Big pharma blamed for skyrocketing US drug prices

Patients are paying increasingly higher prices for medication in the US but the nation’s largest pharmacy benefit managers (PBMs) deny that the industry’s so-called backdoor deals with drugmakers are responsible. They point the finger at big pharma instead.

Executives from the nation’s largest PBM denied that the industry’s so-called backdoor deals with drugmakers are responsible for the increasingly higher prices patients pay for medication, pointing the finger at big pharma instead.

The hearing, led by Chairman Chuck Grassley, R-Iowa., and Ranking Democrat Ron Wyden of Oregon, marks the committee’s third on drug prices this year.

The companies – CVS Health, Cigna, Prime Therapeutics, Humana and UnitedHealthcare’s OptumRx – said rebates paid by drug companies to PBMs, sometimes called ‘middlemen’, are not secret payments as some lawmakers in Congress insist, according to written testimony submitted for a Senate Finance Committee hearing. CVS said rebates are actually ‘a powerful tool used to offset’ the high list prices set by pharmaceutical companies.

Executives blamed high drug prices on the drugmakers and their pursuit of profits. They blasted the drug industry for the rising cost of brand-name drugs and cited the high cost of insulin, a nearly 100-year-old medication, which has nearly doubled in price from 2012 to 2016.

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"A major factor contributing to the increase in drug spending is the list price of prescription drugs. Drug manufacturers alone set the list price of prescription drugs," said William Fleming, president of health-care services at Humana. "Drug manufacturers raise list prices to boost their revenue."

High drug costs have become a rare bipartisan issue. President Donald Trump has made lowering prices one of the key issues of his administration, while Democrats are jockeying to prove they can lead reform. PBMs have arguably received the brunt of the blame from lawmakers.

The pharma executives at the time didn’t talk much about list prices. Instead, they blamed middlemen for pocketing discounts instead of passing them along to patients. They suggested changes to Medicare, including capping the amount seniors would pay for on their own at the pharmacy counter every year.

"Pharmaceutical manufacturers insist that drug price increases are driven by rebates. This is simply not true," CVS Health Executive Vice President Derica Rice said in his written testimony.

Lawmakers, however, grilled the executives for their companies’ alleged roles in rising drug costs.

"Today the committee will be told a thousand different versions of the same talking point: ‘We’re all about getting the best possible price for patients,’" Wyden said. "But there won’t be actual proof. Bottom line, PBMs are middlemen who strike deals with drugmakers in secret. In my experience, that kind of negotiation rarely results in an act of charity for consumers."

Though PBMs are targeted by critics for their rebate system, two of the companies testifying have business models that don’t benefit from earning high percentages of negotiated rebates.

Prime Therapeutics, which is now owned by 18 Blue Cross insurance plans, negotiates rebates, but charges a flat administrative fee instead of taking a percentage of the discount. Though Humana takes a percentage of rebates, it only manages pharmacy benefits for its own customers.

The PBM executives suggested a number of solutions they believe will lower drug prices, mainly targeting anti-competitive behaviour.

They attacked ‘pay for delay’ tactics, which are used by brand-name drugmakers to prevent generic manufacturers from introducing their products to the market by paying them to delay their rollout.

The PBMs voiced support for a bill introduced by Sen. Patrick Leahy, D-Vt., which aims to reduce costs and increase competitiveness in the pharmaceutical market by stopping drugmakers from withholding samples of their medicines from generic manufacturers.

The executives also targeted strategies used by drugmakers to extend patents. They denounced ‘evergreening’ tactics, in which manufactures make minor changes to their medications to lengthen the amount of time their product is patented, and called for reducing the exclusivity period for brand name and speciality drugs.

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