ALEXANDRIA, Va. — In comments to Congress, the National Community Pharmacists Association called for more oversight of pharmacy benefit management (PBM) companies.

NCPA said payers, pharmacy patients and pharmacists could see “tangible benefits” from increased transparency into PBM business practices and potential conflicts of interests. The association submitted its comments to the House Committee on Oversight and Government Reform, which held a hearing Thursday on the prescription drug market.

“The current business climate seems to be one in which market power is increasingly concentrated in an ever-shrinking number of corporate entities,” NCPA said in its comments to the committee. “In particular, the overly concentrated and largely unregulated PBM industry exerts immense influence over how prescription drugs are accessed by the majority of Americans. Given the fact that the federal government is the largest single payer of health care in the United States, it makes financial sense for Congress to demand increased transparency into this aspect of the prescription drug marketplace in order to identify potential savings.”

In its remarks, NCPA pointed to the reach and consolidation of the PBM industry. “PBMs manage pharmacy benefits for over 253 million Americans. Three large companies lead the PBM market: ExpressScripts, CVS Health and OptumRx. In total, they cover more than 180 million lives in the United States, or roughly 78% of Americans whose pharmacy benefits are managed by a PBM,” the association said.

Janet Woodcock

What’s more, NCPA noted, PBM companies aren’t subject to industrywide regulation. “Given the immense market influence that PBMs exert, one would expect these entities to be subject to the same type of comprehensive regulation that is currently required of commercial health insurers,” NCPA said in its comments. “However, PBMs are not subject to industrywide regulation similar to what is generally required of commercial health insurers. There are no federal laws or regulations that are specific to the PBM industry. Instead, PBMs face a patchwork of regulations at the state level.”

There’s also a lack of transparency that enables PBMs to collect rebates from pharmaceutical manufacturers and “mark up” the cost of medication, in turn charging health plans more than pharmacies are reimbursed, NCPA claimed. “If plan sponsors have a clearer picture about the amount of money that is being made by their vendor by virtue of handling the plan’s business, this may provide them with a greater ability to negotiate more competitive contracts with these vendors in the first place,” the association stated. “In this way, plan sponsors could save money and realize actual savings in today’s increasingly difficult prescription drug marketplace.”

Community pharmacists, too, are left in the dark regarding reimbursement rates for generic drugs, according to NCPA. “PBMs create and maintain ‘maximum allowable cost,’ or MAC, lists that set the upper limit or maximum amount that a PBM/plan will pay for most generic drugs. Pharmacies are not provided any insight into how drug products are selected to be put onto this list or how exactly these prices are determined or updated,” the association wrote in its comments to the committee. “In short, contracted pharmacies have zero insight or transparency into the MAC process and sign contracts without having any idea of the rate at which they will be reimbursed for the majority of the prescriptions they fill.”

And because of PBMs’ market power, independent community pharmacies are faced with “take it or leave it” contracts from PBMs to continue serving patients, NCPA said. “PBMs also directly set the ever-shrinking reimbursement rates for retail pharmacies — the very same pharmacies that stand in direct competition to the PBM-owned retail and PBM-owned mail-order and specialty pharmacies,” NCPA stated. “Therefore, it should come as no surprise when PBMs present both employer and government payers with carefully tailored suggested plan designs that steer beneficiaries to PBM-owned mail-order and specialty pharmacies.”

Mark Merritt

Thursday’s hearing was titled “Developments in the Prescription Drug Market: Oversight.” Those on the list to provide testimony to the committee, chaired by Jason Chaffetz (R., Utah), included Janet Woodcock, director of the Food and Drug Administration’s Center for Drug Evaluation and Research; Howard Schiller, interim chief executive officer of Valeant Pharmaceuticals International; Martin Shkreli, former CEO of Turing Pharmaceuticals; Nancy Retzlaff, chief commercial officer of Turing; and Mark Merritt, president and CEO of the Pharmaceutical Care Management Association, the trade group for the PBM industry.

In his testimony to the committee, PCMA’s Merritt reported that PBMs will save employers, unions, government programs and consumers an estimated $654 billion, or up to 30%, on drug benefit costs over the next decade. He explained that PBMs rein in drug costs by negotiating rebates from drug makers and discounts from drug stores, offering more affordable pharmacy channels, encouraging use of generics and more affordable branded medicines, managing high-cost specialty drugs, and reducing waste and improving medication adherence.

“The pricing tactics discussed today are just one piece of a much larger puzzle. The key to reducing costs is through competition. The challenge is we need more of it,” Merritt told the committee. “There is also a growing use of bait-and-switch copay assistance marketing programs that encourage patients to ignore generics and start on more expensive brand drugs.”

Potential solutions for high drug prices that policymakers could consider, according to PCMA, include expediting FDA approvals of “me-too” brands against drugs with no competition; spurring FDA approvals of generics to compete with off-patent brands facing no competition; establishing a government “watch list” of all the off-patent brands so potential acquirers know that policymakers can monitor these situations; and making copay coupons an “illegal kickback” for all insurance that receives any federal subsidy.