In Senate floor remarks on Thursday, Sen. Maria Cantwell (D-WA) decried the role of pharmacy benefit managers (PBMs) and denounced their impact on access to prescription drugs.
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NewsTranscript
00:00Madam President, I thank my colleague from Rhode Island for his dedication and perseverance
00:08on these important issues, and also appreciate him mentioning the dividend concept, because
00:14obviously we want consumers to be kept whole here and to make a transformation that they
00:20too want to make.
00:21So I thank him for his leadership.
00:24Madam President, I come to the floor today to call attention to the high prices Americans
00:28are paying for their prescription medication and the urgent need to pass what is called
00:33Pharmacy Benefit Manager Transparency Act in the Senate that I have co-sponsored along
00:39with my colleague from Iowa, Senator Grassley.
00:43At the beginning of this decade, the United States spent more on prescription drugs than
00:48any other country in the world, reaching an average of $1,432 per person per year.
00:57So six out of every ten adults are currently taking at least one prescription drug.
01:03More than a quarter of us take four or more prescriptions.
01:06So when drug prices go up, it really does stretch the family budget, cuts into our savings,
01:14and it puts us into health challenges if we can't afford those prescriptions.
01:19About one in four residents in my state, the state of Washington, have either rationed
01:24or stopped taking prescription drugs because of costs.
01:28Families should not have to make this choice.
01:31One of the factors driving up the price of prescription drugs are pharmacy benefit managers
01:38and their profit-driven business model that is not transparent as to the price setting
01:44and is causing pharmacies great harm.
01:48Pharmacy benefit managers operate behind the scenes, have a stake in just about every part
01:54of the drug distribution change, and exert extraordinary influence in the prices that
01:59Americans are paying for their medication.
02:03PBMs decide which lifesaving medications most Americans will have access to through their
02:08insurance plans.
02:09They decide how much copay will be for prescriptions.
02:12They decide how much a pharmacy will be reimbursed for distributing these drugs and whether the
02:17pharmacy will lose money when they fill a prescription.
02:22PBMs don't actually handle or distribute the drugs, but they siphon off the profit
02:27at every step in the process from the drug manufacturers all the way up to the pharmacy
02:32counter.
02:34That is because the PBM market, these pharmacy benefit manager middlemen, think of them almost
02:40as like the insurance company that is setting the price, is extremely consolidated, giving
02:46consumers no choice in which PBM they use.
02:51Just three PBMs control 80% of the market.
02:56Can you imagine anybody controlling 80% of the market?
02:59But just three of these companies control 80% of the market.
03:03And effectively, they have unchecked power on their ability to distort the market and
03:09engage in unfair and abusive practices.
03:13So what are we trying to do, Senator Grassley and myself?
03:15We're trying to stop those unfair and manipulative practices.
03:20Not only is the PBM market consolidated, the vertical integration of PBMs, pharmacies,
03:26and insurers are worrisome.
03:28The three largest PBMs are each part of companies that include insurers and large pharmacies.
03:35So this gives them the opportunity to increase their profits by companies, by steering patients
03:41to pharmacies they own, and then lowering the reimbursement rate to competing pharmacies.
03:49Americans are feeling this pinch.
03:51They are seeing that they have higher drug costs, and they are seeing that PBMs are thriving.
03:57The three biggest PBMs are astonishingly profitable.
04:00Last year, OptumRx raked in $116 billion for its owner, United Healthcare Group, contributing
04:09about 30% of the company's total revenue.
04:13PBMs have leveraged their market power and lack of transparency to benefit themselves
04:17at the expense of patients, and certainly, certainly, Madam President, at the expense
04:22of independent pharmacies.
04:25They're happy to try to help the pharmacies in their vertical integration, but certainly
04:29not the independent pharmacies, if you will, trying to put them out of business.
04:35PBMs enrich themselves by manipulating the market for prescription drugs at every turn.
04:40We cannot be fooled when the PBM claims to reduce the cost of drugs by negotiating rebates
04:46from the drug makers in charge in exchange for favorable insurance coverage through an
04:53insurance company they probably own.
04:56I have been so frustrated by this in the past, Madam President.
04:59It's like our organization.
05:01Take for example King County.
05:03Someone comes to them and says, we'll negotiate for King County employees a drug benefit,
05:08and we'll give you a discount.
05:10But then they pocket two-thirds of the discount themselves, the PBM.
05:14That's what's going on here.
05:16These rebates are part of their manipulative scheme to inflate and extract the value from
05:22the prescription drug market.
05:25In a market of free of—in a market that's free of this kind of manipulation or competition,
05:33you would have drug makers.
05:34They would be setting the formulary cost.
05:37They would help drive down competition—drive down price by having competition.
05:43But we know the market isn't working right when the least expensive version of a drug
05:49is the least dispensed.
05:52That's right.
05:53You can tell how a market functions or if it is a great functioning market because why?
05:58When prices are too high and there is supply, people put more supply in the market.
06:03But if the least expensive drug isn't being dispensed, that means somebody is trying to
06:08artificially keep those costs high.
06:11This happens because PBMs control which drugs are included on a formulary.
06:16They get a bigger cut.
06:18Through a larger rebate, higher co-pays, more expensive drugs are put on the list.
06:24This incentivizes drug makers to inflate the price of their drugs to appeal to the PBMs.
06:30Who bears the brunt of all these inflated costs?
06:33The American consumer.
06:35Another way PBMs manipulate the market is through abusive practices like spread pricing
06:41or clawbacks.
06:44Spread pricing is when a PBM reimburses a pharmacy one amount for filling a prescription
06:50and then charges the health plan a higher price and keeps the difference.
06:55That's the scheme.
06:57That's the scheme, how they're making money.
06:59They basically say, oh, this is the price, and they then charge the plan a higher amount.
07:05This creates two problems.
07:07One, neither the pharmacy nor the plan knows what the other paid or was charged, so both
07:13parties lack the data on what a true price for the drug is.
07:17Second, this practice allows PBMs to squeeze more money out of the supply chain without
07:22anyone knowing how much.
07:25They also clawback reimbursements from pharmacies after a claim is settled through direct and
07:30indirect fees, or what I call DIR fees, which have generic effect rates, or GER.
07:42So for example, Independent Pharmacy in Seattle, they actually had to close, Madam President,
07:48because the PBM said that they were owed, this Independent Pharmacy was owed $538,000
07:57in reimbursements in a single year from these PBMs.
08:01They just came up with a number and said, this is how much you owe us.
08:05So not surprising that Independent Pharmacies can't stay open with these kind of tactics.
08:12In just the last 18 months, 83 pharmacies in the state of Washington have closed.
08:19These practices have contributed to a creation of pharmacy deserts.
08:24In fact, Fortune Magazine just wrote a story about this particular problem in the state
08:29of Washington.
08:30There are now 86 towns in my state that are more than 10 miles from the nearest pharmacy.
08:39That means that roughly 450,000 people in my state live in an area where they have to
08:44drive 10 miles just to go to a pharmacy.
08:48And we now rank sixth among all states for poor access to pharmacies.
08:54According to the Washington State Pharmacy Association, there are no more 24-hour pharmacies
09:00left in the city of Seattle.
09:04So Madam President, I'm very concerned about the number of independent and community pharmacy
09:10closures in my state.
09:12I'm also concerned about how insurance company Middleman and their unfair business practices
09:17have contributed to these closures.
09:20Some might ask, why hasn't anyone discovered these schemes or done something about it?
09:25Well, that's because PBMs shield their practices and profits by claiming that their data that
09:31they have is considered proprietary information.
09:35But we must have laws on the books that make sure that illegal manipulative schemes can
09:40help stop these players in the marketplace who have too much of a concentrated power.
09:46PBMs cannot continue to operate in the dark while Americans see their prescription drugs
09:51rise and rise year after year.
09:54And that is why Senator Grassley and I introduced the Pharmacy Benefit Manager Transparency
10:00Act to shine light on these harmful practices, increase the transparency, and increase the
10:06accountability for pharmacy benefit managers.
10:11The Pharmacy Benefit Manager Transparency Act directs the Federal Trade Commission to
10:15crack down on unfair and abusive schemes such as this spread pricing or reimbursement clawbacks.
10:25It also mandates that transparency for these PBMs submit a report about these activities
10:33so that we can understand how they are basically moving other products or not on the formulary
10:40placements.
10:41That is exactly how some of these schemes have operated.
10:45It is important to have this help from the Federal Trade Commission.
10:48It is their job to stop these unfair practices.
10:52It's their job to hold PBMs accountable for manipulation of practices or prices and give
10:58the agency more insight into this marketplace.
11:02We cannot wait any longer to get this legislation passed.
11:06My bill has come out of the Commerce Committee with good bipartisan support and it has bicameral
11:14support as well.
11:16So we must keep the momentum going.
11:19I hope my colleagues here in the Senate will bring this Benefit Manager Transparency Act
11:26to the Senate floor when we return.
11:29Americans are hurting and so are our pharmacists.
11:32Our pharmacies themselves are places where information about our prescriptions are held
11:40to a high standard.
11:42I would hate to see Americans in such a concentrated market that all of our prescription drugs
11:48are bought online from one or two big suppliers.
11:52And that somehow is our delivery system.
11:56I think pharmacists are a key part of our delivery system.
12:00Pharmacies are a key part of communities and we shouldn't have big concentrated players
12:05manipulating the prices of drugs and putting pharmacies out of business and raising these
12:13unbelievable prices on our consumers.
12:16So I thank the President and I ask that I hope our colleagues will consider getting
12:21this legislation in front of the Senate when we return.