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CVS, Cigna, Humana blame Big Pharma for high drug prices in Senate hearing

Berkeley Lovelace Jr.
  • Five of the nation's largest pharmacy benefit managers deny that the so-called "backdoor deals" with drug manufacturers are responsible for the sticker shock some patients see.
  • They blasted the drug industry for the rising cost of brand-name drugs in written testimony submitted ahead of the Senate Finance Committee hearing.

Executives from the nation's largest pharmacy benefit managers denied Tuesday that the industry's so-called "backdoor deals" with drug manufacturers are responsible for the increasingly higher prices patients pay for medication, pointing the finger at Big Pharma instead.

The companies — CVS Health CVS , Cigna CI , OptumRx, a subsidiary of UnitedHealthcare UNH , Prime Therapeutics and Humana HUM — said rebates paid by drug companies to PBMs, sometimes called "middlemen," are "not secret or hidden payments" as some lawmakers in Congress insist, according to written testimony submitted for a hearing before the Senate Finance Committee. They 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 to $5,700 from $2,900.

"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 healthcare services at Humana. "Drug manufacturers raise list prices to boost their revenue."

High drug costs have become a rare bipartisan issue with lawmakers on both sides of the aisle demanding something be done. President Donald Trump has made lowering prices one of the key issues of his administration. Democrats are jockeying to prove they can lead reform. PBMs have arguably received the brunt of the blame from lawmakers.

The hearing Tuesday, led by Chairman Chuck Grassley, R-Iowa., and Ranking Democrat Ron Wyden, of Oregon, marks the committee's third on drug prices so far this year. In late February, the committee heard testimony from drug executives of AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer and Sanofi.

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.

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Though PBMs are targeted by critics for their rebate system, two of the companies testifying Tuesday 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 Tuesday a number of solutions they believe will lower drug prices, mainly targeting anti-competitive behavior.

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 roll-out.

The PBMs voiced support for the CREATES Act, 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 "ever-greening" 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 specialty drugs.



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