Last week, pharmacy benefit manager (PBM) and independent pharmacy representatives provided testimony to the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law in a congressional hearing examining the state of competition in the pharmacy and PBM marketplace.  You can watch the hearing and read the filed testimony here. This was the third in a series of congressional hearings examining competition in healthcare markets. While the focus was on PBMs and pharmacies, some panelists and committee members recognized that a full discussion of certain issues, like drug pricing, needs to involve other players in the prescription drug supply chain.

The witness panel included 2 PBM industry representatives, an independent pharmacy owner, and an antitrust attorney who represents the interests of independent pharmacies:

  • Amy Bricker, Vice President of Retail Contracting & Strategy, Express Scripts
  • Natalie A. Pons, Senior Vice President and Assistant General Counsel, CVS Health
  • Bradley J. Arthur, Owner, Black Rock Pharmacy
  • David A. Balto, Law Offices of David Balto

Each panelist gave testimony aligned with his or her role in the debate and voiced well entrenched opinions regarding the role PBMs play in the health care industry. Ms. Bricker and Ms. Pons each focused on their PBM’s ability to use scale to keep prescription drug costs down for patients and their clients, and stressed that they rely on independent pharmacies to participate in their networks. Mr. Arthur focused on the scale of the PBMs compared to his independent pharmacy, while Mr. Balto pointed to market trends, like rising profit margins, to claim that the entire PBM marketplace is broken and needs regulation to require more transparency.

The subcommittee members highlighted both sides of the debate – some were clearly more sympathetic to independent pharmacies, while others questioned whether the alleged “drastic increase in profits” was actually just a matter of PBM scale and market share. Some members expressed concern that PBMs may be engaging in anti-competitive conduct by leveraging their own retail pharmacy operations, pushing independent pharmacies out of business, and pushing consumers to high-cost prescription drugs. Both Ms. Pons and Ms. Bricker responded that their PBMs encourage generic drug use throughout their networks, update MAC lists to fairly reimburse member pharmacies, and encourage independent pharmacies to join collective-bargaining Pharmacy Services Administrative Organizations, or PSAOs, to negotiate for lower drug costs.

One recurring theme was whether increased transparency in drug pricing would benefit or harm competition. Mr. Arthur and Mr. Balto argued for greater transparency and robust disclosure of rebates and pricing negotiations, while Ms. Pons and Ms. Bricker clarified that their clients already require great transparency, and cautioned that increased transparency to their proprietary pricing information could lead to price-fixing within the industry. In concluding the hearing, Chairman Marino stressed that the committee’s role is to gather the facts and expertise from the industry representatives, because Congress doesn’t have all of the answers, and he hopes the representatives continue to cooperate in exploring the issue.

Although the panelists’ testimony and the subcommittee members’ questions did not brake any new ground in the longstanding debate between PBMs and independent pharmacies, the hearing itself is significant in that it signals Congressional interest in the state of competition in the PBM and pharmacy industry and could portend further scrutiny and possible regulation.  These hearings are likely part of the larger drug pricing debate that is currently raging on in Washington.  This debate often involves the pharmaceutical industry and insurers pointing fingers at each other, while PBMs view themselves as playing a critical role in addressing rising drug costs rather than contributing to the problem.  Given this ongoing debate, PBMs, like other health care industry participants, should expect increased and continued antitrust scrutiny.