"Profits Over Patients: The PBM Business Model Under Scrutiny"

The subcommittee on health, employment, labor, and pensions will come to order. Today's hearing will examine pharmacy benefit managers, or PBMs, and the lucrative relationships they have with brokers and advisors who are trusted by employers for group health group health plan design and administration. PBMs act as third-party intermedi intermediaries uh in a drug supply chain that runs from drug manufacturers through Employment Retirement Security Act, nineteen seventy-four, ERISA plans, to about ninety million patients. In this role, P PBMs wield enormous power over pricing, distribution, and whether a drug is accessible through a pat- uh, patient's health plan. Through a complex and often opaque system of rebase, administrative administrative fees and pricing mechanisms, PBMs are driving up costs, creating huge financial returns for themselves while prescription drug costs rise for the American worker and their employers. In the midst of this complexity, and perhaps because of it, many employers hire consultants or brokers to design their health care plans and help choose and monitor a PBM. Some of these brokers and consultants may be steering employers and sponsors to a particular PBM that, in turn provides consultants and brokers with significant kickbacks, all while the broker or consultant poses as a neutral, trusted advisor to the employer. There's little transparency around PBM pricing and practices, making it difficult to difficult to understand the full scope of these financial arrangements. Addressing this lack of transparency is critical to lowering cost. The committee is taking steps to do just that. A key feature of President Trump's great health care plan inclui includes pending deceptive practices that enable PBMs to pay kickbacks to brokers and consultants which raise drug prices. Building on this effort, my bill, the PBM Kickback Prohibition Act prohibits PBMs from paying kickbacks to brokers or consultants in exchange for steering health plans toward preferred PBMs. Today we will hear from witnesses about the reliance on brokers and consultants in designing employer-sponsored health plans.

Mm-hmm.

And we'll also hear Thank you, Thank you, Mister Chairman. Mister Chairman.

I wanna thank all the witnesses for being here. Um, and I just, it's, this is something I think we can all agree on. This is inefficiency, where the Americans struggling day-to-day to be able to pay for their fixed costs, so they've got a little extra money to take their kids on a vacation, or just spend some time to go out to eat. Uh, PBMs just suck money out of average Americans' workers, uh, pockets. There was a point to them at one point in terms of, uh, improving efficiency. But in the most costly health care system in the world for a developed country, eighteen percent of GDP, with the worst outcomes, this is a perfect example, Mister Chairman, of something you and I have talked about often, that Democrats and Republicans should be able to come together on. It's wasteful. Well, let's be efficient and let's save Americans a little extra money, so that they can get out of the stress they feel, where they've gotta worry about gas prices and just paying for lunch for their kids. Here's a perfect example of something that does no good for really anyone to speak of other than the people who make money off of it. So here's a real opportunity for employers and for working people to get a real benefit. PBMs are, as I just said, a huge part of the problem and are inefficiencies. Americans should be embarrassed by this and outraged. Unfortunately, their business practices are notoriously opaque, leaving employers and workers the inability to I'm proud to say that we have done good bipartisan work on this committee and this subcommittee to get a real start on PBMs and improving transparency and efficiency. My colleague, the gentleman from Connecticut, uh, Mister Courtney, introduced the bipartisan Hidden Fee Disclosure Act to shed light on fees charged by PBMs, uh, and third-party administrators and other service providers. We have also worked in a bipartisan bipartisan manner to craft legislation requiring detailed disclosures of PBM rebates, fees and other information to group health plans. I am pleased to see that portions of both bills were included in February's spending legislation. I hope that these reforms as well as the important rule proposed in January by the Department of Labor can lead to progress that reduces conflicts of interest and inefficiencies in the PBM model. We can't wait. There's real urgency in my perspectives of fixing this and get rid of the fraud. in PBM model. But demanding transparency from PBMs alone will not solve the crisis of skyrocketing gri- drug prices. We cannot get a handle on this issues issue until we address the elephant in the room, big pharma. In two thousand twenty-two, Democrats over uh unfortunately unanimous opposition from our colleagues, and we'll hope to change that, took a historic step forward by creating the Medicare drug price negotiations program. In just the first two years of that program, lower prices have already been negotiated for twenty-five drugs that account for more than ninety billion dollars in spending. It is now time for Congress, in a bipartisan way in my view, and I'll work uh every day, to work with you, uh, Mister Chairman, in a bipartisan way to lower cost for Americans with PBMs and negotiate competitive prices for the market to work the way other developed countries have. eu australia new zealand i've talked about my own personal experience with the with the drug that keeps me alive as a survivor of stage four leukemia much of the investment in that drug came from taxpayers at the department of defense over the last sixty years and uh in nih really remarkable i'm alive today because of this research but johnson and johnson and having talked spoken directly with the ceo of johnson and johnson over that in the oversight committee and we brought him to testify, it's fair to get a reasonable rate of return. We encourage that for the private sector. But let's be honest about where much of the private, the - the - the primary investment research came from, American taxpayers and the brilliant people in the Department of Defense and the NIH and DARPA and ARPA. The legislation we've introduced on PBMs goes to the root of the problem, uh, both for PBMs and the other issue about big pharma. In this instance, with PBMs, targeting middlemen who offer little value to employers or to workers. Thank you, Mister Chairman. I yield back.

I thank the ranking member for yielding and for your uh cooperation in and uh uh by working together in collaboration thank you so much. Uh, pursue it to committal committee rule eight C. All members who wish to insert written statements into the record may do so by submitting them to the committee clerk electronically in Microsoft Word format by five p m, fourteen days, And without objection, the hearing record will remain open for fourteen days to allow such statements and other extraneous materials noted during the hearing to be submitted for the official hearing record. I will now turn to the introduction of our four distinguished witnesses. Our first witness is Mister James Guilfan, President and CEO of the ERISA Industry Committee in Washington, D C. Our second witness is Mrs. Chris Deacon, Principal and Founder of B- Versan Consulting in Mooresville, New Jersey. Our third witness is Doctor Mariana Sokal, Associate Professor of Public uh Health Policy and Management, John Hopkins Bloomberg School of Public Health in Baltimore, Maryland. Our last witness is Miss Hannah Anderson, Director of Healthy American Policy and Senior Director of Policy at AFPI in Washington, DC. We thank the witnesses for being here today and we look forward to your testimony. Pursuant committee rules, I would ask that you each limit your oral presentations to a three-minute summary of your written statement. As committee members have many questions for you, the clock will count down from three minutes. Pursuant to committee rule eight D and committee practice, however, we will not cut off your testimony until you reach the five-minute mark. I would also like to remind the witnesses to be aware of your responsibility to provide accurate information to this subcommittee. I will first recognize Mister Gelfand for your testimony.

Thank you, Mister Chairman, uh, ranking members Sanier and members of the subcommittee uh, for the opportunity to testify today. I'm James Gelfand, President and CEO of the ERISA Industry Committee, or ERIC, the only national association that exclusively represents large employers regarding health, retirement, and compensation policies. Our fortune one hundred member companies employ people in every state and are the backbone of the employer-sponsored insurance system that provides health benefits to over one hundred and sixty Eric member companies provide coverage through self-insured health benefit plans. So when an employee fills a prescription, goes to the doctor, goes to the emergency room, it's not the insurance company paying the bill, it's the employer and the employee. On average, Eric's member companies pay about eighty percent of health care costs for their employees and families. Providing affordable access to health care is a responsibility employers take seriously and Eric's member companies are committed to pursuing value for employees, selecting the very best vendors, the best plan design, and the lowest fees to maximize the benefits for our plan enrollees. And one way that employers seek to be responsible managers of benefit plans, is by relying on advice and counsel from outside experts, such as brokers and consultants. Employers retain these experts to help advise on plan design, to construct requests for proposals, to choose vendors, such as third-party administrators, and PBMs and to oversee the conduct and performance of those vendors through audits, evaluations, and ongoing comparisons with market research and other metrics. Unfortunately, we have been made aware of a troubling practice wherein some, not all, but some brokers, consultants, and advisors who are supposed to advise employer plans are actually paid what appear to be kickbacks from the very vendors they are supposed to be sorting through, and fairly evaluate. These arrangements create clear conflicts of interest and undermine employers' ability to make informed cost-effective decisions for our beneficiaries. The kickbacks in the form of fees, commissions, overrides, and even per-prescription cost add-ons drive costs higher and have the potential to prioritize revenue over value in the vendor selection process. This conflict of interest should be addressed so that employers can fully trust the advice and counsel they receive in administering employee benefits. We appreciate Congress's investment in PBM transparency and the administration's recent regulatory action. The PBM Kickback Prohibition Act, introduced by Chairman Allen, would prohibit PBMs from providing kickbacks or referral fees to intermediaries in exchange for steering business to them. We believe that this legislation would restore trust, accountability and integrity to the process, and lead to more affordable health care,

Thank you gentlemen for yielding. Now I recognize Mrs. Deacon for your testimony.

Thank you, Chairman, Ranking Member, and members of the subcommittee. I've run one of the largest commercial health plans in the country, written and negotiated PBM contracts, run procurements, and am familiar with the financial arrangements and conflicts that drive this system. I am here to tell you plainly that the current kick-back, pay-to-play model is failing employees, employers, and taxpayers. One of the primary functions of broker consultants is to assist the group health plan in procuring PBM services. Unbeknownst to employers, payment to the consultant is often a precondition of even bidding on PBM contracts. It is not uncommon to see question one of an RFP. Do you agree to pay big box broker fifty thousand dollars annually over the life of the contract? Employers never even get to see potential bidders that have agreed not that have agreed not to pay or pay to play. Not only are these conditions not disclosed to employers, they are often told that these questionnaires and bidding documents are confidential, and cannot be shared with the client. Beyond procurement, there are ongoing payments between PBMs and consultants related to the group health plan's business. In one example I share in my written testimony, CVS Caremark agreed to pay Gallagher two dollars and fifty per cents per retail prescription and seven dollars per male and specialty prescription, filled by the group health plan members. This dynamic does not reward reducing cost, nor does it reward reducing utilization. It rewards increased volume and handsomely rewards increased volume filled through those channels that generate the highest profits for PBMs and their affiliates. This dynamic rewards the status quo, and it acts to dissuade consultants from engaging in procurements or oversight that may be financially disruptive to legacy PBM arrangements. I do want to be very clear. Not every consultant operates this way. Those that are truly independent, those that compete on transparent pricing and aligned incentives, will not be disadvantaged by this legislation. They will benefit from it, and more importantly, their clients will benefit. The same is true for PBMs. Those that are willing to compete based on pricing and their product, not on their ability to support these types of financial arrangements, will win. The PBM kick-hack kick-back prohibition addresses a specific and important problem. Employers are fiduciaries under ERISA, and they are expected to act in the best interest of the plan and plan participants. But today they're making decisions involving hundreds of millions, billions of dollars without clear visibility into how incentives are structured and without the power or leverage to change them. This bill is a necessary first step towards correcting that. Thank you, and I welcome any questions.

I thank the gentlelady for yielding. Uh next I recognize Prof- Professor Sokal for your testimony.

Thank you so much, Chairman, Ranking Member, and members of the subcommittee. It's a great honor to be speaking with you today. I'm Mariana Sokal, an Associate Professor at the Johns Hopkins Bloomberg School of Public Health. My research focuses on improving access and affordability of prescription drugs, and I'm speaking today on my own behalf. My views do not reflect the views of Johns Hopkins University. For several years I've been working with large employer organizations, such as the ERISA Industry Committee and the Purchaser Business Group on Health. I have witnessed firsthand how the high cost of prescription drugs weighs heavily on American employers. Over half of all Americans obtain coverage, including for drugs, through their employer. Three out of four employers report persistent growth in cost in recent years, and the high price of prescription drugs has driven much of this increase. The problem is that many Americans cannot afford the drugs they need, even if they have insurance because of high prices. Commercial plans and self-insured employers typically hire a pharmacy benefit manager or PBM to manage their drug benefit. The PBM helps determine the drugs that the plan will cover, and negotiate prices with drug manufacturers. Therefore, the plan PBM plays a central role in determining plans pharmacy spending, the therapeutic options available to patients, and the out-of-pocket costs. Today, the three large PBMs that collectively control eighty percent of the US market are vertically integrated with some plans, pharmacies and providers. In this market, that is characterized by the lack of transparent information, plans that are not integrated must select a PBM and often turn to brokers and consultants for help with that. However, these consultants often get paid by the PBMs that ultimately get selected. This can create a conflict of interest, incentivizing consultants to prefer the PBM that pays the most, not necessarily the PBM that provides the best option for the plan. Through initiatives such as the PBM kickback prohibition act, Congress should prohibit such payments to avoid this conflict of interest. Now, while this and other recent reforms have brought greater transparency onto PBMs and employers may have more visibility into what they're paying, the laws do not address the high drug prices in this market, and this is an important The current PBM business model incentivizes the use of big rebates to which drug manufacturers have responded by raising less prices. Patients pay based on these high prices when they are paying cash, when they are in the deductible phase, or when they must pay a percentage of the drug cost to get their drug. The Medicare program received a series of reforms to directly address high drug prices through the passage of the Inflation Reduction Act, the IRA. Starting in twenty twenty two, twenty three, Medicare began receiving IRA protections, out-of-pocket caps, inflation rebates, and the first drugs selected for drug price negotiation. Employers,

Mm.

however, received none of these protections, and they had their prescription drug costs grow by eight point four percent in that period. Through initiatives such as HR six one six six, Congress should consider extending these protections to the over a hundred and sixty million Americans that obtain health coverage through their employers. Expanding Medicare negotiated prices to the commercial market would allow commercial insurers and self-insured employers to access transparent negotiated prices that in that in twenty two twenty six were up to ninety, seventy nine percent lower than the list price. This can reduce the contribution of rebates in coverage decisions, increase transparency, and over lower overall costs, including for beneficiaries. Extending inflation rebates to commercial markets would also help mitigate the increasing trend of drug companies raising prices to maximize rebates when negotiating with the PBM. PBM reform is urgently needed throughout our healthcare system, but in isolation it is not sufficient to provide the needed relief for employers and patients. Lowering prescription drug prices in the commercial market is imperative. Lower healthcare costs can also contribute to making American workers and companies more competitive in the global market. Thank you so much, and I look forward to answering any questions.

I thank the gentlelady for yielding. Lastly, I recognize uh Mrs. Anderson for your testimony.

Good morning. Chairman Allen, Ranking Member Desaigne, and members of the subcommittee, thank you so much for this opportunity to testify on the President's great health care plan. My name is Hannah Anderson and I lead Healthy America Policy at the America First Policy Institute. And I just want to say a special thanks to getting to uh be before you today, with friends like Jeanne and Dan. who I worked with on uh legislation like this in the past. Um, a hundred and thirty-six million Americans have employer-sponsored health care. These patients rely on their employers or unions to provide them with health benefits as part of their compensation package. And under ERISA they have the authority to provide the most tailor-made health benefits for their employee population. Just like any other industry, they often turn to brokers and consultants to help them offer a more bet- competitive benefits package to potential employees. Ideally, these independent consultants are able to stretch the company's dollar further, uh, getting lower costs, greater coverage, and better health for the employee population. However, that's not been the case. The problem is that those consultants they rely on to select PBMs are not always independent. Reports have found that they often take more in kickbacks from the PBMs than they do payments by the plan sponsors. Uh, and my fellow witnesses have acknowledged this and and kind of discussed this at length, but it's really disappointing because it seems that instead of placing the plan sponsor with the best PBMs, it's more about placing the PBM with the plan sponsor who pays the consultant the most. And so this isn't theoretical, it's affecting millions of Americans right now. One example comes to mind. Uh, a patient at J and J found out that their insurance was paying ten thousand dollars for a drug that was available for twenty-eight dollars if they only paid cash at the pharmacy counter and their lawsuit they claimed that it was because the b- broker Aon steered J and J to Express Scripts which was paying Aon referral fees. That's so disappointing. Um, and these conflicts don't stop at consulting fees. PBMs have inserted gag clauses that prevent pharmacists from telling patients the cash price of the drug and used rebate aggregators to hide rebate revenue. This has all also hurt the independent and community pharmacy. Thanks to President Trump and this committee, we've made real progress. The twenty twenty-one appropriations bill required disclosure of broker and consultant compensation. The appropriations bill of this year extended that to PBM remuneration. And in January twenty twenty six, the Department of Labor proposed a PBM disclosure rule pursuant to the President's executive order putting Americans first on drug pricing. These are meaningful steps, but as we've heard, disclosure alone is not enough when the underlying financial perverse incentives still exist. So Chairman Allen's PBM kickback prohibition act takes the next step to codify President Trump's great healthcare plan into law. This legislation would amend ERISA to directly prohibit PBMs from

I thank the General La- Lady for yielding. Under committee rule nine,

Thank you.

Thank you.

Thank you.

we will now question witnesses under the five minute I will recognize myself for five minutes. Mister Gilpin, your testimony states that one way employers seek to responsibly manage costs is by relying on advice from outside experts. Could you discuss whether these relationships between the plan sponsor and health plan fiduciaries on the one hand and brokers and consultants on the other are typically long-standing relationships?

Absolutely, Mister Chairman, many employers maintain long-standing Mm.

Why should a plan sponsor or a health plan fiduciary be able to trust their broker or consultant to give recommendations that are in the best interest of the plan?

Well, in short, they work for us. So, you know, earlier this year Congress fixed a terrible conflict of interest with PBMs. The PBMs were supposed to work for the employer and fight for us against Big Pharma to lower drug costs, but it turned out they were actually paid by Big Pharma, right? And they were using us to play both sides and to maximize their revenue. So now we've are faced with a very similar conflict of interest, wherein the brokers and consultants that are expected to advise us and be advocates for the employers, are instead potentially being paid by the vendors they're supposed to be arguing against and negotiating down. Um, we do think that brokers and consultants provide an incredibly valuable service. They have expertise that employers simply don't have and can't afford to include in their benefits department. But we've gotta be able to trust them. We've gotta be able to rely on them, cuz we are fiduciaries. Employers have to act in the best interest of employees.

Mm-hmm.

We have to do our best to control cost, and we need accurate and unbiased advice if we're gonna do that.

Yeah. Thank you. Miss Deacon, uh, your written testimony states that employers and help plan sponsors rely on brokers and consultants to advise them on which PBM to select and how those contracts are structured. Could you discuss whether these employers and plan sponsors trust the broker to render advice that is in the best interest a plan sponsor's goal of desi- de- designing a robust but affordable benefit structure?

Um, you know, similar to my colleague, many employers do trust them to um counsel on these decisions and in many cases you know they have to in some cases the trust is warranted but this p b m environment is highly technical and employers don't often have the internal staff or resources to evaluate things like rebate structures and formulary strategies, specialty pharmacy economics um but you know and despite the increased disclosure as discussed the four O eight b two um this increased disclosure of the market it had has been woefully insufficient um and it will continue to be woefully insufficient so long as consultants continue to get paid by the PBM or the bidding um bidding PBM including on per claim basis or participation based um compensation I mean the conflict between the employer's expectation of of getting the best um PBM their plan and independent advice and the consultants in economic incentives on the other hand are completely at odds. Um so until this is solved that trust um is very difficult.

Yeah. How can a plan sponsor learn if a broker or consultant has a financial incentive uh outside uh incentive that would impair the broker's independence?

Well I mean certainly they should ask and under four O eight B two they they must ask, right? Um the problem is again I have seen first-hand where those disclosures are requested and the consultants are not being fully transparent in what those fees are. And again, when the underlying economics of the relationship, like per-script fees, increased utilization at higher profitable channels for the PBM, when the employer isn't able to actually see those underlying economics either, sometimes these very like high-level disclosures do not do not adequately inform the employer as to what the economic

Ms. Anderson, do you have any comment on that at twenty-seven, twenty-six seconds? Okay.

No, sir, only just to say that, uh, you know, uh, this is all part of an employee's compensation package. So all of this money, even though it's it's leaking to other parts of the health system, at the end of the day belongs to the patient or employee that is benefiting from the employee welfare benefit plan similar to four O one K,

I'm out of time, and so uh Miss Lee from Pennsylvania, uh yes your time to answer uh ask questions.

Thank you, Mr. Chairman. Uh pharmacy benefit managers have an unbelievable amount of control over our health care. They control drug prices, uh decide which drugs are covered by insurance and which pharmacies are in network. This is all while, owning and operating their own pharmacies. Express Scripps, Optima Rx, and Care Mart manage eighty percent of drug claims in this country. And they're owned by Cigna, United Health, and CVS, which also owns Aetna. It would be understandable to assume all these names mean different things, but health care monopolies control every part of the system. They profit off of families having to choose between rent or groceries or child care, um, or their lifesaving medications. This administration has come But they've made it abundantly clear that the issue is not uh with exploiting consumers it's with who benefits from the exploitation. Over the last several months the Trump administration has signed secret deals with sixteen drug companies uh in exchange for three year exemptions from tariffs the White House claims these deals have secured the lowest drug prices ever and I'm sure it's just a coincidence that Donald Trump Junior sits on the board of Blink-R-X a company that serves to profit from pharmaceutical companies establishing

Thank you so much for this question. Thank you so much for this question. I think the attention on international drug prices helps us I think the international drug prices helps us identify identify that we're paying so much more than other countries. that we're paying so much more than other countries. But, uh, how to impl- incorporate that into getting a better deal for us? In these negotiations, in these announcements, these are voluntary deals that the industry has uh taken up together with the administration. We don't know how long they last. We don't know why some manufacturers have agreed and others haven't. And so why didn't manufacturers do it before if they can sell, right, at these lower prices? So uh leaving those um leaving those mechanisms to incorporate external prices into getting lower prices for us, should be incorporated into things that are written in statute. For example, the Medicare,

Mm-hmm.

In the first Trump administration we had that idea for Part B drugs, and we could have it today as part of the Medicare drug negotiation program as well.

Thank you. I'd also add that reports show uh more than half of the drugs listed in Chomp Rx have cheaper alternatives um on other direct-to-consumer sites. Consu- conservatives are celebrating drug pricing transparency through PBM reform in the same breath as celebrating Chomp's secret dealings with drug companies, and we can't stop at transparency. We have to actually lower those costs. So your testimony

Thank you for this question. Um, today, the legislation that covers, you know, increased transparency, increased disclosure of information between PBMs and their clients, that does not change how manufacturers charge, Mm. how much manufacturers charge for. And that's a special problem for drugs that are in our market without competition. We have in today very few drugs that account for a large portion of the spending, and don't have competitions, generics and biosimilars. And that's the kind of drug that we negotiate price in Medicare, and we achieve very significant price reductions. However, all the six hundred and fifty plus million beneficiaries that are getting their, uh, insurance coverage through the commercial market, they don't have access to these lower costs, to these lower costs. lower prices and that's a huge gap because that really weighs, like was said here, on their uh paychecks, on their benefits and so on.

Yeah, so between PBM reforms and Trump Rx we're still aren't making a dent in the real problem. Health care monopolies, the president and his family profiting while people in this country go bankrupt trying to afford care. The problems we're seeing with PBMs are a natural by-product of a failing health care system that relies on profits over human lives. It's important that we hold PBMs accountable, but that's only going to address the symptoms of an underlying failing system. We need universal health care so that no American ever has to rely on a Go fund me, uh, for life-saving medications, or so that no one is choosing between feeding their families or paying for insulin. Americans pay three to four times more for medication than in Canada, the United Kingdom, France, Japan, and Australia. So when we say that we could take steps, that's great. But at the end of the day, we need to pass.

General Lady yields, and now I'll call on our Chairman Wahlberg for his five minutes of questioning.

Thank you, Mister Chairman, and thanks to the panel for being here, it's good to see uh some of you again, we haven't seen for a little while and appreciate your involvement here today. Mister Gelfand, um many of us have heard concerns from the constituents uh about the practice of PBMs, uh and how consolidation of PBMs have taken away options uh for health plan sponsors and patients. Um could you discuss w- whether employers have any type of flexibility when designing their prescription drug benefit programs and secondly, what choices do employers have when working with PBMs?

Well, I'm sure the press release is being written as we speak, but a PBM will tell you that everything's negotiable and an employer can have any kind of plan that they want. But in practice, the flexibility is constrained since market consolidation limits meaningful competition. With the three largest PBMs controlling something like ninety percent of prescriptions, they know that they hold all the cards. So if anyone could negotiate, it would be Eric's member companies, cuz we're the biggest, we we pay the most, we have the most covered lives. But oftentimes we're just stuck, take one of the couple options that they offer, or take a hike. Um, one strategy many of our member

So choices ultimately are kind of a mirage. Mm-hmm.

Well, smaller employers have very few choices. They may be just stuck with the PBM chosen by their TPA. With a larger employer, you might be able to choose between a

Thank you. Uh, Uh, Mrs. Deacon, Mrs. Deacon, according to the Federal Trade Commission, according to Federal Trade Commission, the market for PBM services is highly concentrated the market for PBM services is highly concentrated. Uh, uh, and the

In short, they have a massive incentive. In short, they have a massive incentive. Um, Um, in that FTC report, in that FTC report, you actually reference um i think one uh an excerpt from a p b m executive really said it best uh quote you can you can get the drug im imitinab mesylate at a non-preferred pharmacy at costco for ninety seven dollars we have created plan designs to aggressively steer customers to home delivery where they can get the drug for twenty nine hundred dollars where the drug is two hundred times higher the optics are not good End quote. Right? The optics are not good, they recognize this, because it hurts plan sponsors and patients. The economics are fantastic for the PBM. So as they have vertically integrated and own everything from the insurance company to the PBM to the specialty pharmacy to the rebate aggregator, group purchasing organization, and now even manufacturers themselves, um, they own the entire vertical line and absolutely have a a a motivation and financial incentive to steer as many patients to those high profit channels as possible. And as it relates to this bill, those high channels are often compensating the broker consultants on a per claim basis.

So for the very popular ERISA health plans, that has a negative impact, significant impact,

Massive.

yeah.

At twenty nine hundred dollars versus um, you know, ninety seven dollars for a drug. There is an incentive to steer that employer and their members to the twenty nine hundred dollar

Yeah. Thank you. Um, this is Anderson. Um, these same brokers and consultants are responsible for advising the health plan sponsor on the selection of PBM, um, and everything involved with it, uh, uh, it appears in some type of conclusion. Are these brokers and consultants also responsible for advising the plan sponsor on the terms of the contract?

Yes, they are, and uh and they're not really doing their job to hold them responsible. So these brokers and consultants are advising the plan sponsor on a variety of different options for the group health plan for the for the employee welfare benefit plans that the company may uh excuse me offer. And they're not doing their job when they're steering them to the most expensive options. Because again, if a patient can go and get something at a cash price for twenty-eight dollars or three dollars, but it's actually costing the group health plan

Thank you. I yield back.

Gentleman yields now a call on Mister Mannion from New York for his five minutes of questioning.

Thank you, Mister Chair, thanks to all of our witnesses for being here today. This hearing uh will help inform our continued work in tackling rising uh health care costs. I hear from my constituents every day prescription drug costs are out of control and can be devastating a devastating burden on families Earlier this year I was proud to vote in favor of the PBM reforms we passed to help improve price transparency and bring costs down. Requiring PBMs to disclose their compensation and pass through rebates directly to the health plan was a common sense measure to insure plan participants reap the benefit. However, the work we have done is just the start. when it comes to addressing drug costs.

Mm.

The Inflation Reduction Act gave us a model that legislation created the f- that legislation created the first drug price negotiation program for Medicare beneficiaries and capped annual out-of-pocket costs for part D drugs. We should be working to extend these savings to the more than one hundred and sixty million Americans who receive coverage through their employer. As some of my colleagues have noted, the low Lowering drug costs for American Families Act would build on recent reforms by making Medicare fair price negotiation available to all Americans with private health coverage. It would also limit out-of-pocket drug costs under ERISA-covered health plans and prevent pharmaceutical companies from raising prices faster than inflation, among other reforms. I'm hopeful that this committee will give consideration to proposals like this and also find bipartisan agreement on future Professor Sokol, my question is for you. An important provision of the Inflation Reduction Act is the requirement that pharmaceutical companies provide a rebate to Medicare when they raise the list price of drugs covered by Medicare Part B and Part D. However, because of procedural obligations raised uh by Senate Republicans, these rebates do not apply to drugs provided to privately insured individuals. So, would you please talk about the significance of insuring the inflation rebates, also apply to commercially insured patients?

Thank you so much for this question. First of all, it is really important to have the inflation rebate because in this country, there is a tendency of these list prices just going up over time, without any changes to the drug, any innovations, and that's what really drives the higher prices we pay as compared to other countries. Now, it's not only about penalizing manufacturers, it's also about deterring them from raising these prices. So the inflation rebate is today, it's calculated by the difference, what is the actual price versus what the price would have been if it was according to inflation. And it's multiplied by the number of claims in Medicare. Now, Medicare has a lot of beneficiaries, it spends a lot on prescription drugs. But when we compare that to the commercial market, that really covers about fifty percent of prescription drug costs. That's a much heavier penalty, but more importantly a much heavier deterrent against these raising list prices. And that has a direct implication on patients that are paying over these prices over time.

Thank you for that. And how does the lowering drug costs for American Families Act address this issue to ensure that commercial plans would be included, um, when it comes to those negotiations?

I think the very first and most important thing is including these

Are those rea-

right, this this that's the way that the rebate calcula it's calculated and that's what determines the weight on manufacturer's pockets, how much rebate they would have to pay. So that's really what would change if I have to pay all of a sudden a much bigger amount. Also there are some drugs that are more relevant in the commercial space. So today, if they don't have many units in Medicare, these manufacturers are fine with raising prices, right. So that expansion of the of the units that are accounted for in these two environments

Yep. Thank you for that. Thank you, Mister Chair, thank you, Professor, and I yield back.

Thank you. Um, I'm gonna recognize myself for five minutes. Um, our health care system is under serious strain, not just because of complex or expensive, but because some have to use that complexity for their own financial gain. This has led to a health care system that's been pulled in opposite directions, where patients are told, are told price costs are going up, while the middlemen record profits. PBMs are not created to be the billions of the billions. Uh, they were meant to be help the stu uh help the patients to negotiate lower price uh drug prices, improving the ex excess, and bring in order to a fragmented system. But over time, this purpose has drifted. Today, too many PBMs seem more focused on taking value out of the system than delivering values to the patient. And this is not an accident. It's the result of incentives that reward secrecy, consolidation, shifting profits into shadows, instead of rewarding openness, com- competition, and patient care. At the end of the day, this hearing's about accountability, it's about transparency, it's about whether we are willing to confront a system where too often profit comes before patience. And again I wanna thank the the witnesses for being here today. This is a very, very important topic.

And I, and thank you for the question, And thank you for the question, I really appreciate it, I really appreciate it, because I think this is what we're seeing with Trump Rx. because I think this is what we're seeing with Trump Rx. You know, You know, the president put, the president put,

Mm-hmm.

camp our acts together to to make sure that we were taking the middlemen out of the system. And so for some of the drugs that we're seeing that an eighty-six percent and ninety percent, ninety-five percent cost reduction for American patients, and patients can go and buy that directly without using their, you know, PBM or other middlemen, and they're seeing a really, uh, true cost reduction on a drug that they might want to purchase and then not go through step therapy or other utilization management tools to get to. So for a drug like Humira, which is, uh, I think now listed at four hundred and

Thank you. Uh, Mister Giffield,

Thank you.

is that, does, okay, thank you. There's a growing recognition that limited transparency in PBM operations makes it difficult for policymakers to fully assess the cost that it'll Based on your work, uh what are the most critical data gaps that Congress should be focused on in closing this b- in better understanding the marketplace and how it functions?

Uh thank you for the question, Mr. Owens. Um, plan sponsors believe that our claims data belongs to us, that it should be in our possession, it's d- it's developed based on what we pay for and what our patients pay for, but oftentimes we do not get access to those claims. Congress attempted to solve this problem in twenty twenty one, passing the consolidated appropriations act that that banned so-called gag clauses, wherein a TPA or a PBM would refuse to provide data to the plan that generated that data. However, it hasn't worked. The result has been that the PBMs and TPAS has simply said, we have other reasons for not providing that data. It's proprietary. It belongs to us. Without it, we can't truly know what we're spending on what or where the money is going. I think if we could solve that problem in combination both with the reforms that were passed in failure, February and with the regulation that should soon be coming finalized from the Department of Labor we will have enough knowledge of the ecosystem that we can really start to make meaningful change.

Thank you so much. Ms. Deacon, spread pricing has been identified as a key way PBMs generate profits, often at the expense of both plans and pharmacies. In your experience, how whi- how wide-spread is this practice? You might have addressed this a little earlier. Um, and does it, uh, does it reflect a system that is fundamentally prioritizing margins over the

Yeah, I believe that these practices are prolific, um, and absolutely there are times again when the profits and margins are placed above, um, you know, whether it's a cost or a clinical analysis, um, whether that be through spread pricing, formulary management and placement, um, different utilization management techniques, uh, employers and patients are certainly under the assumption and understanding, um, or for most of us, that these decisions of of what drugs are we're given access to and the cost of the drugs are driven by clinical reasons, not because it serves somebody else's bottom line or profits, um, but these, you know, continued, uh, this continued conduct, it flies in the face of that. And again, to my colleague's point, uh, the more data and access we can have, uh the more we can begin to understand those and solve those problems.

Thank you so much. Uh this this again is such an important conversation, it should be bipartisan, and we need to stop this monopoly, not trade off to another government monopoly, let the free market work. There's no accountability, no loyalty, it's total greed, and we need to, that's not the American way, so I appreciate what you guys are doing. And with that I'm gonna uh uh recognize my my friend from Georgia, Miss Macbeth.

Thank you, Mister Chair, and thank you, Ranking um Member Designe. Thank you to our witnesses that are here this morning. I have read your testimonies. Um, but thank you for being here to discuss pharmacy benefit managers, otherwise known as PBMs, and the role that they play in limiting access to lifesaving drugs. I don't have any formal questions for you today, but I do wanna say I'm really encouraged by the bipartisan progress that Congress has made to curb PBM abuses. I like the language that I'm hearing, the discussion that I'm hearing, that, but there's still so much more work to be done to regulate PBMs. control over the drugs that are or are not covered and the challenges patients must navigate to get the medication that they need. The big three, PBMs, CVS, Care uh CareMark, Express Scripts, and Optimum Rx administer about eighty percent of all prescriptions in the United States. This market structure has given PBMs immense power to limit which prescription medications patients can have access to under their health plans. PBMs often employ a practice called step therapy, or what I like to call fail first, which requires patients to first fail a medication preferred by an insurer before they are able to access the treatment that the patient and the doctors have agreed is best suited for them. The problem with step therapy is that real life people are not PBM policies are guided by business leaders and driven by profit incentives. Their lack of transparency leads to practices like step therapy and other health plan designs that do not always make sense for our patients and ultimately may not achieve the cost savings that PBMs are touting. But what happens to the patients who are forced to start PBM preferred medication? That they already know. What is the human cost for patients who must wait months and months at the expense of their health before they get the coverage for the treatments that they need like a teenager from Georgia with Crohn's disease Georgia is where I represent who while preparing for a college entrance exam experienced a stress induced flare-up even though she had her even though she and her doctor knew that uh biologic would be the best source of care and treatment for her, fail first required her to try a steroid first. While waiting to fail, her disease progressed. She lost fifty pounds in a matter of weeks. Her face swelled up, her hair fell out, and she lost complete control of her body. She also lost the chance to enjoy the milestone of her senior year. And instead of celebrating graduation with her friends, she spent the last day of high school That is the cost of sweeping mandates that far too often leave patients behind at the expense of their health and the quality of life. And while we all continue to grapple with the exorbitant cost of health care, we have to find a balance between the policies that keep costs down and still deliver the lifesaving medications that our patients need. This session, Congressman Rick Allen and I reintroduced the Safe Step Act, which would provide a clear and timely exceptions process for PBM mandated fail-first policies. The legislation would require health plans to offer a step therapy exemption process for those who have already tried and failed a PBM preferred drug, and for whom delayed treatment could cause irreversible health consequences. This is much needed for patients who are being steered to treatments that they know will not work for them. It means less time failing through the wrong medication, less time waiting to feel better and to heal. I am thankful to the Department of Labor's proposed rule that will help shed light on the financial incentives PBMs have to add certain medications to their list of covered drugs and push patients toward one treatment over another. But as we wait to s- see just how PBMs churn their profits and influence health plans, we can act now, right now, this very minute, to provide much needed relief for patients who are just patiently waiting for care. Waiting for their condition to get worse, before they are ever given the opportunity to feel better. I urge my colleagues, all of them, to support this common sense legislation that will better protect patients from the influence of PBMs. And I yield.

Thank you. I now ruf- recognize my friend from N- North Carolina, Doctor Fox.

Thank you very much, Mister Chairman, and I really appreciate our um witnesses for being here today. This is a really, really important subject um that we've been dealing with for a long time and seri- seriously need to find a, an answer to. Mrs. Deacon, everybody's described the vertel vertical integration of PBMs, the fact that they control eighty percent of the market, um, or three of them do. So, how does the market power increase their leverage to enter into into the complex and opaque relationships with brokers and consultants. And what are they likely to do as we, pardon the expression, put the screws on them and try to get more visibility into what they're doing? We know that people re- who get their money this way are not gonna give up easily. So what will they be doing to try to maintain their market share.

Thank you for the question. And you're absolutely right that this will not be something that they simply lay over um and accept um you know with respect to this bill, I think we know we know the game plan um we've seen it before, we see it in contracts today where these pig big PBMs contractually try to reclassify kickbacks to be something else. In fact, in one of the contracts that I highlighted in my written testimony, they in fact state in the contract, um, for purposes of the anti-kickback statute, this, you know, this kickback shall not be constituted as a kickback, right? We know that will happen, so I think we have to, uh, when we're tightening those screws, be aware of that, um, uh, and really, uh, account for that in how we're describing, and not focus so much on the labels that these entities are labeling themselves and rebates and um whatever the thing is they're labeling, we have to look at the underlying economics. What are the economics here? What is this economic relationship? Um and then legislate or regulate um from there. Uh you know their vast and growing um market share and vertical integration has just led them to be able to call the shots, um and pay as much as they can, again in this context to the broker and consult.

It's astonishing to me that we've gotten into this position when even people on the street, so to speak, know PBMs are bad. I mean, I talked to people in my district who've read enough about this to know it, and it's amazing that some the smartest people running the biggest companies in this country, could have let us get into this position to begin with. Um, so I'm thinking we're gonna all have to be on our toes. Mister Gelfand, thank you for the work you've done over the years, uh, with the committee. Um, we're, we know that over the years the National Institutes of Health says pharmaco- pharmaceutical expenditures were over eight hundred billion in twenty, twenty-two. So, we've all, the, we know the FTC is now on top of some of these things. So, how I think you've talked about this, but say a little bit more about the PBM actions affecting the cost and availability of prescription drugs to ERISA health plan participants because that's of course what we're most concerned about.

So PBMs, thank you by the way, um, Madam Chairman. Um, PBMs do play a a central role in determining both the cost and accessibility of medications, because the power to create and manage a drug formulary is the power to grant and deny market share to drugs. I've s- never seen a better eg example of this, of when biosimilars for Humira came to market. There were a dozen of them and they were way, way cheaper than the branded product, but none of them got any market share, and this was one hundred percent due to decisions that PBMs made about how to structure their formularies. And those decisions, they made

General lady yields, General lady yields, and now, and now, Miss Hayes, Miss Hays, I'm gonna get you in here before we I'm gonna

Mm. Yeah.

Thank you. Thank you to our witnesses for being here today. The cost of health care remains extraordinarily high. In my state of Connecticut, the average employee sponsor premium has reached almost twenty-seven thousand dollars in twenty-twenty-five. Families are making impossible trade-offs, paying for health care as they continue to experience rising costs in essentials like gas groceries utilities insurance, A major driver of those health care costs is prescription drugs. PBMs play a role in managing prescription drug programs, serving as intermediaries between insurance providers and pharmaceutical manufacturers to manage drug benefits. PBMs develop the formulary list of drugs covered by plans, negotiate prices, and reimburse pharmacies for drugs. In theory, this should give them significant leverage to lower patient costs. In practice, practice, however, the market structure raises serious concerns about transparency. I supported bipartisan legislation signed into law in February that enacted sweeping PBM reforms in Medicare and employer-sponsored plans. This legislation included increasing transparency and reducing the incentives for PBMs to favor high-priced drugs. But additional reform is needed to address the opaque business practices of PBMs, which are highly concentrated and vertically The PPM market is dominated by three large companies as we've heard many times today, CVS Health, Cigna Express Scripps, and United Health Group Optum Rx. That controls more than eighty percent of the market and own insurance plans, pharmacies, and provider networks. As a result, these companies continue to hold significant influence over which drugs are covered and their prices. Mister Gelfand, how do vertically integrated arrangers impact the ability of employers to evaluate PBM performance and fulfill their fiduciary responsibilities under ERISA?

Thank you for the question. Vertically integrated PBMs, those that are affiliated with insurers and pharmacies, they can exert significant control over the supply chain. So they can design the drug formularies that determine which drugs will be covered. They can use tiering and prior authorization and step therapy to create barriers and steer patients to one drug or to a different one. They can set reimbursement rates for pharmacies, including their own pharmacies that they own. And remember, all PBMs own specialty pharmacies and mail-order pharmacies, if they don't also own um retail pharmacies. Um they can create preferred pharmacy networks that can exclude competitors or e- exclude um independent pharmacies. Um the mergers and acquisitions that keep getting approved, they almost always say that this vertical integration is gonna create efficiency. It's gonna save money, it's gonna be better for patients because of that efficiency. But at this point, I'm not sure we could even find a credible expert who would agree that that's actually what's been happening. Um, instead the market consolidation has just been used against plant sponsors and against patients.

Thank you. Professor Sokal, in your testimony you described how mar- market concentration means there's no real competition across PBMs, similar to what we've just heard. According to your research, how does market concentration impact access and drug prices in rural areas, like many parts of my

Really important question, and thank you so much for this question. I should say that um all the actions of the PBMs, they do matter when there are choices in the marketplace. When there are Humira and Biosimilars, for example, then they can choose across these drugs. And often they choose for the highest cost. And then what we see is patients not being able to afford that. What I think it's even more concerning is the fact that if the patient couldn't afford the drug, because of that choice that the PBM made, and they went to the emergency room because they couldn't get the drug they needed, for example, an insulin, it is the plan that is going to pay for that medical visit. And there is no skin in the game for the PBM in terms of accountability for that decision. Now, those decisions about which product to cover, we have identified in in self-insured employers how much money, how much extra money they add to the employer's spending. In one of the companies that we examined their formularies, it was a fifteen percent change, only associated with those choices, those of the products that were included in the formulary. And there's no surprise that every year one in every four Americans say we can't afford our drugs even though we have insurance because of those choices. Right.

Thank you. It's clear that we need to do more to improve this system. With that, I yield back.

The General General Letty yields. Uh, uh, A vote has been called in the house. Pursuant to the previous order, the chair declares the committee in recess, subject to the call of the chair. We plan to reconvene promptly ten minutes after the last votes have been called in this series. The committee will reconvene and continue questioning. And uh, Dr. Unger, you're up for your five minutes of questioning.

Uh, thank you, Mister Chairman. And, yeah, thank you to all the witnesses for being here today, you know, Ms. Deacon, you know, this kickback shall not be considered as a kickback. I guess it depends on what the word, uh, " is" is. Well, House Republicans have been working to lower health care costs for patients in their employer-sponsored plans, all while reducing unnecessary delays in care. One of these reforms is the Safe Step Act, which is led by our subcommittee chairman, uh, Mister Allen. Every patient is unique. which is why a physician ne- spends time working through each patient's individual history to decide which treatment will be most effective. But insurances offer require patients to ostensi- try their dr- their preferred drugs first before moving on to what the physician initially wanted to prescribe. The intent here, ostensibly, is to prevent physicians from prescribing more expensive drugs when um when more affordable options are available. In practice, the health plans often steer patients to more expensive brand name drugs, even when generic or uh generic or other options or available. And I believe uh it was uh you uh uh uh, Mister Gelfand, who said yeah, biosimilars for Humira develop uh acquire minimal market share despite being dramatically less expensive than named brand uh Humira. Um, you know, this The - the - the current system unfortunately isn't designed around controlling costs for patients. It too often is designed to financially benefit everyone except the patient and the employer plan to, in other words, to benefit middleman over the - over the payer and over the patient. In the meme- meantime, patients are exposed to preventable complications that require more visits to the doctor, emergency department visits, and even s- hospitalizations. Now, Now again, I understand the goal of step therapy if it's genuinely designed with the patient in mind or even w- even with some cost considerations injected, but that's often not the case. We sometimes see this when a patient has been on the same drug for years, shopped around for plans that cover the drug only to find out after he or she is swi- switches plans that the gov- uh this drug will only be covered if they first fail other drugs. Even the m- the m- even more concerning scenarios, when the doctor knows the patient will experience problems with the insurer preferred drug but has to recommend that the patient risk it anyway before he or she can access the drug they truly need uh Ms. Anderson uh can you explain how step therapy protocols are designed and and why they sometimes steer uh patients to expensive name brand drugs rather than alternatives

Absolutely, and you know step therapy is something that, again, it like you had mentioned in your remarks, it's something very benevolent. It's something that you say, okay, you know what, we wanna make sure that we are doing cost containment, we're trying to manage costs for the health plans, we're trying to make sure everyone's premiums don't go up too much, but I think what's the challenge is

And I would add, if I could just interrupt a second,

Yeah, of course.

and uh, you know, as a physician myself, there are, you know, MeToo drugs, you know, there are, you know, several different statins, there are several different ACE inhibitors and so on. And um, you know, I know most of the the two

But, but you know, But you know, I mean, I mean, and this is the case with many people who have rheumatoid arthritis, and this is the case with many people who have rheumatoid arthritis, ulcerative colitis, all sorts of colitis, Crohn's disease, Crohn's disease, is the drug that they're being asked to fail first on is not the drug that they have is the drugs that they're being asked to fail first on is not the drug that they have maybe heard in in working with their doctor. maybe heard in in Yes. So a patient is gonna have their insurance restart at the beginning of the year, and maybe they're gonna have to restart for six months back on that drug that didn't work for them and I think that is so heartbreaking for patients, Yes. who they say we can control our costs best, actually, more so than the health plan, more so than the PBM, and they can control it best and you know, thanks to to President Trump's reforms, many of the things between Trump Rx and expansion of HSAs, that really gives uh patients more ability to

Right. Great. Uh, th- this probably w- is worth more than the twenty seconds we have, Mister Gelfand. Um, what should Congress consider doing to, um, to improve this situation?

I think that there are aspects of - of, um, say, of step therapy that could certainly be reformed and modernized. For instance, it should all be electronic. It should all take place - you as a patient should be able to track through an on-line portal exactly how many times a patient is doing a step. Thank you.

The gentleman yields, and now I'll call on Mister Courtney from Connecticut for his line of questioning.

Great. Thank you, um, Mister Allen. Uh, Miss Deacon, you've written extensively on the issue of PBM transparency both in your testimony and el elsewhere, and I appreciate the attention to this complex relationship between PBMs manufacturers, brokers, other businesses that can contribute to rising costs of health insurance for employers and patients one provision of bipartisan legislation that I introduced the hidden fee disclosure act that was included uh in the COBRA act uh in February uh amended ERISA to clarify the scope of who is a quote covered service provider that must disclose their direct and indirect compensation to plan fiduciaries before this change there was confusion as to whether or not uh only companies that characterize themselves as

Uh, thank you for that question, and and you're right, this was a huge issue, and with covered service providers like third party administrators and PBMs, taking the

the

that they weren't covered service providers for purposes of um disclosure after the c a a twenty twenty one um so now again employers can actually understand if conflicts exist um who's being paid by whom um if the bidders or procurements being put in front of them are truly disinterested or given you know sort of uh the best advice in their interest um and i think again because Because of the vertical consolidation in the industry, um, where we have, you know, providers being owned by insurance companies, being owned by pharmaceutical benefit managers, being owned by, you know, specialty pharmacies, they're all vertically integrated. Um, knowing where those compensation dollars flow across all of those covered service providers is key. You squeeze one end of the balloon, it pops up on the other, right? So if you're not catching all of those covered service providers, you will be

Well, that is a really helpful um answer and very clear, so um again we're really um excited about the fact that language was included and again really looking forward hopefully to DOL to make sure that you know the word gets out, um that you know the they're these entities really are part of um the scope of the of the law. Um Doctor Sokol, can you estimate the savings available to plan sponsors as a result of increased transparency for PBMs and other service providers, I mean, even roughly?

Uh, thank you for this question. Yes, um, when PBMs have choices and they add more wasteful, more expensive products into the formulary, that's when they increase costs primarily. And we estimated that if we were to change that formula, in practice, savings would be up to fifteen percent net, net of all rebates and discount per member per month. I mean, that's very significant. for the self-insured employers that we have examined.

And just to sort of put that in context, um how does that compare to savings available to plans and employers if we were to incorporate the Inflation Reduction Act price inflation cap uh in private plans or to extend negotiated uh prices uh to to these uh to that population?

It's an excellent question, primarily because what PBMs cannot do is when the drug has no competition. If we have a drug, that has been in the market for a long time and there is no generic, there is no biosimilar, like Osempic for example, it has generics in other places in the world, but it ha doesn't have it here. So what can the PBM do? There's no competition there. And that's exactly the reason why we, number one, need to negotiate the price of these drugs, the top spending drugs that have been in our market without competition for a long time, and expand those negotiated prices to the commercial market. Uh, Osempic was negotiated in Medicare from nine hundred dollars list price for thirty days to two hundred and seventy-four dollars per thirty days for a patient in a high deductible health plan that has to pay that full price until their deductible is reached that's a very significant change in savings from expansion of those inflation rebates. I mean, Osempic has been in our market for a long time, it didn't start at nine hundred dollars, it just increased over time. So savings from expanding those uh rebates have been in the uh estimated as

Great. Um, again, thank you to both of you for your really uh outstanding answers. With that, I yield back.

I thank the gentleman for yielding now a column just to find from Florida for his line of questioning.

Thank you, Mister Chairman, the issue of PBMs is a complicated one. Um, I was the chairman of the health care committee in Florida for my final two years in the Florida house, in which we in which we um dealt with PBM reform. What I learned in my time, I had really no uh experience in health care prior to that. The speaker asked me to do it, in thing in part because he wanted something that I could sink my teeth into and learn a lot about. And what I learned in this is that there were no clean hands, that that everyone wanted to blame someone else, but but everyone had some responsibility. So I'll have some questions for about PBMs, but but I I would start by noting um I don't know, I'm gonna ask one of you at random. I'll ask the professor. Um, um, PBMs are responsible for negotiating to some degree with the drug manufacturer. I would note, by the way, that the United States of America has the lowest generic drug prices in the world. So obviously something's working when we have generic drugs. They're the lowest in the world. But when it comes to prescriptions, I mean, to to non-generics, the ones that are under-patent because they've invented, traditionally we've had the highest prices.

Thank you so much for that question. Such a good question. And I love mentioning that number. We always forget that generics are so much cheaper here. We're paying eighty-five percent of what other countries pay for the same

Mm.

whereas we're paying three times higher prices for the brand.

So why?

Well, one of the reasons is because PBMs feed on these rebates that are confidential and they negotiate that only for the branded products. So, uh, that is part of the reason why branded prices keep going up, is really to inflate that bubble and create some opportunities for profit for the PBM.

So if we pass legislation in line with what President Trump is trying to do with Trump Rx, where we add international drug reference where we said branded or I'm not branded, under patent drugs, whatever you wanna call them, patent protected drugs could not be sold in the United States for any more than they are sold in other countries, a most favored nation. Would that resolve the issue with the PBMs? Cuz they wouldn't be able to keep pushing the list prices up. Would that solve it?

One of the problems is that how do we know that it's cheaper? That's one of the problems. How do we know that it's cheaper than other countries? Because the same manufacturers can be giving confidential rebates to other countries. So that that's part of the story. Now I do agree that we pay so much more and we should be finding ways to lower these prices. So one of them uh is incorporating that into negotiation and incorporating that for our branded products.

See, one of the observations that I had was that because we were so good on on off-patent drugs, generic drugs versus non-generic drugs, was that part of the problem was that the drug companies were trying to make a lot of money in the United States, um, and then sell those drugs for a lot less overseas, and to some degree the PBMs had to deal with that. How much of the issue do we think with PBMs, I'm gonna ask Mister Gelfin just randomly, um how much of the issue of the PBMs occurs when we allow a PBM to also own a pharmacy, for example, and we create this vertical integration that can create, you know, uh bad incentives?

I think there's no question that when you have a vertically integrated healthcare company that owns the means of distribution as well as is what will be distributed and to who, you create opportunities for arbitrage, right? So it's interesting, you look across the different major PBMs and the drugs that they choose to run through their specialty pharmacies as as opposed to running through retail pharmacies are different in fact there's less than a fifty percent overlap in what the different PBMs say is a specialty drug it's not a real definition it's just what do we wanna sell you versus what do we wanna let other people sell you so you you're creating this opportunity for them and they're gonna seize that opportunity. opportunity in the system and they're gonna make profit from it.

Yeah, I would wrap up by saying again, I don't think there are clean hands here, I think there are challenges with PBMs, I think there are challenges with the people who hire PBMs, I think there are challenges with the drug companies, I think it's a complicated system that has to be managed and while I think there is ample room for reform the number one thing we could do is create transparency because if we do that people can then see what is going on and we can deal with the problems as they stand so I thank all of you for being here on this issue and and Mister Chairman I yield back.

Gentlemen Yields, uh now I'll call on Mister Scott from Virginia, our ranking member, for his line of questions.

Thank you, Mr. Chairman. Uh, Mister Gelfeld, you mentioned that PBMs hired by employers to manage programs, um, often because of conflicts, the employers are paying too much. What would happen if PBMs were required to act as fiduciaries?

Uh, thank you for the question, Mister Scott. Um, we are in favor of making a legal change to clarify that PBMs should be acting as fiduciaries, because the decisions that PBMs make have a material effect on the plan and on the patients in that plan, on the prices that they pay, on the products that are available to them. And what would change is that the PBM would then have the exact same requirements that employers have had for fifty years. And when you boil it down, it's two primary requirements. Number one, to act in the best interest of the people on the plan, and number two, to try

Thank you, and and if the um if you prohibit kickbacks

Mm.

if you did not prohibit ki- kickbacks but just required disclosure of all fees uh how would the employer actually know whether or not they're getting the best value and be able to compare plans? If all he sees is is is a spreadsheet of fees without knowing how effective the PBM is in actually reducing costs.

I think transparency alone would leave two problems. The first problem is non-compliance, and as we mentioned we've seen non-compliance with the twenty twenty-one CAA in which the brokers and consultants were already supposed to be telling us what fees they were getting and how are they were being paid and the PBMs declared themselves ex exempt from that, which is why Congress had to issue a clarification in twenty twenty-six CAA. Um, I think that the the second problem with that is that But ultimately, we do not have access to their data. We do not know where the the flows are. And if they don't tell us, we can't really double check. We don't have a right to audit all of their information. So a ban would be more effective than simple transparency.

Thank you. Uh, Miss Anderson, you mentioned the benefits of Trump Rx. Are there examples of brand names with lower costs on Trump Rx, uh, where their actual charges, where their actual cheaper generics, not on on Trump Rx where the patient could actually pay even less.

Absolutely. I think many of the drugs on Trump Rx offer a a uh lower price generic, but I think it goes back to the patient choice and what's working best for the patient. I know this committee's talked a lot about step therapy, and I think when you go to drugs like, again, recently Humira

Well, I I mean are there are there examples of generics not on Trump Rx that the patient would not have been aware of where they could have paid even less than the bargain they would get? On Trump Rx.

Um, in terms of - No, I don't believe there's any generics on Trump Rx at the moment.

OK.

But i-

So - so that - so that if it's all brand names they could have possibly paid even less by going off of Trump Rx into a generic. Uh, with Trump Rx, can you use your insurance to, um, pay the, um, pay for drugs off of Trump Rx?

No, but you can use your HSA and you can get on average a thirty percent discount off the

Wait a minute. You can you can't but you can't use your insurance.

You're not using your HSA. No, sir, but you can use your HSA as part of your insurance benefit.

Okay. Okay, uh Uh Professor Sarkal, did you wanna comment on that?

Certainly, I think that we we have to keep in mind that patients very rarely just use one drug, right? Most chronic conditions that and drugs that people need to take for a long time, they are multi- um drug regimens. So for patients who do need drugs, there are some of them maybe in Trumparks. We have a I think there's about forty five drugs in that list, but others aren't. So these individuals with insurance, they have to make an informed choice about, wait, if I use this drug not under insurance, these other drugs under insurance, how how soon will I meet my deductible? What uh what is the best deal for me? And um I think it gets complex very quickly, and I'm not sure that all patients, even as a provider, I could say as a provider, I would try to do the best for my patient, but I would be very puzzled about.

Thank you. Uh, now, we've said a lot about, um, the fact that prices paid in other countries are less than you pay in the United States. Are these the exact same drugs?

They are, but sometimes our insurers are paying less. It's really about the high list price that affects our patients. That's what's paying more. After the rebates and discounts, sometimes our insurers are paying the same. It's just not having these prices transparently available

Thank you, Mister Chairman.

OK, uh, now we'll recognize Mister McKenzie from Pennsylvania for, uh, his five minutes of questioning.

Well, thank you, Mister Chairman, and thank you to ranking member Scott for bringing the issue of PBMs being considered fiduciaries. I have bipartisan legislation to do that. I think that would be a positive step forward. Uh, for my questions, I'll start with Mister Gelfand, PBMs receive compensation from employer-sponsored health plans as well as other sources in the drug industry chain. What types of compensation do PBMs receive and how does this inflate costs and restrict the availability of drugs to employer plan participants?

Thank you. I will I'll try to answer that question quickly, cuz there's a lot of line items there. Um, a PBM will receive compensation, for instance, from an employer who may pay a percentage of rebates, a per-member per-month fee, administrative fees based on other services like medical management, fees related to integrating the PBM with other vendors, arbitraged amounts the PBM makes off of spread pricing, or fees in the form of so-called rebate credits when the employer finds ways to save money and the PBM then punishes the employer. But the PBM also collects a lot of money from pharma For instance, administrative GP O fees for the pleasure of negotiating with the GP O, formulary placement fees similar to rebates that help the drug get in front of the competition and better placement on the formulary, data fees that are purportedly in exchange for analytics that the PBM and its GP O may require the pharma company to purchase, and in some cases the PBM may require a drug company to sell their drugs at or even below cost to the PBM so the PBM can then re-label that drug and sell it at a mark-up, at a higher I should also mention that pharmacies, a PBM might use an employer's money to pay a pharmacy and then claw back that money and keep it. Um, these are just some examples of the very interesting and creative ways that they get paid.

Uh, understood, and so if you can please submit that to the committee for our review. Uh, I think it's important to see that full list of all the different ways uh that they are being compensated. Next question for you would be what can Congress do to bring transparency to those forms of direct

Thank you. I think a couple of things that should be considered is number one, support the administration's work to require full transparency into the direct and indirect uh remuneration that PBMs receive. Um please support our efforts as well to ensure that that covers their GPOs, their specialty pharmacies, their overseas drug branding entities, and the other interesting parts of their enterprise. Um we hope that this committee and Congress will pass your your bill, um the PBM fair act, as well as uh

Great, thank you. Great, thank you. Next I'll go to Mrs. Deakin. Next I'll go to Mrs. Deakin. PBMs and drug manufacturers sometimes negotiate PBMs and drug manufacturers sometimes negotiate prescription drug rebates that are expressly prescription drug rebates but are expressly conditioned to the effect that these drugs are, conditioned to the effect that these drugs are,

Uh, thank you for the question. It directly reduces access oftentimes to lower-cost drugs,

Mm.

and it also increases both plan spending and out-of-patient costs. When the PBMs and the um brand manufacturers enter into rebate agreements, they often do so, except condition, as you said, on limiting access to lower cost generics, including the exclusion of generics, biosimilars, and other formularies in exchange, again, for higher rebates. Um, as my colleague stated, this is one of the reasons we didn't see a huge, you know, drop when Humira went off patent and biosimilars entered the market. They immediate the PBMs immediately stepped in, um, and directed employer plans to their own biosimilar products. that they were manufacturing and white labeling. So, um, absolutely, again, I think another colleague highlighted a case where a member in a, the Johnson and Johnson, uh, employee, Miss Lewandowski, um, who was in a, a lawsuit, she could have gotten a drug for close to twenty dollars, but she ended up paying her cost share on a drug for ten thousand dollars because that was the drug that was on the formulary and that decision was driven by rebates.

Understood. Well, thank you. Uh, I'll close out.

Uh, thank you gentlemen for yielding, and now I'll call on Miss Uh, thank you gentlemen for yielding, and now I'll go on this. son yeah i'll rank you member for his line of questioning

thank you mr. chairman i'd like unanimous uh to ask for unanimous consent to submit for the record a statement from the national MS society

uh without objection

thank you mr. chairman i'd like to start my comments um from the perspective of somebody who didn't have health problems until ten years ago when i was diagnosed with stage four leukemia um i was in a situation where i was told by my oncologist you're lucky because fifteen years ago there was nothing we could do for you. So the treatments that I got primarily came from American taxpayers' investment in the National Cancer Institute, the National Institutes of Health, and DARPA. And then private sector companies came in and distributed those products, uh, and made a reasonable profit, but unfortunately some of them came in and may and took advantage of our laws. And I also a survivor of I'm not supposed to be here because the ICU doctors, six years ago, at uh George Washington told my two sons when they had to fly across country, that I was going to die. And because of Providence and their talent, and four weeks on a ventilator, I am sitting here. So from that perspective, I am so grateful for much of the American healthcare system. But I am so angry at people who have, Miss Deacon, Mrs. Deacon, and I wanna ask you about this part is, too many people who basically are sociopaths. I mean my view PBMs and much of the pharmaceutical industry is we we are too nice. We're dealing with organizations that are like the Sopranos, kickbacks, think of the language we're using here. We have to energize, Mister Chairman, and realize what we're dealing with. We've been sort of nipping at the edges here, but we're dealing with a culture and, Miss Deacon, you referred to this in your opening statement, that are solely driven from return on investment, astronomical returns on investment. Um, I think of my drug was one of the five drugs in the initial negotiations in the Biden administration. It was about four hundred dollars a day when it was put on market by Johnson and Johnson. But in Australia it was forty dollars a day. In Europe it was ninety dollars a day. Extended people's lives. People in America, the Wall Street Journal did stories about this. Upper middle income people had to make life and death decisions because they couldn't afford the copay. Well, we walked in and, Mister Chairman, as you and I as friends and former business, me as a former republican in a different time, we believe in the private sector and competition, but not when the competition is consolidated and there's no competition, and the culture within those organizations do not have the intellectual capacity to understand how much pain they're causing to people. So, Mr. Deacon, two things, just if you could comment on that, and it's PBMs but it's also pharmaceutical companies, not all of them, to Mr. Guilfrey.

Well, I'll f- I'll first start by saying that it would be a

Mm.

misconception to think that we have a competitive market. It would be a misconception to think that we have competition, or that we even have a market, right? markets require transparency, they require that we not have information asymmetry. Um, what we have today is again a very vertically integrated market that operates, um, a- and not just the PBMs, but I'm also talking about largely the provider side of this.

Mm-hmm.

I, you know, United Health Group is the largest employer of physicians in America. Most people don't know that. Um, we have, we do not have markets, we do not have competition. We have monopolistic, um, entities. that are operating with that profit motive, but with no check and balance of the market, right, with no check and balance of competition. Um, and so I think that that that's probably the first and most important point. Um, and I think once those forces come into the, um, into play, and in addition, uh, again, we have to have some check on the greed, right? Um, once those forces come into play, i think we will have some checks um but it's gotta be both the incentives and realigning the financial incentives number one number two ensuring that the disincentives to bad behavior are real and are felt by those entities

thank you and i wanna point out a study has has shown that twenty five of the fastest growing drugs in the united states are owned by firms that are owned by private equity companies and then lastly just as an example of that if you remember martin sacrilegio who we had in front of the

OK, seeing no further questions, uh, I will uh ask the ranking member uh for his closing remarks.

Mm-hmm. I might have just made it, sir, chairman, I just think, uh, Uh, I look forward to working with you. Um, and I really hope that, you know, we are in a culture up here where we, um, unfortunately are sort of trained to get in our own ideological perspectives and say, we're taking credit for this or, you know, the other people are not. This is something, for the sake of Americans' lives and the culture in this country. If we could get together, Mister Chairman, and really forcefully create disincentives for the bad behavior that all republicans and democrats who believe in american what i refer to as a mixed market system where competition is important but that competition is based on a moral authority that you're going to do the right thing and get a good rate of return so these folks are taking low risk and making high rates of return and everyone else pays for it mister chairman i would be thrilled to work with you on proposals that not only legally and politically uh and structurally that we have in front of us, but also capture the spirit of the urgency that I'm trying to express. This is really a cancer that has metastomized metastasized on the American business culture, and we could do something about it.

I thank the ranking member. Uh, without objection, I will enter in the record a letter from fifty-two associations in support of H. R. seventy-eight uh my PBM kickback prohibition act and a letter from the National Association of Manufacturers on reforming PPMs, and I'll do that without objection. Now, uh thanks to our witnesses for testifying about the uh brokers and consultants who employers trust to help design their health care plans, and the Opaque financial rewards that PPMs are paying to some of these brokers and consultants. And it is time. We we need to immediately do something about this. Uh, this committee remains committed to ensuring that American families have access to high quality uh and affordable health care that works for them uh access to the prescription drugs your doctor doctor recommends is a major part of our health care system. PBMs control the drugs that a group health plan will provide for its participants through a list of covered drugs. American Americans work hard to pay their group health plan premiums and the co-pays and deductibles for their prescriptions. Health care costs continue to rise. It's time that we shed a light on the hidden and deceptive practices that impact cost and accessibility for dru uh of drugs for American workers. Employers who place their trust in experts to help design their he uh their group health plans need independent advice to allow them to design cost-effective, high-quality health plans. We will continue our work and our uh uh and thank you for your cooperation uh to to uh design uh to stop these deceptive pra uh practices and expand access to more choices and better options for families and workers. Again, I would like to thank our witnesses for taking the time to testify before the subcommittee today. Without objection, there being no further further business, the committee stands adjourned. you