Freedom Line Blog

Today, the House Energy & Commerce Committee holds a hearing entitled “Lowering Health Care Costs for All Americans: An Examination of the Prescription Drug Supply Chain” that offers another opportunity to advance substantive reform.

CFIF applauds the Committee, and members Brett Guthrie (R – Kentucky) and Morgan Griffith (R – Virginia), for their collective efforts on this issue of affordability.  In that effort, we also continue our own effort to emphasize the importance of avoiding destructive government price controls, which only serve to make lifesaving pharmaceuticals less available to Americans, not more available.  It’s also critical to maintain focus on ongoing reform in the pharmaceutical benefit manager (PBM) arena, which actually can bring improvement, as we’ve consistently emphasized:

For those unfamiliar, Pharmacy Benefit Managers (PBMs) amount to middlemen that control prescription drugs for millions of Americans.  A majority of Americans receive health insurance through employer plans or government programs such as Medicare, which in turn cover prescription drugs through PBMs.  Those PBMs negotiate with drug companies and pay pharmacies, but throughout the process determine the drugs that insured patients may obtain and at what cost.

The problem is that PBMs operate in such an opaque and complex manner that they’re able to inflate drug costs while claiming to be working to reduce them.  It has reached a point where even the Federal Trade Commission (FTC) is now investigating PBMs’ role in driving up costs for Americans.”

Another critical arena offering potential reform? What’s known as Section 340B:

At issue is Section 340B of the Public Health Service Act passed in 1992 to help hospitals – especially those serving low-income and uninsured populations – to purchase pharmaceuticals from drug manufacturers at significantly discounted prices.

In theory, those savings for hospitals should have translated into lower out-of-pocket prices for everyday patients by being passed along to them.

Since 1992, however, real-world practice has not lived up to that laudable Congressional intent.  As the number of participating hospitals and pharmacies has grown, oversight has failed to keep pace with the scale and complexity of the program.

As a result, hospitals and their partner pharmacies have increasingly exploited the 340B program in ways that bring significant revenue streams for themselves, but no demonstrable benefits for the consumers who were the law’s original intended beneficiaries.  Multiple studies examining the growing discrepancy have exposed how hospitals and their partners generate tens of billions of dollars each year from 340B drug sales.  Rarely, however, have those funds been passed on to patients in the form of lower drug prices or even reinvested into better patient care.

Outrageously, some hospitals even charged full prices to patients for pharmaceuticals discounted under the 340B program, and then pocketed the difference rather than pass them on to consumers as designed.  The federal agency in charge of administering the 340B program has highlighted those transparency concerns and an inability to accurately audit the program in practice.

Accordingly, since 1992 the 340B program hasn’t fulfilled its intended aspirations.  Instead of reducing drug costs for patients, it has too often incentivized hospital profiteering, distorted healthcare behavior and ultimately raised costs rather than lowering them.”

Our message is clear:  Keep up the positive work, and focus on reform where it works, while avoiding the catastrophic potential pitfalls of drug price controls, whether through so-called “Most Favored Nation” (MFN) or other iterations, or erosion of strong patent rights that make American pharmaceutical innovation the envy of the world.

In order to lower healthcare costs for all Americans, a pivotal and necessary realm to address remains health insurance.

It’s therefore appropriate that the United States House of Representatives Committees on Ways & Means and Energy and Commerce will hold a timely hearing this week with executives representing major U.S. insurance companies.

Currently, the health insurance industry remains highly concentrated while American consumers continue to pay higher and higher healthcare costs.  At a deeper level, Pharmacy Benefit Managers (PBMs) amount to middlemen that control prescription drugs for millions of Americans.  A majority of Americans receive health insurance through employer plans or government programs such as Medicare, which in turn cover prescription drugs through PBMs.  Those PBMs negotiate with drug companies and pay pharmacies, but throughout the process determine the drugs that insured patients may obtain and at what cost.

The problem is that PBMs operate in such an opaque and complex manner that they’re able to inflate drug costs while claiming to be working to reduce them.  It has reached a point where even the Federal Trade Commission (FTC) commenced an investigation of PBMs’ role in driving up costs for Americans.

That’s why this week’s hearing with insurance company executives is so important, and offers such a critical opportunity to make real, meaningful progress on the ongoing concern to American consumers.

It’s critical to emphasize that the answer to healthcare affordability doesn’t lie in counterproductive drug price controls or violating critical patent protections for pharmaceutical innovators.  That would do nothing to lower healthcare costs, and would instead only make critical lifesaving pharmaceuticals and healthcare innovations less available to Americans.

To improve consumer access and affordability, let’s achieve real reform where it matters – at the health insurance and PBM levels.