

Regulatory Reform, Commercial and Antitrust Law Subcommittee Chairman Tom Marino, R-Pa., said due to their central position in the administration of drug benefits PBMs have the ability to "place downward pressure on the prices of drugs." But their critics, largely smaller local pharmacies, have questioned whether they are passing any savings on to consumers.

Most of the hearing revolved around the interaction of PBMs with smaller, local pharmacies, which often take a loss on the pricing of specialty pharmaceuticals. Brad Arthur, the president of the National Community Pharmacists Association, an association of independent pharmacists, told the panel the largest PBMs have "disproportionate market power."

He said small independent pharmacies have no power to negotiate contracts often forcing them to enter into "take it or leave it contracts" to stack their shelves with the necessary prescriptions.

Lawmakers took up the plight of local pharmacies in repeated questioning of PBM executives.

Georgia Republican Doug Collins launched a stinging attack against representatives of CVS and Express Scripts at the hearing, questioning claims that the PBM market was competitive. "Three companies, Express Scripts, CVS Health, and Optum RX control about 80 percent of the PBM market," Collins said. "Not a great deal of competitiveness there."

Collins called for congressional action to tackle the rate of reimbursements received by local pharmacies, which are often well below the price of skyrocketing generic drugs.

Local pharmacies have called for greater transparency from PBMs on discounts they were able to achieve from generic drug manufacturers. Also known as Maximum Allowable Cost lists, they are often clouded in secrecy to the detriment of small pharmacies.

Earlier this year, Collins introduced a measure (HR 224) to shed more light on these lists and compel federal health care programs to disclose unfair practices. The bill is supported by five Democrats and 25 Republicans. PBMs have often been accused of not passing on savings from rebates and their negotiations with drug manufacturers on to consumers.

While Collins has previously toed the party line during health care hearings in the House Judiciary Committee, this time he was joined by House Judiciary Chairman Robert W. Goodlatte, R-Va., and Marino, in his call to better regulate the pharmaceutical market.

"During my tenure in Congress, I have seen many community pharmacies in my district shutter their doors," Goodlatte said. "While we should allow the free market to operate, we should ensure that there is a level playing field for both large and small pharmacies."

Local pharmacies are also pushing for legislation exempting them from antitrust laws allowing them to band together to negotiate better contract terms from the PBMs and health insurers. The Federal Trade Commission has not been receptive to these efforts, but subcommittee ranking member Hank Johnson of Georgia said the Federal Trade Commission (FTC) has not properly examined competition in the PBM space since 2005.

Since then, Express Scripts completed a $30 billion acquisition of Medco, CVS acquired PBM company Caremark Rx and UnitedHealth Group bought Catamaran. And Walgreens Alliance Boots Inc. said this month it would acquire Rite Aid Corp. to become the country's largest retail pharmacy.

Johnson said significant consolidation in the PBM market and questionable rebate schemes have led to higher cost to consumers.

Judiciary ranking member John Conyers Jr., D-Mich., said the issue of exempting local pharmacies from antitrust laws have previously been discussed and questioned whether changes to antirust laws alone would level the playing field, calling for "more direct regulatory measures" to be implemented. 

Marino has previously sponsored bills alongside Democrats to exempt small town pharmacies from antitrust laws. The FTC said such bills would have a "dire impact on seniors" and increase cost to employers.

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