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The Dose

Policymakers Identify PBM Consolidation as a Driver of Higher Costs and Fewer Patient Choices

by Michael Rule | Feb 16, 2018

The proposed merger between CVS and Aetna is the latest example of the consolidation trend in the health care marketplace. As the health care market becomes more concentrated, questions arise as to how this affects patients and consumers. NCPA raises these questions especially concerning pharmacy benefit managers, where three companies control approximately 80 percent of the market. In fact, there are three recent examples of policymakers scrutinizing consolidation on the PBM marketplace and its impact on prescription drug prices and consumers.

First, a recent hearing by the House Energy and Commerce Subcommittee on Oversight and Investigations focused on concentration in the health care system, and concerns with PBMs was one of the dominant themes. NCPA sent a letter for the record explaining that PBM consolidation is contributing to higher drug costs and creating access barriers for patients.

Several members of the subcommittee shared NCPA's concerns. For example, the Ranking Member of the Subcommittee, Rep. Diana DeGette (D-Colo.), explored whether PBM consolidation contributed to higher prices for insulin. Two witnesses, Dr. Leemore Dafny, a professor at Harvard Business School, and Dr. Martin S. Gaynor, professor of economics and health policy at Carnegie Mellon University, expressed interest in examining recent PBM mergers and how they have impacted pricing. Rep. Morgan Griffith (R-Va.) also raised the issue, echoing Rep. DeGette's concerns over PBM consolidation. Rep. Buddy Carter (R-Ga.), who is the only pharmacist currently serving in Congress, lamented that PBM and drug store consolidation has adversely impacted patient access to their preferred local pharmacy provider. The witnesses noted that PBMs are the least transparent entities in the health care system. Rep. Carter further noted that there is a need for legislation to address some of the issues pertaining to PBMs.

The Senate Committee on Commerce, Science, & Transportation also discussed PBM consolidation at the confirmation hearing for four Federal Trade Commission nominees, Joseph Simons, Rohit Chopra, Christine Wilson, and Noah Phillips. Thanks in part to NCPA's continuous efforts to engage policymakers on these topics, three committee members either directly raised or alluded to PBMs and the impact consolidation has had on drug prices, consumers, or other players in the supply chain, including community pharmacies.

For example, Sen. Shelley Moore Capito (R-W.Va.) questioned nominees on PBM consolidation and conflicts of interest (PBMs owning retail, mail order, and specialty pharmacies) as well as leveling the playing field for community pharmacies. Simons stated that he would like to establish a merger retrospective program to determine if merger enforcement has effectively addressed competitive concerns. Sen. Roger Wicker (R-Miss.) echoed Sen. Capito's concerns and raised questions about the lack of PBM transparency and the negotiation leverage PBMs have over other players in the drug supply chain. Finally, Sen. Richard Blumenthal (D-Conn.) related increasing drug prices to consolidation in the industry. Simons expressed support for a drug pricing monitoring task force.

These two hearings came on the heels of a report by the White House Council of Economic Advisers, which identified PBM consolidation as a key factor in the increasing costs of prescription drugs. The report notes that three PBMs dominate the market, providing them with undue market power when dealing with others in the supply chain as well as plan sponsors and plan beneficiaries. The report suggests enacting policies that reduce concentration of the PBM market, which would lead to greater competition and lower prices.

These are positive developments and demonstrate, as the Feb. 15 version of Axios Vitals stated, "[i]f there's one area where politicians of all stripes are inclined to agree, it's pharmacy benefit managers. Republicans and Democrats have both expressed concern about three companies controlling more than 75 percent of the market…" Still, as Rep. Carter alluded to, there remains a need for the adoption of common-sense legislative solutions to address some of the issues that have been exacerbated by consolidation in the PBM market.