Today’s Health, Employment, Labor, and Pensions (HELP) Subcommittee hearing addressed issues of health care competition and transparency, key areas in which legislation can bring costs down for American working families and small businesses.
Health care costs are on the rise, but neither the hospitals, the insurers, the drug manufacturers, nor the Pharmaceutical Benefit Managers (PBMs) want to take responsibility. Today’s hearing cut through the industry blame-game and identified the market’s main health care cost drivers: consolidation and lack of transparency.
Subcommittee Chairman Bob Good (R-VA) opened the hearing by outlining the state of American health care. “All sectors of our health care system are plagued by market consolidation and a lack of transparency,” said Chairman Good. “Until these issues are addressed, patients will remain victims of a broken, exploitative health care system.”
Industry leaders comprised today’s bipartisan expert witness panel, including Dr. Gloria Sachdev, President and CEO of Employers’ Forum of Indiana; Sophia Tripoli, Director of Health Care Innovation of Families USA; Greg Baker, CEO of Affirmed RX; Christine Monahan, Assistant Research Professor at Georgetown University Center on Health Insurance Reforms; and JC Scott, President and CEO of the Pharmaceutical Care Management Association (PCMA).
In recent years, PBMs have come under fire for lacking transparency yet wielding massive influence over prescription drug costs. PBMs help set the formulary, or the list of insurance-approved drugs, but employers are concerned that they cannot access accurate pricing information to determine which plan to choose.
Rep. Tim Walberg (R-MI) raised this concern, which he’s heard from his constituent small business owners in Michigan. He posed the question to both Mr. Scott and Mr. Baker in three words: “What’s the disconnect?”
Mr. Scott responded, “I still haven’t understood where the RFP [request for proposal] process may be failing some employers who are expressing that sentiment to you Congressman.”
Mr. Baker sees the relationship between plan sponsors and PBMs differently. He observed, “I do not know of one employer who knows at the claim level how much they’re getting back in rebates from the pharmaceutical manufacturers.”
It seems like the granularity of data is the disconnect. Mr. Scott is correct that PBMs often offer pricing data to employers, but it is aggregated and largely useless without itemized drug rebates clarified. The law could help solve this disconnect.
Mr. Baker offered his support in working with the Committee on the issue because he agrees on the principle of transparency. To a pricing transparency question posed by Chairwoman Virginia Foxx (R-NC), Mr. Scott replied, “Yes, I would agree we need our clients and employers to have all the information they need to make informed decisions.”
Transparency is the first step in fighting market consolidation. Mr. Baker knows this all too well as CEO of a PBM company fighting in a market in which 80 percent of the share is owned by three big players. Not only is this competition nearly an oligopoly, but each of the “Big Three” PBMs is owned under a health care corporate umbrella also including insurers, pharmacies, and physicians’ groups.
Market consolidation drives increased price, and Mr. Baker used a real-world example to explain just what consumers experience. Mark Cuban has a direct-to-consumer pharmacy which doesn’t use the PBM business model. He offers a year supply of Imatinib for $866. However, when PBMs negotiate Imatinib prices for state-run health plans in states like Kentucky, Louisiana, Georgia, or Tennessee, a year’s supply costs $26,000, $57,000, $170,000, and $212,000, respectively.
Obviously, drug makers can manufacture Imatinib at low costs, yet some clients are paying a fortune for it. Why? Everyone except PBMs is unsure, so sunlight is needed.
Hospital pricing transparency was also on the agenda today. In an exchange with Ms. Tripoli, Rep. Eric Burlison (R-MO) pointed out how pricing data is available for almost every other consumer good and service through review-based apps like Yelp.
“Why can’t we get to that point on health care?” questioned Rep. Burlison.
Ms. Tripoli replied, “Part of the reason is because of the way that prices are negotiated, and the way they are set is in closed door negotiations between plans and providers.”
This is true, but employers finally have a key to the black box of negotiated rates thanks to Trump’s “Transparency in Coverage” rule. Under the rule, plan sponsors can see where prices are needlessly high, resulting in huge savings in their health plans.
Finally, like with PBMs, horizontal and vertical mergers among hospitals and physicians’ practices have driven health care costs. Hospitals continue to be a major choke point for health care spending. They account for one in every three dollars spent on health care and use their leverage to bully the private insurance market into paying nearly 250 percent more for services than Obamacare exchanges.
Also, by buying up physician’s practices, hospitals can charge higher reimbursement rates and tack on excess fees for patients. This point, and most every point raised throughout the hearing, garnered widespread bipartisan agreement.
Ranking Member DeSaulnier put it best in his opening statement, reaching across the aisle and saying, “As a Progressive, I agree with you. I believe in transparency.”
Republicans and Democrats agree: sunlight is the best disinfectant.
Bottom Line: The Committee is fighting for transparency and competition in the American health care system.
