[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                      THE ROLE OF PHARMACY BENEFIT
                        MANAGERS IN PRESCRIPTION
                              DRUG MARKETS
                                PART II:.
                      NOT WHAT THE DOCTOR ORDERED

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                      OVERSIGHT AND ACCOUNTABILITY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 19, 2023

                               __________

                           Serial No. 118-66

                               __________

  Printed for the use of the Committee on Oversight and Accountability
  
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]  


                       Available on: govinfo.gov,
                         oversight.house.gov or
                             docs.house.gov
                             
                             
                              __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
53-520 PDF                  WASHINGTON : 2023                    
          
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               COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY

                    JAMES COMER, Kentucky, Chairman

Jim Jordan, Ohio                     Jamie Raskin, Maryland, Ranking 
Mike Turner, Ohio                        Minority Member
Paul Gosar, Arizona                  Eleanor Holmes Norton, District of 
Virginia Foxx, North Carolina            Columbia
Glenn Grothman, Wisconsin            Stephen F. Lynch, Massachusetts
Gary Palmer, Alabama                 Gerald E. Connolly, Virginia
Clay Higgins, Louisiana              Raja Krishnamoorthi, Illinois
Pete Sessions, Texas                 Ro Khanna, California
Andy Biggs, Arizona                  Kweisi Mfume, Maryland
Nancy Mace, South Carolina           Alexandria Ocasio-Cortez, New York
Jake LaTurner, Kansas                Katie Porter, California
Pat Fallon, Texas                    Cori Bush, Missouri
Byron Donalds, Florida               Jimmy Gomez, California
Kelly Armstrong, North Dakota        Shontel Brown, Ohio
Scott Perry, Pennsylvania            Melanie Stansbury, New Mexico
William Timmons, South Carolina      Robert Garcia, California
Tim Burchett, Tennessee              Maxwell Frost, Florida
Marjorie Taylor Greene, Georgia      Summer Lee, Pennsylvania
Lisa McClain, Michigan               Greg Casar, Texas
Lauren Boebert, Colorado             Jasmine Crockett, Texas
Russell Fry, South Carolina          Dan Goldman, New York
Anna Paulina Luna, Florida           Jared Moskowitz, Florida
Chuck Edwards, North Carolina        Vacancy
Nick Langworthy, New York
Eric Burlison, Missouri

                                 ------                                

                       Mark Marin, Staff Director
       Jessica Donlon, Deputy Staff Director and General Counsel
            Dan Ashworth, Deputy Chief Counsel for Oversight
                       Catherine Potter, Counsel
                        Kelsey Donohue, Counsel
                Sarah Feeney, Professional Staff Member
      Mallory Cogar, Deputy Director of Operations and Chief Clerk

                      Contact Number: 202-225-5074

                  Julie Tagen, Minority Staff Director

                      Contact Number: 202-225-5051
                                 ------                                
                        
                        
                        C  O  N  T  E  N  T  S

                              ----------                              
                                                                   Page

Hearing held on September 19, 2023...............................     1

                               WITNESSES

                              ----------                              

Mr. Juan Carlos ``JC'' Scott, President and CEO, Pharmaceutical 
  Care Management Association (PCMA)
    Oral Statement...............................................     4

Ms. Lori Reilly, Chief Operating Officer, PhRMA
    Oral Statement...............................................     6

Mr. Craig Burton, Executive Director, BioSimilars Council, Senior 
  Vice President, Association for Accessible Medicines
    Oral Statement...............................................     7

Mr. Hugh Chancy, RPh, President, National Community Pharmacists 
  Association (NCPA)
    Oral Statement...............................................     9

Ms. Rena M. Conti Ph.D. (Minority Witness), Associate Professor, 
  Department of Markets, Public Policy, and Law Questrom School 
  of Business
    Oral Statement...............................................    10

 Opening statements and the prepared statements for the witnesses 
  are available in the U.S. House of Representatives Repository 
  at: docs.house.gov.
                           INDEX OF DOCUMENTS

                              ----------                              

  * Statement for the Record; submitted by Rep. Connolly.

  * Statement for the Record, Employers' Prescription for 
  Affordable Drugs; submitted by Chairman Comer.

  * Statement for the Record, National Association of Chain Drug 
  Stores; submitted by Chairman Comer.

  * Statement for the Record, Kentucky Independent Pharmacist 
  Alliance; submitted by Chairman Comer.

  * Statement for the Record, TransparencyRx/APCI; submitted by 
  Rep. McClain.

  * Report, McKinsey & Company, ``Improving Patient Adherence 
  Through Data-Driven Insights''; submitted by Rep. Sessions.

  * Letters, 11 letters from the FTC; submitted by Rep. 
  Krishnamoorthi.

  * Article, ``Pharma spent over $9 million on anti-PBM 
  advertising''; submitted by Rep. Burlison.

  * Article, Wall Street Journal, ``Why Insurers are charging 
  thousands for generic drugs''; submitted by Rep. Garcia.

  * Report, Oversight Committee Democratic Staff Report on 
  Pharmaceutical Industry; submitted by Rep. Frost.

  * Report, Maryland Rx Drug Affordability Board, Operation of 
  Drug Market; submitted by Rep. Mfume.

  * Statement for the Record, TransparencyRx - APCI; submitted by 
  Rep. Raskin.

  * Article, ``Big Insurance Earnings Report 2022'', by Wendell 
  Potter ; submitted by Rep. Mfume.

  * Questions for the Record: to Mr. Scott; submitted by Chairman 
  Comer.

  * Questions for the Record: to Mr. Scott; submitted by Rep. 
  Carter.

  * Questions for the Record: to Ms. Reilly; submitted by 
  Chairman Comer.

  * Questions for the Record: to Ms. Reilly; submitted by Rep. 
  Connolly.

  * Questions for the Record: to Mr. Burton; submitted by 
  Chairman Comer.

  * Questions for the Record: to Mr. Burton; submitted by Rep. 
  Carter.

  * Questions for the Record: to Mr. Chancy; submitted by 
  Chairman Comer.

  * Questions for the Record: to Mr. Chancy; submitted by Rep. 
  Carter.

The documents listed above are available at: docs.house.gov.

 
                      THE ROLE OF PHARMACY BENEFIT
                        MANAGERS IN PRESCRIPTION
                              DRUG MARKETS
                                PART II:
                      NOT WHAT THE DOCTOR ORDERED

                              ----------                              


                      Tuesday, September 19, 2023

                       House of Representatives,

               Committee on Oversight and Accountability

                                           Washington, D.C.

    The Committee met, pursuant to notice, at 10 a.m., in room 
2154, Rayburn House Office Building, Hon. James Comer, Chairman 
of the Committee, presiding.
    Present: Representatives Comer, Jordan, Foxx, Grothman, 
Palmer, Higgins, Sessions, Biggs, Mace, LaTurner, Fallon, 
Perry, Timmons, Burchett, McClain, Edwards, Burlison, Raskin, 
Norton, Lynch, Connolly, Krishnamoorthi, Khanna, Mfume, Ocasio-
Cortez, Porter, Bush, Brown, Stansbury, Garcia, Frost, Lee, 
Casar, and Goldman.
    Also present: Representatives Carter, Harshbarger, and 
Auchincloss.
    Chairman Comer. The Committee on Oversight and 
Accountability will come to order. I want to welcome everyone.
    Without objection, the Chair may declare a recess at any 
time.
    I now recognize myself for the purpose of making an opening 
statement.
    I want to welcome everyone to today's hearing on the role 
of pharmacy benefit managers in pharmaceutical markets. This is 
the second hearing in our series discussing pharmacy benefit 
managers, or PBMs, and their role in the pharmaceutical market. 
Last Congress, Oversight Republicans conducted a review of 
PBMs. What we found was deeply concerning and raised many 
questions about PBMs' role in the healthcare industry.
    PBMs started out as beneficial additions to the healthcare 
system because they were competing with others to provide 
clarity to pharmacies, payers, and patients about drug costs, 
but that environment of competition and transparency is no 
longer true today. Instead of fierce competition, now just 
three PBMs control 80 percent of the market, and each of the 
three major PBMs--CVS Caremark, Express Scripts, and Optum Rx 
is owned by a major health insurer and is owned by a pharmacy. 
This means that when PBMs negotiate with a pharmacy or a health 
insurer, they are either negotiating with themselves or one of 
their direct competitors. This can create incentives to do 
things that have negative impacts on patients. That is why the 
Committee's examination of PBMs is a priority of this Congress.
    Our concerns were compounded by what we learned in our 
first PBM hearing held earlier this year in the spring. We 
heard from Greg Baker, a pharmacist in Jacksonville, Florida, 
who discussed how he is unable to serve TRICARE beneficiaries 
in his community. This is because Express Scripts is forcing 
TRICARE beneficiaries to use specific pharmacies on military 
bases. We heard from Dr. Miriam Atkins, an oncologist in 
Georgia, who discussed how PBMs, not doctors, can dictate which 
drugs the patients can use. They do this through tactics that 
require a patient to fail on a certain drug before trying 
another drug and by requiring the use of mail order pharmacies, 
which can be unreliable and wasteful.
    We also heard from Greg Baker, the CEO of AffirmedRx, a 
transparent PBM that works to provide clear pharmacy benefit 
services to employers. He discussed how typical PBM practices 
could be considered price gouging, and gave examples of a 
cancer drug and the difference in price for a 30-day supply of 
the cancer drug, Imatinib, at Cost Plus Drugs versus CVS. That 
difference is astounding. A 30-day supply at Cost Plus Drugs 
costs $72. That very same 30-day supply at CVS costs more than 
$17,000. Those two prices are for the exact same prescription. 
It begs the question, why is one prescription so much more 
expensive, and what is happening with that extra money?
    We know that PBMs regularly engage in spread pricing where 
PBMs overcharge payers and underpay pharmacies and pocket the 
extra money. We also know that drug manufacturers pay rebates 
to PBMs in order to be placed in a favorable tier on a 
formulary, which can make it difficult for competing 
prescriptions, often generics, to get on formularies. These 
practices have real-world consequences and impact constituents 
in all of our districts. I hope today's hearing provides more 
clarity into the pharmaceutical market so that Congress can 
determine what actions are necessary. I want to thank the 
witnesses, and now I yield 5 minutes to Ranking Member Raskin 
for an opening statement.
    Mr. Raskin. Chairman Comer, thank you very much for calling 
the hearing and for your great leadership on this issue. Thanks 
to the witnesses for coming, and I want to thank the Members on 
my side of the aisle who have arrived already, and Mr. 
Auchincloss from Massachusetts who joins us today, who is an 
expert in the field. It is the second time we have come 
together to talk about this issue that affects everybody in 
America: access to affordable medication. And here is the 
bottom-line value that we are seeking in the wealthiest nation 
on Earth at the wealthiest time in our history: everybody 
should be able to afford the medical care and attention and 
prescription drugs that they need.
    In 2021, we spent $4.3 trillion on healthcare in our 
country, nearly twice as much per capita as the next closest 
country. Most of our healthcare system is for profit with many 
big corporations involved making billions of dollars in profits 
annually. During a multiyear investigation conducted by 
Committee Democrats, we found that some major pharmaceuticals 
employed profit-maximizing pricing practices at the direct 
expense of the people who rely on their medications to survive.
    Today, we are investigating the role of pharmacy benefit 
managers, PBMs, which are supposed to negotiate lower drug 
costs and improve the delivery of medication to patients. That 
is the theory. What we have actually heard is that certain PBM 
business practices may be favoring more expensive drugs and 
making it more difficult for patients to get timely and 
affordable access to the medication prescribed by their doctors 
at the pharmacy of their choice. In our last hearing, we heard 
from witnesses who suggested that PBMs and other big health 
companies are using their enormous market power to maximize 
their profits at the expense of patients and community 
pharmacies. As of today, three companies control 80 percent of 
the PBM market. The same parent companies that own these PBMs 
also own health insurers and pharmacies, so the parent company 
can profit at multiple points of access through the healthcare 
system.
    PBMs profit from rebates and fees from pharmaceuticals that 
want PBMs to include their drugs on insurance plans. PBMs also 
profit from health insurers directly, which reimburse PBMs when 
medications are dispensed to patients at the pharmacy. Because 
of the integrated market, PBM parent companies can also profit 
from directing patients toward the retail and specialty 
pharmacies that they own.
    In the question of PBM profits versus patients, we need to 
make sure that patients are coming out on top every single 
time. The first step is understanding the problem. The 
Committee's drug pricing investigation shone a light on the way 
that drug companies have spent years exploiting patients. In 
the Inflation Reduction Act, Democrats worked to lower drug 
costs for seniors by allowing Medicare to negotiate prices 
directly with manufacturers, capping out-of-pocket costs for 
patients covered by Medicare and limiting the price, for 
example, of insulin to $35 per vial for seniors.
    Today, we have got an opportunity to build on that success. 
This hearing will help us understand the ways that PBMs add 
value and improve patients experience, as well as the ways they 
may not be living up to the hype and contributing to our crisis 
of drug affordability and accessibility. Given their central 
role, we need more transparency into how PBMs operate and how 
their practices might be working alongside others in the supply 
chain, including Big Pharma, to increase the price of drugs 
that we all pay. I hope together we can buildupon our drug 
pricing reduction work so far and move toward the moral North 
Star here, which is that every person in America should be able 
to access the affordable medication they need in order to 
survive and thrive with their families. Thank you very much, 
Mr. Chairman. I yield back.
    Chairman Comer. The gentleman yields back. Without 
objection, Representative Carter from Georgia, Representative 
Harshbarger from Tennessee, and Representative Auchincloss from 
Massachusetts is waived on to the Committee for the purpose of 
questioning the witnesses at today's Subcommittee hearing.
    I am pleased to welcome an expert panel of witnesses, who 
each bring experience and expertise that will be valuable to 
today's discussion. I would first like to welcome Mr. JC Scott, 
who is the President and CEO of Pharmaceutical Care Management 
Association. Next, we have Lori Reilly, who is the Chief 
Operating Officer of the Pharmaceutical Research and 
Manufacturers of America. Next, we have Mr. Craig Burton, who 
is the Executive Director of Biosimilars Council and Senior 
Vice President of the Association for Accessible Medicine. 
Next, we have Mr. Hugh Chancy, who is the President of the 
National Community Pharmacists Association. Last, we have Rena 
Conti, who is an Associate Professor for markets, public 
policy, and law at Boston University.
    Pursuant to Rule 9(g), the witnesses will please stand and 
raise their right hand.
    Do you solemnly swear or affirm that the testimony you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    [A chorus of ayes.]
    Chairman Comer. Let the record show the witnesses all 
answered in the affirmative, and thank you. You may be seated.
    We appreciate all of you being here today and look forward 
to your testimony. Let me remind the witnesses that we have 
read your written statements, and they will appear in full in 
the hearing record. Please limit your oral statements to 5 
minutes. As a reminder, please press the button on the 
microphone in front of you so that it is on, and Members can 
hear you. When you begin to speak, the light in front of you 
will turn green. After 4 minutes, the light will turn yellow. 
When the red light comes on, your 5 minutes has expired, and we 
ask that you please wrap up.
    I now recognize Mr. Scott to please begin his opening 
statement.

                       STATEMENT OF ``JC'' SCOTT

                           PRESIDENT AND CEO

           PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION (PCMA)

    Mr. Scott. Good morning, Chairman Comer, Ranking Member 
Raskin, and Members of the Committee. Thank you for the 
opportunity to join today's hearing on behalf of PCMA. We 
represent the Nation's pharmacy benefit companies which 
negotiate and administer prescription drug benefits for 275 
million insured Americans. For most of this year, there has 
been a heavy congressional focus on our industry with the 
expressed goal to reduce high drug prices.
    [Chart]
    Mr. Scott. Yet, as the chart shows, PBMs represent only 6 
percent of the drug dollar, and proposed PBM reform bills do 
not actually address drug prices or lower costs. I am grateful 
for today's opportunity to talk about why, and we will share 
that chart if it does not appear on the screen.
    Efforts to lower drug costs must start with an 
understanding that prices are set by drug companies. When a 
drug company sets its initial price, that dictates costs 
throughout the supply chain, from the wholesalers' negotiation 
for discounts, to its markups to pharmacies, to pharmacy 
acquisition costs, to the amount that the insurance plans 
sponsor, and patients ultimately pay. PBMs negotiate with drug 
companies to deliver savings on prescription drugs to patients 
and health plan sponsors, including employers, unions and 
government programs like Medicare and Medicaid. These discounts 
take the form of rebates, and many are surprised to learn that 
most prescription drugs do not have a rebate.
    Ninety percent of prescriptions are filled with generics, 
and most newly launched brand drugs and specialty drugs do not 
have a rebate. What is more, study after study has shown that 
rebates are not correlated with pricing decisions. Government 
data illustrates this very important point. Prices continue to 
go up on drugs regardless of how big, small, or nonexistent a 
rebate is. The idea that PBMs force drug companies to set 
prices higher is simply incorrect. PBMs pass these savings back 
to plan sponsors and employers, who have full decisionmaking 
authority on how best to use rebate savings to benefit the 
patients enrolled in their plans, whether it be through lower 
premiums, lower out-of-pocket costs, or more comprehensive 
benefits.
    Our company's mission is to lower costs. We support lower 
drug company list prices. We promote use of generics. We want a 
robust biosimilars market. We cheered when several insulin 
companies lowered list prices for some of their products 
earlier this year, and we have called on other drug makers to 
lower their own list prices for needed medications. PBMs also 
work with over 60,000 pharmacies on behalf of employers and 
plan sponsors, and our companies rely heavily on this 
relationship with retail pharmacies to be access points for the 
patients they serve. That is why at PCMA, we have been 
advocating to look toward the future state of retail pharmacy, 
empowering pharmacists to do more to provide care to patients.
    No employer, union, or other plan sponsor is under any 
obligation to hire a pharmacy benefit company. They choose to 
do so, and you will hear me talk about the importance of choice 
as a foundational principle. Employers and plan sponsors have 
unique needs and represent unique patient populations. They 
choose whether to contract with a PBM and what they want out of 
that service. They choose how to set up their contract and how 
to pay for the services, whether it is through fees, shared 
savings, incentives, or otherwise, and they choose how best to 
use the savings delivered by their PBM.
    For the system to work, employers and plan sponsors have to 
be empowered not only with choice but with the information they 
need to make informed choices. At the beginning of the 
contracting process with the PBM, employers determine what 
information, disclosures, and audit rights they need. Our 
industry supports open, transparent exchange of useful 
information. Our companies comply with the many transparency 
and disclosure requirements in place at the state and Federal 
levels, but we do not believe the government should dictate 
private contract terms between two businesses. Employers should 
make the call on what information they want to receive, and 
they should receive it. Mandating public disclosure of 
confidential information will only invite drug companies to 
collude and raise drug costs.
    In almost every industry, and especially healthcare, the 
most effective way to lower costs is through increased 
competition. That is why we must ensure that any misuse of the 
patent protections meant to balance rewarding innovation and 
ensuring affordable access for patients is not blocking 
competition and keeping prices high. So, I would encourage you 
to keep two key questions in mind today, would legislation 
limit choice, competition, and innovation in the markets, and 
would it actually help lower drug prices? We ask the Committee 
to take a look at the practices of not just PBMs, but drug 
companies, pharmacies, wholesalers, plan sponsors, and other 
stakeholders. High drug prices will not be solved in a vacuum 
or by singling out one sector, especially not the sector 
charged with lowering costs, and PCMA is committed to being a 
positive partner in the policy discussion about how to bring 
down drug prices and improve patient access.
    Thank you for including me today. I look forward to your 
questions.
    Chairman Comer. Thank you. Ms. Reilly?

                        STATEMENT OF LORI REILLY

                        CHIEF OPERATING OFFICER

                                 PhRMA

    Ms. Reilly. Chairman Comer, Ranking Member Raskin, Members 
of the Committee, my name is Lori Reilly, and I am here 
representing PhRMA.
    Over the past 23 years, biopharmaceutical companies have 
brought 750 new medicines to market, including medicines like 
cell and gene therapies and Alzheimer's treatments. These 
medicines are helping slow the progression of disease and 
improving patients' lives, all for 7 cents out of every 
healthcare dollar, which is what is attributed to brand name 
medicines. How is that possible? Well, first, insurers do 
negotiate very significantly with pharmaceutical manufacturers. 
Typically, rebates exceed 50 percent or more, on average, for 
prescription medicines. Medicines also face significant 
competition from other brand drugs. Take, for example, 
hepatitis C medicines. When they were introduced, within a year 
there were multiple hepatitis C medicines on the market, which 
dropped the price by 80 percent.
    And last, generic medicines comprise 90 percent of every 
prescription written today. These medicines typically launch at 
90 percent less than brand medicines. All of these things 
combine to make our system based on one of competition and 
negotiation. Unfortunately, however, there are aspects of the 
market that today are not working as intended.
    Today, as was mentioned earlier, just three pharmacy 
benefit managers control 80 percent of the market. They own or 
are owned by insurers, they have pharmacies, and they also 
increasingly have physician practices, and they use their 
leverage to enrich themselves often to the detriment of the 
patients that they are intending to be serving. There are three 
different ways that they do this. No. 1, they limit patients' 
ability to access lower-priced medicines. They make their money 
on rebates and fees that are tied to the list price of a 
medicine. The higher the list price, the more money that goes 
in their pockets. They often deny or limit access to biosimilar 
and generic medicines. And when branded medicines offered lower 
priced insulins and lower priced hepatitis C medicines, while 
they may have cheered, they were reluctant to actually cover 
them on their formularies. As a result, patients are paying 
more.
    Second, they refuse to pass negotiated discounts on to 
patients. Negotiated rebates often exceed 50 percent or more, 
but they insist on making patients pay the full price when they 
go to the pharmacy counter. In fact, recently, the GAO looked 
at the top 100 most rebated drugs in Part D and found that in 
79 of those medicines, patients paid more than their insurance 
company did for the very same medicine, in fact, 4 times more 
than their insurance company did, and that is not an anomaly. 
In two-thirds of all commercial claims and 92 percent of all 
Medicare Part D claims, patients are being asked to pay a price 
tied to the list price of the medicine. This happens nowhere 
else in the healthcare system. If you go to the hospital or the 
doctor's office, you pay the negotiated rate, not the high list 
price.
    And last, large consolidated PBMs use their leverage to 
extract additional profits throughout the supply chain, which 
means higher costs for everyone else. In addition to rebates, 
PBMs also get additional revenue by new fees and markups on 
medicines at specialty pharmacies. A Wall Street Journal 
article just last week found that PBMs are marking up generic 
drugs by thousands of dollars. They have also created PBM GPOs 
to generate new sources of profit through opaque fees that 
provide no direct benefit to patients.
    A study released just yesterday by Nephron Research found 
that fees that are paid to PBMs have more than doubled in the 
last 5 years, and these, again, are predominantly tied to list 
prices. That same study found that 42 cents out of every 
healthcare dollar goes to PBM, not 6 cents as was just stated 
by JC. The 6 cents that was quoted by Mr. Scott actually 
neglects to include the profits that they receive from 
specialty pharmacies, which is one of the largest drivers of 
profit that they receive.
    So how do we fix this problem? Congress has an 
unprecedented opportunity to hold PBMs accountable, restore 
competition, and lower costs, and they can do so in three ways. 
No. 1, delink PBM compensation from the price of medicine so 
that PBMs are not incentivized to prefer high list price 
medicines over lower price medicines; two, require that rebates 
and discounts be passed on to patients so that patients are not 
left in the position of having to pay more than their insurer 
for a medicine; and last, increase PBM transparency so that 
everyone has a better understanding of how PBMs make their 
money and where that monies go. Thank you very much.
    Chairman Comer. Thank you. Mr. Burton?

                       STATEMENT OF CRAIG BURTON

                           EXECUTIVE DIRECTOR

                          BIOSIMILARS COUNCIL

                         SENIOR VICE PRESIDENT

                  ASSOCIATION FOR ACCESSIBLE MEDICINES

    Mr. Burton. Thank you, Chairman Comer, Ranking Member 
Raskin, and other Members of the Committee. My name is Craig 
Burton. I am speaking on behalf of the BioSimilars Council and 
Association for Accessible Medicines. AAM and its Biosimilars 
Council represent the manufacturers of generic and biosimilar 
medicines, and we work to expand patient access to safe, 
quality, and effective generics and biosimilars.
    Generics are the backbone of U.S. healthcare. As folks have 
mentioned, they represent 9 out of every 10 prescriptions 
filled in the U.S. but less than 18 percent of all drug 
spending. These are lower-cost FDA-approved versions of brand 
drugs, and their development cost can range from $5 million to 
$10 million for a relatively simple product to upwards of 
several hundred millions of dollars for a complex generic or a 
biosimilar. And biosimilars, in particular, are critical to 
future savings. Today, they cost less than half the price of 
the brand at the time of a biosimilar launch, and, importantly, 
they are also driving brand prices down.
    One of the most important things about generics and 
biosimilars, though, is that they expand patient access. Since 
2015, biosimilar competition has resulted in more than 344 
million additional patient days of therapy. It is no 
overstatement to say that patients depend on generics and 
biosimilars, but these savings and this access is at risk 
because of Medicare policy incentives that delay patient access 
to and savings from new generics and biosimilars.
    First, I should note a foundational difference between 
generic and brand pricing. Brand manufacturers operate in a 
monopoly environment. They can set high list prices, and they 
often will negotiate PBM formulary coverage through opaque 
backend rebates and fees, but generics do not price with the 
PBM in mind. Rather, generics are pricing as competition for 
wholesaler and pharmacy stocking, and they price based on 
discounts and ability to meet desired volume. In fact, generics 
rarely, if ever, negotiate rebates with PBMs and health plans.
    Now, new generics have historically achieved rapid 
adoption, but that trend is no longer the case. Patients are 
increasingly blocked from new generics and biosimilars for a 
period of years, 3 years, in fact, in the Medicare program for 
new generics to be covered on as many as half of Part D 
formularies. This delays patient savings, and it is a direct 
result of Medicare incentives that encourage PBM preferences 
for high priced brands with high rebates and fees.
    Biosimilars also face similar challenges. Humira 
biosimilars are launching at discounts of up to 85 percent, but 
the adoption so far has been less than desired. As biosimilars 
seek to achieve coverage, some are pricing based on a high list 
price, high rebate strategy. Others are trying to get coverage 
with a lower list price and a larger discount. And these PBM 
preferences can be seen in the biosimilar insulin market, where 
a biosimilar insulin launched with two prices, one high price 
with backend rebates and one with a 65 percent discount in list 
price, but PBMs did not cover the lower-priced biosimilar 
insulin. PBMs stuck with the brand. And if you look at adoption 
in the insulin market, even though two-thirds of prescriptions 
written for this product were for the biosimilar, only about a 
third of those prescriptions were actually filled with the 
biosimilar. This is because of PBM preferences that blocked 
adoption of the biosimilar.
    To be clear, as we look at biosimilar and generic 
competition, it is great that everyone is supportive of it, but 
it cannot simply be a ploy for PBMs to leverage bigger rebates 
and fees from brand drugs. This is not sustainable. And even 
when formularies do cover generics, we are seeing those 
generics increasingly placed on brand formulary tiers with 
higher co-pays. Today, fewer than half of generics and Medicare 
are on a generic tier. This dramatically increases patient 
costs, more than double the cost the patient out of pocket is 
spending on generics covered in 2011 and 2019, even though the 
price of those generics declined by 40 percent over the same 
time period.
    Representatives Kuster, Miller-Meeks, Dunn, and Matsui have 
introduced legislation to ensure that patients have access to 
new generics and biosimilars, and that patients do not spend 
more than necessary for low-cost generics. We encourage 
Congress to take up this legislation and improve patient access 
to lower cost treatments. I would be happy to take any 
questions.
    Chairman Comer. Thank you. Mr. Chancy?

                     STATEMENT OF HUGH CHANCY, RPH

                               PRESIDENT

           NATIONAL COMMUNITY PHARMACISTS ASSOCIATION (NCPA)

    Mr. Chancy. Chairman Comer, Ranking Raskin, and other 
Members of the Committee, I am Hugh Chancy. I am a pharmacist 
and co-owner of Chancy Drugs. I currently serve as the 
President of the National Pharmacists Association. I greatly 
appreciate the opportunity to speak to you today regarding my 
experience as a pharmacist and pharmacy owner and how current 
PBM practices negatively impact my family business and my 
community.
    My family has three generations of pharmacists. My parents, 
Hubert and Sue, opened Chancy Drugs in 1966 in Hahira, Georgia. 
Chancy Drugs has since expanded under me and my brother's 
leadership, and more recently, my son, Patrick, has also taken 
a leadership role. Chancy Drugs has seven locations and 
currently employs approximately a hundred people across South 
Georgia. I am proud of the work that Chancy Drugs has done over 
the decades providing healthcare to patients in my community. 
But PBMs put this important work at jeopardy, dictating who has 
access to our pharmacy, the prices patients pay, what 
reimbursements pharmacies receives, and what medications are on 
formulary.
    As you know, the top three PBMs control 80 percent of the 
market. They use the monopoly power to steer patients to PBM-
affiliated pharmacies. In fact, a recent report from MedPAC 
found that vertically integrated PBMs and Medicare Part D 
appear to pay the affiliated pharmacies more than they do 
pharmacies like mine. Imagine that. This is leading to higher 
cost to the Medicare program. Many of my patients who are 
forced to get their drugs through mail order receive their 
medications damaged or do not get them on time.
    Chancy Drugs has three stores near Moody Air Force Base, 
which means that we have a lot of veterans as customers. When 
Express Scripts implemented the changes to the TRICARE pharmacy 
network last year, many of our patients were negatively 
impacted. We had one patient in particular who called in tears. 
She is blind, and we hand deliver her medications to her home 
in specialty packaging. With TRICARE's changes, she was forced 
to go to mail order without the specialty packaging, or her 
elderly husband must drive 40 miles round trip to the pharmacy 
in Valdosta. Our service members and veterans deserve better.
    PBMs employee harmful anti-competitive tactics such as 
spread pricing and DIR fees. Spread pricing is the difference 
between how much the PBM pays me for a drug and the higher 
price that they charge the payer for the same prescription. For 
years, community pharmacists have said PBMs play spread pricing 
games, contributing to higher drug costs. Studies of state 
Medicaid-managed care programs have found that PBMs overcharge 
taxpayers while pocketing the spread for themselves. In fact, 
over the last 2 1/2 years, Centene has entered into settlements 
for up to $900 million for at least 17 states for overcharges 
to the Medicaid program.
    Another tactic PBMs use are direct and indirect 
remuneration fees. DIR fees have allowed PBMs to pay pharmacies 
for prescriptions and later clawback thousands of dollars at 
random. A MedPAC March 2023 report found DIR fees reached $12.6 
billion in 2021. That is 33 percent increase in just 2 years. 
The unpredictability wreaks havoc on my pharmacy's financial 
health, threatening my ability to keep the lights on. On top of 
this, our contracts with PBMs are take it or leave it. Some of 
the most life-sustaining medications are often underpaid by 
PBMs. Georgia's cost to dispense for Medicaid patients is 
$10.63, but it is not unusual for PBMs to pay me a nickel. And 
oftentimes, we have zero dollar dispensing fee on Part D 
prescriptions.
    Because of PBMs, thousands of pharmacies represented by 
NCPA have gone out of business over the last decade, and it is 
not only independent pharmacies that PBMs impact. Large chain 
pharmacies are also closing. In fact, two large grocery stores 
are closing in my community now. If these large national chains 
and grocers are having difficulty maintaining pharmacy 
operations, it is no surprise that small businesses are 
struggling. Pharmacies are going under while PBMs are getting 
fatter. CVS, UnitedHealthcare, and Cigna are all part of the 
Fortune 500 top 20. If the PBM industry continues to go 
unchecked, there is a severe risk of putting thousands of 
pharmacies like Chancy Drugs out of business.
    In sum, community pharmacies supports commonsense 
legislative reform to PBMs' harmful practices, which I would be 
glad to discuss further. I applaud the Committee's bipartisan 
efforts to shine light on the PBMs through this investigation, 
and I am happy to answer any questions. Thank you.
    Chairman Comer. Thank you. Dr. Conti?

                    STATEMENT OF RENA M. CONTI PH.D.

                          ASSOCIATE PROFESSOR

                         DEPARTMENT OF MARKETS

                         PUBLIC POLICY, AND LAW

                      QUESTROM SCHOOL OF BUSINESS

    Ms. Conti. Good morning. I am Professor Rena Conti. I am a 
Professor of Economics applied to prescription drugs at 
Questrom School of Business at Boston University. Today, I am 
honored to address Representative Comer and Raskin and all 
distinguished Committee Members to discuss the pivotal roles 
played by pharmacy benefit managers in the U.S. healthcare 
system.
    PBMs are often regarded as enigmatic intermediaries despite 
the central role PBMs play in the healthcare system. The 
primary function of PBMs is to create a competitive arena for 
drug makers. This arena is built upon PBMs' strategic use of 
formularies, among other tools, to guide patients toward 
specific medications. These strategies are intended to foster 
competition among drug makers. PBMs wield the potential to 
enhance the efficiency of prescription drug markets, which can 
ultimately benefit both consumers and payers. Notably, PBMs, 
through their formulary strategies, incentivize utilization of 
generic and biosimilar drugs when clinically appropriate. 
Generic drugs, in turn, offer substantial cost savings for both 
patients and payers. Use of these strategies do not disturb the 
incentives for innovation.
    Nonetheless, I have some concerns about the potential for 
PBMs in their current organizational structure to burden our 
system with additional costs. Branded drug makers may respond 
to the strategies of PBMs in ways that undermine patient 
benefit. Branded drug makers offer rebates off of list price to 
compete within the arena constructed by PBMs. PBMs, in pursuit 
of their own self-interest, may favor placing branded drugs 
with higher list prices in preferred formulary tiers.
    When drug makers exclusively retain the power to set list 
prices and engage in formulary competition, as in our system, 
it can trigger shadow pricing behavior. In the race for 
superior placement, list prices may skyrocket without 
commiserate benefit to patients, as confirmed by the House 
Oversights Committee's recent reports. Such behavior directly 
burdens all Americans with higher out-of-pocket costs and 
undermines access, especially for people who are underinsured, 
including those with high-deductible health plans, and 
uninsured individuals. It also undermines transparency within 
the system, essentially disconnecting reimbursement from the 
acquisition costs of these drugs.
    The consolidation of PBMs presents challenges. While mega 
PBMs may extract deeper rebates from branded drug makers, the 
benefits of such arrangements often remain with the PBMs 
themselves and are not shared with consumers or payers. The 
consolidation of PBMs with health plans does not appear to 
lower premiums for consumers, nor enhance their medical 
benefits. Similarly, the consolidation of PBMs with pharmacies 
does not appear to render generic drugs even more accessible, 
nor render such services more convenient to access. Moreover, 
PBM consolidation erodes competition, contributing to increased 
costs for PBM services and greater opacity in our system. These 
effects hinder smaller health plans and employers to select 
services that actually align with their unique health needs.
    Developing evidence suggests that some PBMs design 
formularies primarily to maximize revenues, potentially 
neglecting the promotion of individual and population health as 
well as cost reduction. Thus, while PBMs offer efficiencies in 
our healthcare system, PBMs also pose emergent tasks. Increased 
transparency in the PBM market would empower consumers and 
employers to make informed decisions in selecting PBMs, plans, 
and pharmacies that align with their requirements. Banning 
spread pricing and requiring rebate pass-through may offer 
solutions to these intricate challenges. However, I urge 
policymakers to exercise due diligence as these and related 
reforms may also yield unintended consequences.
    I welcome the opportunity to engage in a meaningful 
discussion with the esteemed Members of this Committee. Thank 
you.
    Chairman Comer. Thank you very much. We will now proceed 
with 5 minutes worth of questioning per Member. The Chair 
recognizes Dr. Foxx from North Carolina for 5 minutes.
    Ms. Foxx. Thank you, Mr. Chairman, and thanks to our 
witnesses for being here. Mr. Scott, in the employer-sponsored 
market, plan sponsors have a fiduciary responsibility to their 
employees to provide the highest quality plan for the lowest 
cost. How do large PBMs help employers fulfill their fiduciary 
duties?
    Mr. Scott. Good morning, Congresswoman. It is nice to see 
you again. Thank you for your time recently to visit on these 
questions. So, I appreciate your question because it is sort of 
foundational to what I was getting at in my opening comments, 
that this is a marketplace where employers and plan sponsors 
have full choice in how to leverage the value of the PBM. And 
most of the time, the value that they are looking to derive on 
behalf of the patients they represent is to bring down the cost 
of the benefits.
    And that can be derived through the negotiation with the 
drug company to bring down the net cost of the drug, to promote 
networks of lower-cost, higher-quality pharmacies. All of that 
generates savings that the employer can then use to expand the 
benefit, lower the premium, lower out-of-pocket costs, whatever 
is going to be best for their unique patient population.
    Ms. Foxx. Thank you. Mr. Scott, again, Congress has been 
exploring proposals to reduce the cost of prescription drugs, 
some of which are included in H.R. 5378, the Lower Costs, More 
Transparency Act that we hope the House is going to consider 
this week. What impact would requiring PBMs to pass through all 
rebates to patients at the point of sale have on overall drug 
costs, and what would the impact be on premiums?
    Mr. Scott. Thank you for the question. That is sort of the 
key consideration here, right? There is an amount of savings 
that is negotiated. And as long as the price of the drug, the 
price of the good continues to be high, whether you shift that 
fully to offset all out-of-pocket cost or you shift that fully 
to offset premium, then you are just squeezing the balloon and 
causing cost to rise on the other side of that equation. So, if 
you moved it all to the point of sale, then you are risking 
that the premium and the cost of the benefit is going to have 
to go up.
    We saw that effect measured by CBO and OACT at HHS and 
others around the Trump Administration's rebate rule, all of 
which is to say this is why it is so important to have 
flexibility so that there can be a balance struck between 
keeping the benefit affordable and trying to address out-of-
pocket cost at the counter.
    Ms. Foxx. Another question, 25 words or less, what is 
spread pricing, and why should PBMs be allowed to charge 
insurers more for a drug than what they paid the pharmacy?
    Mr. Scott. Spread pricing is a form of contracting that the 
employer can choose for mitigating their financial risk. If I 
could just use an analogy, so if you are an employer, for 
example, running a cafeteria, you may say to the vendor, I just 
want to pay a per person fee. You tell me how much it is going 
to be per person, and then the vendor has to deal with the cost 
of the lettuce and the ketchup and everything that goes into 
it, or they may say, I will pay you a small flat fee, and I 
want an exposure to paying for the variability of the things 
that go into the meal. It is really a financial risk tolerance 
choice that is being made by the employer.
    Ms. Foxx. OK. So why should PBMs be allowed to charge 
insurers more for a drug than what they paid the pharmacy?
    Mr. Scott. Well, in that instance, if you pull the analogy 
through to the pharmacy marketplace, then the PBM can be 
compensated if it is able to negotiate a better deal with the 
pharmacy on the cost of a given drug, but the PBM also owns the 
risk and takes the loss if they are unable to negotiate a 
better rate with the pharmacy.
    Ms. Foxx. Mr. Chancy, what impact does spread pricing have 
on independent pharmacies?
    Mr. Chancy. The spread pricing is a big problem for us 
because we are getting underpaid, and then the spread is going 
to them.
    Ms. Foxx. OK. Well, what would the impact of additional 
transparency regarding spread pricing be for independent 
pharmacies?
    Mr. Chancy. Well, I think, first of all, clear and 
transparent reimbursement would be helpful to us because many 
times we are being underpaid. We are actually being paid below 
our cost of purchasing the product, so I think that spread 
pricing has taken away from our reimbursement and making it 
more difficult for us to serve our patients.
    Ms. Foxx. I am going back to Mr. Scott, and I have a short 
period of time. CVS Caremark, Express Scripts, and Optum Rx, or 
the big three, own 80 percent of the U.S. PBM market, as the 
Chairman said in his opening remarks. What impact does this 
consolidation have on prescription drug prices?
    Mr. Scott. Congresswoman, it is important to have a variety 
of different PBM models, whether a large integrated company or 
a small standalone PBM, which is why it has been good to see 
the number of competitors in the PBM market expand by 10 
percent in just the last 2 years. That provides choice for 
employers and plan sponsors.
    Ms. Foxx. Thank you, Mr. Chairman. I yield back.
    Chairman Comer. I now recognize Mr. Lynch for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman, and thank you for 
holding this hearing. In a previous Congress, I was actually 
the Chair of the Subcommittee on the Federal Workforce, where 
we conducted an extensive investigation into the role of 
pharmacy benefit managers with respect to the prescription drug 
pricing under the Federal Employees Health Benefit Plan.
    The FEHBP is the largest employer-sponsored group health 
insurance program in the world. We have got about 8 million 
Federal employees, retirees, former employees, and their family 
members, so it is often considered sort of the gold standard 
when it comes to affordable health insurance. Importantly, our 
investigation found that the FEHBP employee members, retirees, 
and active employees were paying up to about 45 percent more 
for its prescription drugs. Even with that collective power of 
8 million people in a healthcare plan, they were paying 45 
percent more for prescription drugs than any other agency, and 
it was because we relied on PBMs to negotiate the prices.
    When we tried to figure out what the rebate system was that 
was leading to this unfairness, the PBMs fought us on the issue 
of transparency. We were trying to find out, OK, how do the 
PBMs actually work this rebate system. Why is it not 
transparent? They fought us tooth and nail in court, and one 
claiming that it was a proprietary advantage that they had, and 
so we cannot get full transparency on that. Ms. Reilly, you 
talked about that in one of your points. How do we get at that? 
I know some states have individually brought lawsuits. I know 
Maine has, Texas has, Ohio has. There are states all over the 
country that are trying to find out the same thing, like, what 
does a PBM pay for their drug, and why are they charging so 
much more to employees or to insured parties? Can you talk 
about that a little bit?
    Ms. Reilly. Absolutely. Thank you for the question, and 
there are a number of pieces of legislation that Congress is 
considering: one, the PBM Sunshine and Accountability Act, 
which is a bipartisan bill that Members of this Committee are 
sponsors of. I think that would go a long way to providing some 
sunshine into the various fees that PBMs collect and where that 
money goes.
    As you rightly pointed out, there are a number of fees, not 
just rebates that PBMs collect. The report that I referenced 
just released yesterday from Nephron showed that what is 
happening now, I would argue, is shape-shifting in the PBM 
market. As Congress and state legislators have begun to shine a 
light on rebates and the significant dollars associated with 
rebates, more plan sponsors are demanding that those rebates 
get passed through to them. So PBMs have set up PBM GPOs, often 
located offshore, and they collect a number of opaque fees. It 
is hard to find any direct patient benefit to these fees, and I 
think it would be enlightening for folks to know just how large 
and significant these fees are today and how much they have 
grown in just the last 5 years.
    Mr. Lynch. Great. I just want to illustrate one of the 
absurdities that we found here. So here we have 8 million 
people in an insurance plan, that collective bargaining power, 
the weight of that plan. We found that the PBMs were operating 
individually with CVS and the drug companies, offering another 
program to the general public. So, somebody off the street 
could come in and pay $10, and there was a whole formulary of 
drugs that were available for $9.99.
    Our members that are paying all this money for insurance, 8 
million of them paying into this plan went in and they paid 
more than someone coming in off the street. So, we were telling 
our members do not tell them you have insurance. Just tell them 
you are a stranger. You do not have insurance. You will get a 
better price from the PBMs than you would with Federal employee 
health insurance. Ridiculous, and it is because of the scam 
that is being perpetrated by the PBMs. In some cases, the 
Federal employee with insurance was paying $200 more for the 
same drug that the PBM was offering to the general public 
walking off the street for $9.99. It is just absolutely 
maddening.
    And I think we have an area here, Mr. Chairman, where we 
can actually work together and have some bipartisanship, I dare 
say, on this. I think the sponsors of this legislation from 
your side and ours are on the side of the angels, and I 
heartily support their effort, and I yield back. Thank you.
    Chairman Comer. Thank you, Mr. Lynch. And I agree 100 
percent on bipartisan agreement and cooperation moving forward. 
The Chair now recognizes Mr. Sessions from Texas for 5 minutes.
    Mr. Sessions. Mr. Chairman, thank you very much. Mr. 
Chairman, I would like to, if I could, at the beginning of this 
put in the record a report from McKinsey & Company called, 
``Improving Patient Adherence through Data-Driven Insights.'' I 
would like to ask that that is in the record.
    Chairman Comer. Without objection, so ordered.
    Mr. Sessions. Mr. Chairman, thank you very much. Our 
witnesses today have provided, as well as the Members, a lot of 
interesting information. And, Mr. Scott, I know that a lot of 
it is aimed at the business model that you and your companies 
have established. But it is very apparent to me that 
competition is one of those factors that is not part of your 
equation for the marketplace, and the marketplace would be 
consumers, and consumers in the United States of America need 
to be able to count on the U.S. Congress, the laws of this 
country. But I think across the board, the marketplace 
represents an agreement by large companies and small companies 
to offer a competitive model where it would be available and 
best for the consumer.
    We have people who showed up today with a small pharmacy. 
We have Ms. Reilly who is here with large pharma companies, and 
they both see the same anti-competitive model that is employed 
in this marketplace. Dr. Conti, please tell me what you think 
would happen if there were full marketplace access? Would 
prices and the competitive model be better?
    Ms. Conti. So, by definition, the market that we have set 
up is pro-competitive. PBMs clearly are producing savings for 
Americans and pushing Americans to use generics and biosimilars 
when they are available. That is a good thing. We all win from 
that. However, the competitive pressure that is potentially 
eroding patient access and affordability is related to vertical 
integration between PBMs and pharmacies or PBMs and plans. It 
is in those arrangements where we think premiums are not going 
down, and potentially patients are paying more at the pharmacy 
counter.
    Mr. Sessions. Would it be your testimony today because I 
heard Ms. Reilly allude to this, I believe directly land on it, 
that it is the PBMs' model that they want to control the 
marketplace? That I would consider this to be anti-competitive. 
What would you say, Dr. Conti?
    Ms. Conti. I would say, again, these vertically integrated 
plan and PBM models are complicated and may create perversity, 
harming us, individual patients. At the end of the day, 
however, drug makers do set the prices of their drugs, and the 
list prices are what patients pay out of pocket. So, I would 
say both the drug makers, especially branded drug makers, and 
the PBMs here are both at fault for imposing costs on us.
    Mr. Sessions. Well, we just heard from several Members of 
Congress about an investigation a few years ago where actually 
it was determined that the PBMs controlled far greater than I 
believe what you are giving reference to, the actual price, 
giving preference in a marketplace through their market 
advantage, and that is what I would like to focus on for a 
minute. Ms. Reilly, I believe that you see this clearer than 
most of us here on this Committee. We are not new to this 
issue, but I think you have landed on really the equation. And 
that is that I believe that these PBMs, the largest ones that 
control 80 percent of the marketplace, can use their size as an 
anti-competitive behavior against the marketplace. Could you 
amplify that?
    Ms. Reilly. Absolutely. And I would agree with you 
wholeheartedly that there is significant evidence from the OIG, 
from the Federal Trade Commission, from GAO, and a number of 
others of a number of different practices that PBMs utilize, 
No. 1, to make it harder for companies to reduce the list price 
of their medicines. So, while it is true our companies set the 
list price of the medicine, PBMs are responsible for setting 
the terms of coverage and access and cost sharing that patients 
have, and their preferences do matter.
    And when companies have attempted to lower their list 
price, as they did with insulin and hepatitis C medicines, that 
was not met with cheers, as JC testified, but rather oftentimes 
exclusions from formularies as a result of doing that. They 
often also do not prefer biosimilars and lower price generics, 
as I referenced in my testimony. The Wall Street Journal just 
this past week noted that they often overcharge by thousands of 
dollars generic medicines at their specialty pharmacies. So, I 
believe there is a pattern of behavior that has been well 
documented by economists and government agencies to demonstrate 
the large challenges that today exist with PBMs that are 
working not for the benefit of patients, but to the detriment 
of patients.
    Mr. Sessions. And I would add too--Mr. Chairman, I know I 
am almost over my time, if not over--and that is I believe that 
PBMs use their competitive market advantage to hold others out 
of the marketplace, notwithstanding their own gift that they 
have provided themselves. So, Mr. Chairman, I intend to be a 
part of trying to bring some sanity to this, and that would be 
through transparency, but I really do appreciate Mr. Scott 
coming here. I think that the model with PBMs could work, but 
you cannot use your competitive size against other companies 
coming to the marketplace as our private pharmacies.
    Even somebody as big as Albertsons, I think, they find 
themselves on the back side of these three largest companies 
who use, in my opinion, anti-competitive behavior, which should 
be against the Federal law. Mr. Chairman, I yield back my time.
    Chairman Comer. Thank you, Chair. I now recognize Mr. 
Krishnamoorthi from Illinois for 5 minutes.
    Mr. Krishnamoorthi. Thank you, Mr. Chair. Mr. Scott, you 
said in a PCMA website post from February 14, 2023, ``We can 
once again state unequivocally the independent pharmacy market 
is stable,'' correct? That is what you said in that post, 
correct?
    Mr. Scott. That sounds correct. Yes, sir.
    Mr. Krishnamoorthi. Sir, according to the FTC as well as 
Fortune magazine, the number of independent pharmacies has gone 
down from 23,000 in 2010 to about 19,000 right before the 
pandemic, and it has not done that much better since. Mr. 
Chancy, I see in your testimony you say PBMs wreak havoc on 
independent pharmacy's financial health. Isn't that right?
    Mr. Chancy. That is correct.
    Mr. Krishnamoorthi. And one of the main reasons are what 
are called DIR fees, direct and indirect remuneration fees, 
correct?
    Mr. Chancy. Yes, sir.
    Mr. Krishnamoorthi. And those often amount to fees that 
basically claw back any amounts of money that were paid to the 
pharmacies to dispense drugs in the first place, right?
    Mr. Chancy. Yes, sir.
    Mr. Krishnamoorthi. According to the Centers for Medicare 
and Medicaid, CMS estimates that DIR fees have gone up by 
91,500 percent between 2010 and 2019. You do not disagree with 
that, right?
    Mr. Chancy. I do not.
    Mr. Krishnamoorthi. And, Ms. Reilly, that does not 
contribute to stability in the independent pharmacy market, 
does it?
    Ms. Reilly. It does not.
    Mr. Krishnamoorthi. So let me talk about patients for 1 
second. The FTC is conducting a major study of PBMs currently. 
They have initially released some of their findings in a recent 
statement from the summer. Here is what they said. They said 
the following. ``One patient told us she was required by her 
health insurance carrier to go through PBMs' specialty 
pharmacy, which significantly delayed medication she vitally 
needed to ensure she could have her baby.'' She says, ``I may 
have lost the pregnancy because of the delays.'' Now, Mr. 
Chancy, that is consistent with your experience with specialty 
pharmacies, isn't it?
    Mr. Chancy. Yes, sir.
    Mr. Krishnamoorthi. Another finding from the FTC. This is 
dated again July 20, 2023. This is from an owner of an 
independent pharmacy: ``To keep up with the costs of PBM 
practices and the ever-increasing cost of prescription drugs 
while keeping the pharmacy doors open, my mom, a pharmacist, 
was not able to pay her own wage for 4 months in 2019.'' Now, 
Mr. Chancy, is that consistent with your own experience?
    Mr. Chancy. Yes, sir, it is.
    Mr. Krishnamoorthi. And that obviously is not a sign of 
stability among independent pharmacies, is it?
    Mr. Chancy. No, sir.
    Mr. Krishnamoorthi. Now, the FTC at one time actually sent 
out letters that stated that at the state and local level, any 
efforts to increase transparency and disclosure for PBMs was 
somehow against the best interests of consumers. Now, they sent 
11 letters out in the last 20 years. On July 20, they 
officially withdrew support for those various letters.
    Let me just tell you about some of those letters very 
briefly. They said, ``Freedom of choice provisions at the New 
York state level actually increased pharmaceutical costs for 
patients.'' They withdrew support from that letter. Another 
letter that they wrote on September 7, 2004, again from the 
Federal Trade Commission to California State Legislature, said 
that, ``These particular bills that you are pursuing with 
regard to disclosure requirements hurts patients.'' The FTC has 
withdrawn support from that letter, and the list goes on and on 
and on. I have all nine--I am sorry--all 11 letters here. This 
is garbage. The FTC has now officially withdrawn support from 
all of this guidance.
    Mr. Chair, I request permission to enter remnants of these 
letters into the record.
    Chairman Comer. Without objection, so ordered.
    Mr. Krishnamoorthi. That is what we have from the FTC. The 
FTC is conducting a wide-ranging study into what PBMs are doing 
in wreaking havoc on independent pharmacies and hurting 
consumers, and I can not wait to see that study. Thank you so 
much, and I yield back.
    Chairman Comer. Thank you. The gentleman yields back. The 
Chair now recognizes Ms. Mace from South Carolina for 5 
minutes.
    Ms. Mace. Thank you, Mr. Chairman, and I applaud my 
colleague across the aisle. We want consumers to have choices, 
competition, and lower prescription drug prices. I am going to 
dive in here. I have several questions, and I would just 
appreciate just primarily yes or no answers from our witnesses 
today. We do not have a lot of time this morning.
    My first question goes to Mr. Scott. You say in your 
written testimony that PBMs lower prescription costs by 
encouraging the use of more affordable alternatives to brand 
drugs such as generics? Is that correct?
    Mr. Scott. Yes.
    Ms. Mace. Can you also confirm that PBMs negotiate rebates 
with drug manufacturers in an effort to reduce the cost of 
those drugs?
    Mr. Scott. Yes.
    Ms. Mace. In March 2019, the Journal of American Medical 
Association expressed concern that your member businesses often 
exclude low price generics from coverage. Are you aware of 
those claims?
    Mr. Scott. I am aware of the claims but not the specific 
study.
    Ms. Mace. Interesting. In a purely competitive environment, 
I would usually say the market would take care of such anti-
competitive practices. Is it true that Caremark, Express 
Scripts, and OptumRx make up about 80 percent of the industry? 
Yes or no.
    Mr. Scott. No.
    Ms. Mace. These are ``yes'' or ``no'' questions. So, they 
are not 80 percent of the industry. What percentage then would 
it be?
    Mr. Scott. I believe there are three companies that make up 
80 percent of the industry, Congresswoman.
    Ms. Mace. And they are which ones?
    Mr. Scott. Express Scripts and the two that you mentioned.
    Ms. Mace. OK. That was the question.
    Mr. Scott. I am sorry. I misheard you.
    Ms. Mace. OK. Thank you. If you have three companies making 
up the vast majority, that is not really competitive at all of 
an industry. All right. Ms. Reilly, when does the patents for 
branded drug expire?
    Ms. Reilly. Patents for medicines are just like patents for 
any other product. It is 20 years.
    Ms. Mace. OK. People generally assume that a drug becoming 
generic will result in a price decrease. Our witness 
representing the PBMs alleges that they help reduce cost for 
consumers. In your experience, do PBMs often exclude low price 
generics from the list of covered drugs?
    Ms. Reilly. Yes.
    Ms. Mace. Do PBMs often exclude lower-cost generics in 
favor of high-cost branded drugs, effectively eliminating the 
benefit of the short patent on drugs?
    Ms. Reilly. Yes.
    Ms. Mace. Do you believe they do this to cash in on drug 
rebates at the expense of patients?
    Ms. Reilly. Yes.
    Ms. Mace. All right. Mr. Chancy, this past session in my 
home state of South Carolina, they passed legislation that I 
worked on a number of years ago, which banned PBMs from 
permitting pharmacists from discussing more affordable 
alternatives. Have you or any pharmacists you know experienced 
these types of restrictions?
    [No response.]
    Ms. Mace. What was that?
    Mr. Chancy. Yes.
    Ms. Mace. OK. You also expressed concerns that PBMs, which 
are often vertically integrated with their own pharmacies, are 
using their pricing power to harm independent pharmacies. Is 
that correct?
    Mr. Chancy. Yes.
    Ms. Mace. And are you aware of a whistleblower lawsuit 
against CVS Caremark alleging that they sought to block generic 
competition?
    Mr. Chancy. Yes.
    Ms. Mace. Do you believe these practices are commonplace 
across the PBM market?
    Mr. Chancy. Yes.
    Ms. Mace. Do you believe that restrictions on pricing and 
rebates would result in more generics being prescribed at your 
pharmacies and a reduction in prescription drug costs?
    Mr. Chancy. Yes, I do.
    Ms. Mace. Yes, I would agree. More competition in the 
market is better for every consumer. Less overreach from 
government, more competition in the private marketplace is 
better for everybody. Thank you, Mr. Chairman, and God bless 
you. I yield back.
    Chairman Comer. Thank you. The Chair now recognize Ms. Lee 
from Pennsylvania.
    Ms. Lee. Thank you, Mr. Chairman. Our Nation is facing an 
inequality crisis not seen since the Gilded Age. At its core is 
the unprecedented corporate greed that has inflated prices, 
giving massive bonuses to C-suite executives and left the 
American people struggling. The harm, of course, falls 
disproportionately on black, brown, marginalized, and poor 
folks who are already struggling the most. Our healthcare 
system is one of the worst offenders with some of the deadliest 
caused from big pharma, to pharmacy benefit managers to big 
insurance companies and ``nonprofit hospital monopolies'' that 
abandon communities like mine. Every level of our healthcare 
system is being exploited to drive money straight into 
stockholders' pockets. For example, it appears that PBMs are 
leveraging their role at the center of the healthcare system to 
extract profits from players at multiple points. Reporting even 
suggests that the fees PBMs charge to drug manufacturers 
increased by 51 percent over a 2-year period.
    Ms. Reilly, what types of fees do PBMs charge your members, 
the Nation's biggest pharmaceutical companies, and how do those 
fees get passed on to customers?
    Ms. Reilly. They charge a number of fees. I would argue 
most of those fees are quite opaque, meaning that they are not 
known necessarily to many folks, including the plan sponsors, 
their data fees, and all sorts of fees that oftentimes pop up 
out of nowhere, and, as you mentioned, have increased 
significantly. And I would argue, they provide no direct 
benefit to the patients.
    Ms. Lee. Thank you. In your members' experience, are the 
fees charged by PBMs tied in any way to the list price of a 
drug, and how does this affect the price the consumer pays?
    Ms. Reilly. Yes. I would say in virtually every instance, 
these fees are tied to the list price of the drug, which, as 
you suggest, the higher the list price, the larger the fee, the 
larger the rebate, the more money that goes into the pocket of 
the PBM.
    Ms. Lee. Thank you. Your organization, which represents Big 
Pharma giants from Bayer to Pfizer, and, until recently, 
represented opioid pushing Purdue Pharma, is running an 
aggressive ad campaign blaming PBM rebate practices for high 
drug prices. What motivated that campaign, and how much did you 
all spend on that campaign?
    Ms. Reilly. Well, what motivated the campaign is to shed 
light on the practices that have been pervasive over the past 
many years, which is PBMs overcharging patients at the pharmacy 
counter, not passing, you know, the significant rebates, over 
$200 billion a year, back to the patients to lower the drug 
prices they have.
    Ms. Lee. How much did you spend on it?
    Ms. Reilly. I would have to get back to you. I do not know 
the total amount spent on that ad campaign.
    Ms. Lee. OK. Thank you. The United States pays by far the 
highest prices for prescription drugs in the world. Pharma 
member Novo Nordisk is charging Americans with diabetes $12,000 
for Ozempic, while the exact same drug can be purchased for 
$2,000 in Canada. Pharma member, Eli Lilly, is charging 
Americans nearly $200,000 for Cyramza to treat stomach cancer, 
a drug that can be purchased in Germany for $54,000. Pharma 
member, Sanofi, is charging America over $200,000 for Caprelsa 
to treat thyroid cancer, a drug that can be purchased in France 
for $30,000. Pharma member, Gilead, is charging Americans with 
non-Hodgkins lymphoma $424,000 for Yescarta, a therapy that can 
be purchased in Japan for $212,000. Ms. Reilly, do you really 
expect this Committee to believe that the blame lies entirely 
with PBMs and not also with your members?
    Ms. Reilly. I would say all of the prices that you quoted 
are list prices for the medicines.
    Ms. Lee. Was rhetorical, but I do have another question. 
Why are several of your member companies suing to stop the 
Federal Government from negotiating drug prices through the 
Inflation Reduction Act?
    Ms. Reilly. I would be happy to answer that question. We 
have strong concerns about the constitutionality of the IRA 
provisions that were passed. No. 1, they violate the separation 
of powers because Congress delegated too much authority to an 
outside----
    Ms. Lee. What are your concerns about negotiating drug 
prices does your company have about allowing the Federal 
Government to negotiate drug prices?
    Ms. Reilly. Was not negotiation, and let me be clear. It is 
a misnomer to call it negotiation. These are the choices our 
companies face. The government sets the price of a medicine. It 
is a take-it-or-leave-it-price. If we choose not to pay the 
price that the government offers us, we face two options: one, 
a 1,900 percent tax on the sale of every single medicine sold, 
or we can----
    Ms. Lee. Well, it seems that the American people are 
receiving that tax right now on prices that are incredibly over 
expensive, so thank you so much for cost. Mr. Scott, I would 
also like to hear your take on this, your claim that PBMs use 
the fees they charge drug manufacturers and pharmacies to 
create cost savings in the system. Can you give me some 
concrete examples because it sounds to me like they are using 
these fees to churn an additional profit.
    Mr. Scott. Yes. I think we could look specifically at the 
Medicare Part D Program where it has been documented that 
virtually 100 percent of the rebates that are negotiated are 
passed back to the Part D plan sponsors, and we have seen that 
deliver a steady low premium for Part D beneficiaries over a 
number of years.
    Ms. Lee. Thank you. I am taking my time back up, but I want 
to end by saying these profits for big corporations grow, the 
American people suffer. It is despicable that more than 500,000 
households go bankrupt each year because of medically related 
debts. Healthcare is a human right. It is about time we started 
treating it that way. I yield back.
    Chairman Comer. Thank you. The Chair now recognizes Mr. 
LaTurner from Kansas for 5 minutes.
    Mr. LaTurner. Thank you, Mr. Chairman, and welcome to all 
of you joining us here today.
    Mr. Chancy, we have seen examples in the past of PBMs 
engaging in spread pricing where the PBM charges payers more 
than what they reimburse the pharmacy and then pocket the 
difference. In my home state of Kansas, accusations of this 
practice were recently settled for $26.7 million. How difficult 
is it for pharmacies to tell that they are being reimbursed 
less than what the payer is paying to the PBM?
    Mr. Chancy. We are not always aware of how much they are 
charging the payer, but I will give you an example. I worked 
with a self-insured company in my area, and we had a specialty 
drug that we filled for that company and the next field they 
mandated to go to the PBM. The PBMs wanted to approve the rate 
for me. They ended up charging the company $300 more when it 
went to their mail order. So, we see instances like that that 
happen, so we know it is there.
    Mr. LaTurner. But you would assume that it is happening, 
and you do not know it a lot of the time.
    Mr. Chancy. That is correct.
    Mr. LaTurner. Yes, I assume that happens quite a bit. Mr. 
Scott, do you believe that additional transparency in the price 
setting of prescription drugs is important?
    Mr. Scott. Yes, transparency can be beneficial.
    Mr. LaTurner. Just last week in the Wall Street Journal, 
Mr. Scott, they ran an article on the price of Imatinib, the 
generic form of the cancer drug, Gleevec. According to the 
report, this drug went generic in 2016 and can be bought today 
for as little as $55 a month. But if you happen to have CVS or 
Cigna, the same drug can cost as much as $6,600 a month. The 
article makes the claim that this in large part is due to the 
role of PBMs and PBM-owned pharmacies. How would you respond to 
the claims laid out in this article, Mr. Scott?
    Mr. Scott. Thank you for the question, Congressman. I saw 
the article as well, and I would start by level setting that 
the PBM's goal is always to manage to the lowest net costs for 
the drugs that they are offering to patients in any particular 
plan. I know there were some survey data as a part of that Wall 
Street Journal article that conflated what is listed in the 
Medicare Plan Finder, which is the maximum possible highest 
contracted rates, which does not really show what the average 
patient pays out-of-pocket. Our goal is lowest net cost.
    Mr. LaTurner. I understand your goal. If you will just 
address the contents, what I just said, that when the generic 
can be bought today for as little as $55 a month, but if you 
have CVS or Cigna, it can cost as much as $6,600 a month. How 
can you explain that to the American people?
    Mr. Scott. Without having the specifics on a particular 
drug, if you look----
    Mr. LaTurner. Let us stipulate that it is true. How is that 
fair? Would you agree that it is----
    Mr. Scott. There may be multiple versions of the same 
generic drug at different price points and also different 
issues about supply availability which have to be taken into 
account.
    Mr. LaTurner. So, you would say there is a scenario by 
which that it would make sense and be fair and reasonable that 
it could cost $55 a month for generic, but if you have CVS or 
Cigna, it is $6,600 a month. There is a scenario in your mind 
where that makes sense and that is fair.
    Mr. Scott. There are scenarios where other factors beyond 
cost come into consideration, and in those outliers----
    Mr. LaTurner. Granted, but that big of a delta?
    Mr. Scott. Well, in those outliers, I think the plan 
sponsor has to be very thoughtful about benefit design and out-
of-pocket exposure for patients on that drug.
    Mr. LaTurner. You said in your testimony that choice and 
flexibility in the market are a foundational principle for 
effective prescription drug coverage and delivery. Does the 
fact that the three largest PBMs currently make up 80 percent 
of the market not run counter to that foundational principle of 
choice and flexibility?
    Mr. Scott. Actually, the trends that we are seeing are more 
and more entrants in competition in the PBM marketplace. And 
that choice and flexibility has benefited by having large 
companies that can provide certain services as well as smaller 
individualized companies that provide more tailored services. 
That is the definition of having different models to choose 
from for any given employer.
    Mr. LaTurner. Eighty percent, three PBMs?
    Mr. Scott. Oftentimes you will see some larger PBMs be able 
to use that scale, which is really important in negotiating 
with large drug companies to be able to have broader 
populations of patients and beneficiaries that they represent 
in order to help bring down the net cost of the drug. So, scale 
can matter as a value proposition for many employers when they 
are choosing their PBM.
    Mr. LaTurner. Lori Reilly, are new generic drug suffering 
as a result of PBM coverage decisions to prefer higher price 
drugs with high rebates over lower list price drugs? Can you 
give an example of this?
    Ms. Reilly. Yes, I think there is evidence of that. We saw 
it with not just new generics, but lower-price brand medicines 
that have entered the insulin example, the hepatitis C example, 
where our manufacturers have issued lower price products in the 
hopes that those would get picked up by the PBMs because they 
would be lower cost to the consumer because everyone says they 
want pharma to lower their list prices. When we actually do 
lower their list prices, they do not get covered by the PBM.
    Mr. LaTurner. Really quick, just answer the question 
quickly. Has market consolidation enabled and incentivized them 
to negotiate higher rebates?
    Ms. Reilly. Yes, I think actually negotiation works in the 
system. The challenge is how does those rebates get passed on 
to the patient that needs them, and I think that is what is 
broken in the system.
    Mr. LaTurner. Thank you. I yield back, Mr. Chairman.
    Chairman Comer. The gentleman yields back. The Chair now 
recognizes Ms. Norton from Washington, DC.
    Ms. Norton. Thank you, Mr. Chairman. Professor Conti, as 
Americans, we are the global exception when it comes to drug 
prices because we face exorbitant prices for lifesaving 
prescription drugs. During the Committee's first hearing on 
pharmacy benefit managers in May, Dr. Miriam Atkins, an 
oncologist, described a situation in which one of her patients 
was sent a $1,000 bill for a drug as part of cancer treatment. 
Dr. Atkins explained that patients are unable to afford this 
cost, ``just will not take the medication,'' and then ``that 
will affect their life expectancy.'' Professor Conti, how do 
high drug prices harm patients that seek lifesaving care from 
their providers?
    Ms. Conti. Thank you so much for the question. Financial 
toxicity is real. It is real among Americans who are facing a 
dry diagnosis and treatment of cancer and other conditions. Our 
evidence suggests that more than 40 percent of people with some 
types of blood cancer are facing financial toxicity that makes 
them choose between filling their medications and paying their 
rent. This is a real concern and one that is affecting 
patient's health and their ability to take care of themselves 
and their families.
    Ms. Norton. Thank you, Professor Conti. I have another 
question for you. According to one outside group, and here are 
some astounding statistics, one-half of U.S. adults say they 
have difficulties affording healthcare. It is half the people 
who live in this country --and 1 in 3 adults ages 60 to 64, and 
1 in 5 adults aged 65 and older--paid more. And here is another 
astounding number: more than $2,000 annually and out-of-pocket 
costs for the healthcare. I do not know how they do it.
    High prescription costs can have a devastating effect on 
patients and families. Last Congress, President Biden signed 
into law the Democratic-led Inflation Reduction Act. Under this 
law, out-of-pocket costs for patients covered by Medicare Part 
D will be capped at $2,000 per year starting in 2025. This will 
improve the lives of 1.4 million Americans covered by Medicare. 
It will lead to substantial savings for patients who need 
expensive medications. Professor Conti, in addition to saving 
patients money, how will the Inflation Reduction Act's drug 
pricing reforms improve long-term health outcomes for Americans 
seeking care?
    Ms. Conti. Thank you so much. The IRA provisions are a 
substantial evolution in access to prescription drugs for 
Americans. Right now, seniors have greater access to insulin 
based on IRA provisions. Seniors also have better access to 
vaccines that prevent serious illness. And finally, Part D 
redesign will extend access to patients for 49 million 
Americans, starting in the next year. This is a major, major 
step forward for population health and individual health as 
well.
    Ms. Norton. Thank you, Dr. Conti. I yield back.
    Chairman Comer. The gentlelady yields back. The Chair now 
recognizes Mr. Burlison from Missouri for 5 minutes.
    Mr. Burlison. Thank you, Mr. Chairman. We have heard a lot 
about the 80 percent number, and while it sounds extremely 
disturbing, I just looked up, in the short time that I have 
had, various marketplaces. Are you aware, Mr. Scott, that 
Lowe's, Home Depot, and Menards compose 87 percent of the home 
improvement market?
    Mr. Scott. That sounds right.
    Mr. Burlison. That is terrifying. Terrifying. Can you 
imagine the impact on consumers? Oh my goodness. Can you 
imagine how much that they are putting the squeeze on Black & 
Decker and DeWalt, right, because if DeWalt and Black & Decker 
want to sell their products, they have got to deal with Lowe's 
and Home Depot, right? Maybe what we should be doing, Congress, 
is studying the spread or the pricing that Lowe's or Home Depot 
have on some of the products that they are selling, like Black 
& Decker and DeWalt, because we want to make sure that we, the 
consumers, are taken care of, right? That is what this place is 
all about: the government stepping in to take care of the 
consumers. Wouldn't it be interesting if Black & Decker and 
DeWalt decided to enter into a campaign? That is really what 
they need to do.
    Ms. Reilly, let me ask you this. How much has your industry 
spent in television advertisements demonizing PBMs?
    Ms. Reilly. I do not know the exact amount. Happy to report 
back.
    Mr. Burlison. Well, I have an article that I will submit to 
the record that pharma spent over $9 million on anti-PBM 
advertising. Mr. Chairman, if I could submit that to the 
record.
    Chairman Comer. Without objection, so ordered.
    Mr. Burlison. Thank you. Mr. Scott, I am actually 
interested in what we can actually do to reduce cost. In my 
opinion, and I might be the only one on this Committee who has 
actually been in the position of negotiating with PBMs of 
deciding what PBM that we are going to use and purchase or 
enter a contract with over 100,000 lives, and I can tell you, 
if you are in that situation, you know there is choice. There 
are a lot of PBMs to choose from, and not a single one is 
coming to the table saying we are going to increase your cost 
for your patients. Every one of them is bringing down those 
costs, so as the employer, I am telling you that eliminating 
the opportunities of PBM will only increase the premiums for 
those insured.
    So, the question that I have within the 2 minutes, Mr. 
Scott, what can we actually do that would reduce the costs of 
pharmaceuticals?
    Mr. Scott. Thank you, Congressman, for the question, and I 
would say a couple of things. I think you are exactly 
identifying one of the primary value propositions that 
employers measure a PBM on, which is are they going to be able 
to bring down my net cost and help me to provide affordable 
benefits. And the PBMs, as has been recognized, I think, have a 
very strong track record of delivering about $145 billion in 
value for the system every year through that work of 
negotiating discounts.
    Where we sometimes get caught up is when we see that the 
balances I referenced in the use of patent system is being 
leveraged in inappropriate ways to keep new competitor drugs 
off the market. Where there is no competition, it is a lot 
harder to leverage that to negotiate savings on behalf of plan 
sponsors. Looking at some of those patent practices, we think, 
would be an important step to really making that a competitive 
marketplace.
    Mr. Burlison. What about the dynamics with the biosimilar 
drugs? Is there a lot of opportunity with that?
    Mr. Scott. Absolutely. And I think we have seen that in the 
few instances where biosimilars have already come into the 
marketplace. Humira is a great example of where the competition 
is only coming online this year, and we can analyze what 
happened in the competitive marketplace so that it was not on 
the market sooner. But as those have come into the market, they 
are having a positive effect on bringing down the cost of the 
originator products and providing more affordable options 
dedicated to plan.
    Mr. Burlison. Thank you. The way I see it, Mr. Scott and 
others, is that this is similar to what Netflix has done to the 
entertainment industry. Netflix was a great disruptor. It 
negotiated with the entertainment industry en masse because of 
their large subscriber pool. What is ridiculous to me is that 
if Blockbuster came here, they would probably be screaming in 
front of Congress that they are having to close to the huge 
membership pool of Netflix and that Netflix drives everyone to 
their product. Thank you, Mr. Chairman.
    Chairman Comer. Thank you. The Chair now recognize Ms. 
Brown from Ohio for 5 minutes.
    Ms. Brown. Thank you, Mr. Chairman. In this country, far 
too many people are forced to choose between paying for their 
medications and keeping the lights on. This impossible choice 
is a crisis largely manufactured by Big Pharma and pharmacy 
benefit managers. In 2021, Oversight Committee Democrats 
published a result of a 3-year-long investigation into 
pharmaceutical companies' drug pricing and found pharma giants 
target the United States' market, exploiting taxpayers with 
higher prescription drug prices than anywhere else in the 
world. Our investigation found in the past, Big Pharma has 
taken advantage of Medicare's inability to negotiate and hike 
prices on patients to the tune of $25 billion over a 5-year 
period. That was just for the seven drugs we investigated.
    As a result of Democrats passing the historic Inflation 
Reduction Act, which was signed into law by President Biden, 
Medicare is now finally able to negotiate directly with drug 
manufacturers to bring down the price of lifesaving 
prescription drugs. President Biden is putting dollars back 
into the pockets of American families and Big Pharma on notice 
for decades of unchecked price gouging. So, Dr. Conti, I want 
to ask you, how will Medicare's negotiation of drug prices lead 
to lower out-of-pocket costs for seniors?
    Ms. Conti. Thank you so much for the question. IRA passage 
is a major evolution in access to prescription drugs for 
Americans, and especially for seniors. We expect that insulin-
dependent diabetics will receive immediate savings at the 
pharmacy counter and improved access, so will adults seeking 
vaccines and their children seeking new vaccinations to prevent 
serious illness. And seniors who are covered under Medicare 
Part D will directly benefit from Part D redesign, improving 
access and improving both their individual health, but also 
population health.
    Ms. Brown. Thank you. And Dr. Conti, how will Medicare's 
ability to negotiate lead to better health outcomes for 
millions of seniors and patients with disabilities?
    Ms. Conti. Sure. We expect that approximately, what, $3.4 
billion in out-of-pocket costs were imposed upon American 
seniors with the 10 drugs that are slated for negotiation first 
this year. Lowering those costs even 20 percent at the pharmacy 
counter will expand access and hopefully lead to better 
individual outcomes and population health.
    Ms. Brown. Thank you, and you kind of led into my next 
question. Can you expound on the significance of these 10 
drugs?
    Ms. Conti. Sure. Approximately 10 million Americans are 
taking those drugs currently, and we expect that, again, their 
cost savings at the pharmacy counter will amount to 
approximately 20 percent, maybe more. That will be significant 
savings for them and, again, lead to greater access in using 
these drugs.
    Ms. Brown. Thank you, Dr. Conti. So, President Biden's 
announcement regarding these 10 drugs is just the start. Thanks 
to the Inflation Reduction Act, Medicare will be able to 
negotiate the price of even more lifesaving drugs in subsequent 
years, an additional 15 drugs starting in 2027, another 15 in 
2028, and another 20 each year afterwards. We must build on the 
successes by increasing access to affordable and equitable 
healthcare and requiring comprehensive transparency rules in 
drug pricing. If my Republican colleagues truly wants to reduce 
staggering drug costs, they should join with the Democrats to 
build on the achievements of the Inflation Reduction Act. And 
with that, I yield back. Thank you.
    Chairman Comer. The gentlelady yields back. The Chair now 
recognize Mr. Higgins from Louisiana for 5 minutes.
    Mr. Higgins. Thank you, Mr. Chairman. I appreciate the 
panelists for being here today.
    It is a really painful discussion for my constituents and 
my family back home. I feel that our Nation, in many ways, has 
betrayed our biblical responsibility to care for our elders. It 
is a real problem. The Word tells us, ``Cast me not off in the 
time of old age, forsake me not when my strength faileth.'' I 
am not sure how does PBMs sleep at night. It is an issue. Our 
elders are like treasures. They are commonly frightened. They 
have no financial stability, too commonly alone.
    They are constantly receiving confusing letters in the mail 
from insurance companies and doctor's bills and benefit plan 
offers and wild promises from this company and that agency and 
the other offer. They might think this is funny. You find it 
funny, talk to me in the hallway. We will see how that 
conversation goes. We are talking about our elders in our 
country that deserve to be respected and cared for. And one of 
the last remaining remnants of what America was when we cared 
for our elders was our pharmacists, and our pharmacists have 
been driven out of business by PBMs and the cost of medicine. 
Let me see another giggle, you will meet a side of me you do 
not like.
    Mr. Chancy, you have been in the pharmacy business for 
generations, sir. That is what your statement clarifies. I 
recall growing up the seventh of eight children. I was born in 
1961. My father, we raised and trained horses. We did not have 
money. We did not have health insurance. What you know we had, 
we had a doctor, we had a pharmacist, and we get injured, 
injury was common in a life like that, would get to the doctor, 
my dad would pay him cash. There was no middleman. There was no 
government bureaucracy. There was no insurance restrictions and 
mandates. There was my family, there was the doctor, there was 
the pharmacist, and it was a formula that worked.
    Mr. Chancy, you come from that background, it sounds like, 
sir. Yes, I am quite sure you recall those days, your 
grandparents and your parents. I am going to turn the floor 
over to you. Tell us from your heart from your story of how 
this deep pain is being brought into your community, especially 
to the homes of your elders, by the monopolistic power of these 
PBMs and the cost of healthcare medicines by elders. I will 
give you my remaining minute, Mr. Chancy.
    Mr. Chancy. Thank you, sir. I grew up in a small town, and 
my father was a pharmacist, and he cared for the people in that 
community. We had relationships with them, and they depended on 
us, and it was back in the day before we had PBMs. It was all 
cash, and we charged to those patients that could not pay for 
it at the time. And there are four counties in the state of 
Georgia that the only accessible healthcare practitioner is a 
pharmacist. There are no doctors. There are no hospitals or 
anything. And if we do not do things to change, if we do not 
have PBM reform, then we are going to have pharmacy deserts, 
not just in rural America, but in the cities.
    So, it is critical that we make some reform that is going 
to allow us to stay in business and take care of the seniors 
like you are talking about. It is critical for us to be able to 
do that. Under the system we have now, we are restrained, and 
you talk about wreaking havoc on our business. In 2018, we paid 
$865,000 in DIR fees. In 2022, that almost doubled, and this 
year alone, I am at $1.2 million just through July. Now, that 
is taken away from jobs, and that is taken away from 
opportunity in small communities that I live in. So, I think 
there needs to be a lot of reform. We need to have clear 
transparent pricing, and we also need to stop the ability for 
the PBMs to be steering patients to other pharmacies where they 
do not have a relationship and people are not there to care for 
them.
    Mr. Higgins. Thank you, Mr. Chancy.
    Mr. Chancy. Thank you.
    Mr. Higgins. Mr. Chairman, my time has expired. I yield.
    Chairman Comer. Thank you. The Chair now recognizes Ms. 
Bush from Missouri for 5 minutes.
    Ms. Bush. Thank you, Mr. Chairman. St. Louis and I are here 
today in defense of patients, pharmacies, and healthcare 
providers. Before I came to Congress, I worked as a nurse in a 
hospital and a community mental health agency. I had to worry 
every single day about whether my patients could afford the 
medication that I knew they needed. It is an awful part of an 
otherwise extremely rewarding profession.
    We know that PBMs play a critical role in the 
pharmaceutical supply chain, but that does not mean that drug 
manufacturers are being let off the hook. Big Pharma plays a 
leading role in drastically and unethically raising the cost of 
lifesaving medications for the sake of profit and for the sake 
of greed. Notably, only three companies
    --OptumRx, CVS Caremark, and Express Scripts--make up a 
staggering 80 percent of the PBM market, which we have heard 
earlier. Three companies play a central role in making 
decisions about what medications are covered by healthcare, 
insurance plans, and the cost of those medications.
    PBMs negotiate pricing with drug manufacturers and use 
these negotiations to determine which medications are covered 
on someone's insurance formulary. The difference between life 
or death is a series of shady contracts struck between the drug 
manufacturer, the PBM, the insurer, and the pharmacy. The end 
result of this complicated design is patients are expected to 
shell out thousands of dollars in out-of-pocket medical costs, 
even for lifesaving prescription medicine. Professor Conti, how 
does PBM control over drug formularies affect the medications 
patients are able to receive at the pharmacy?
    Ms. Conti. PBMs steer patients to use, in general, the 
cheapest and most effective drug for them. That includes over a 
90-percent utilization of generics and biosimilars when they 
are available. This benefits patients, and it benefits their 
health.
    Ms. Bush. My understanding is that PBMs consider 
formularies, though, as sensitive business information. PBM 
decisions about which medications to cover and how to sort them 
into tiers or rankings are generally not available to patients, 
and as a nurse, I was never able to get that information early. 
I had to wait until they sent us the book, and this was very 
devastating and horrifying for so many of our patients.
    Professor Conti, if a patient does not understand why a 
specific medication is chosen for inclusion on a PBM formulary, 
how will they know that the price that they are being asked to 
pay at the pharmacy is a fair price?
    Ms. Conti. They will not.
    Ms. Bush. Thank you. It is clear both the PBM and the 
pharmaceutical industries are in desperate need of reforms that 
increase transparency and reduce costs for patients and for 
pharmacies. In fact, Barnes-Jewish Hospital, the largest 
hospital in Missouri and the largest private employer in my 
district, has the following to say about their experience with 
PBMs: ``Often pharmacy benefit managers create additional 
financial and administrative challenges for many providers, 
pharmacies in particular, and delay or deny patients' access to 
the medications they need.'' The biggest hospital system in the 
state of Missouri is at the mercy of PBMs. They often require 
step therapy treatments or burdensome prior authorizations 
before covering medications ordered by a healthcare provider, 
which is devastating to patients and their care. They lose 
jobs, they lose homes, they can lose children because they are 
now unstable on medications. And I am speaking to that being a 
mental health nurse that watched it happen to my patients over 
and over again. They were stable, and then the new formulary 
came out.
    Insurance companies, PBMs, and Big Pharma are deciding what 
medications patients should take, not patients with their 
doctors. These obstacles compromise patient care at every 
single turn by denying patients the lifesaving medications and 
the treatments that they need. As a nurse, I have seen it over 
and over with the patients I have cared for, as I said, who 
were stable on medication, some for decades. Their care was 
upended when their PBMs and insurance companies decided that 
their medication was not profitable. The health and well-being 
of the people of this country lie in the hands of industries 
represented right here today.
    How can we be confident that these companies are acting in 
the patients' best interest if they face so little competition? 
People with terminal illnesses, disabilities, seniors, and our 
most vulnerable members of our community deserve more. I 
implore my colleagues on both sides of the aisle to enact 
sensible legislation to drastically reform the PBM industry and 
get drug prices under control once and for all. Thank you, and 
I yield back.
    Chairman Comer. Thank you. The Chair now recognizes Mr. 
Palmer from Alabama for 5 minutes.
    Mr. Palmer. Thank you, Mr. Chairman. Mr. Burton, I have got 
some questions for you. How do the rebates affect the 
biosimilar market, and be as concise as you can because I have 
got a few others.
    Mr. Burton. Absolutely. Simplest way to look at it, 
biosimilars right now have a choice: they can price, keep a 
high price and offer a rebate, or they can drop their list 
price which benefits patients, but dropping their list price is 
not getting them on formulary. So, they have a choice of engage 
in the rebate games, which has a chance of getting them on 
coverage, or have a lower list price which benefits patients 
but is not being covered by PBMs.
    Mr. Palmer. So, what you are saying is this has a negative 
impact on patients.
    Mr. Burton. Yes, sir.
    Mr. Palmer. Well, let me ask you this. The passage of the 
Inflation Reduction Act permitted the Centers for Medicare and 
Medicaid to negotiate the prices of some prescription drugs 
covered under Medicare Part D. As the Senior Vice President of 
the Association for Accessible Medicines, Mr. Burton, how will 
the Inflation Reduction Act's government price-setting scheme 
affect patient access to lower-cost generic and biosimilar 
medicines, in your opinion?
    Mr. Burton. Yes. We are concerned that the negotiation 
provisions of IRA could undermine generic and biosimilar 
competition. They could reduce incentives for generic and 
biosimilar entry. Depending on how the price is set by CMS, 
that could actually end up rewarding the brand and giving the 
brand more of a monopoly for a longer period of time, if it 
reduces incentive for generic entry.
    Mr. Palmer. But it also reduces the number of different 
types of drugs that some patients might need. Would that be an 
accurate statement?
    Mr. Burton. So, I believe the way IRA works, as they choose 
products, generics and biosimilars are looking for certainty. 
In order to invest, I mentioned biosimilars can cost several 
$100 million to develop. Without knowing what products will be 
negotiated and what the negotiated price will be, it becomes 
challenging for a biosimilar manufacturer to make that 
investment commitment years before that price is ever 
negotiated. And we believe that biosimilars and generics, at 
the end of the day, will drive prices lower than anything CMS 
negotiates through this scheme. We think there is a long track 
record showing that.
    Mr. Palmer. So, what you are saying to the Committee is 
that this price setting could impact the availability of 
generics and certain biosimilars.
    Mr. Burton. Yes, sir.
    Mr. Palmer. OK. I think that it stands to reason then that 
it would make these drugs less available to patients. Can you 
explain how that works because a moment ago you were talking 
about if they are not listed.
    Mr. Burton. Yes.
    Mr. Palmer. That seems to indicate to me that it makes them 
less successful to patients because they are not going to be 
covered, but if they are listed, it is going to make them more 
expensive to the patient, so it is a confusing game that is 
being played. But the thing that I do not want to get lost in 
this is that the patient is not the No. 1 concern here.
    Mr. Burton. I think that is right. I think if you look at 
the market as it stands today, the biosimilars that are on the 
market are not being preferred. They are not being driven by 
PBMs. PBMs are not driving coverage of biosimilar insulin. They 
are not driving coverage of the biosimilar Humira. If we look 
forward at what will happen under an IRA price-setting 
approach. There seems to be an assumption that a brand drug 
will stay on that market in perpetuity. That is probably not 
going to be the case. So, you need biosimilars. You need 
generics to be able to come onto the market to fill that which, 
frankly, pushes the brand into other markets into pursuing new 
therapies. It is that dynamic, that competitive dynamic that we 
are concerned could be lost.
    Mr. Palmer. I really appreciate your response to the 
questions. I appreciate all of the witnesses being here and the 
unanimity that I think I see here in this Committee in regard 
to this issue. With that, Mr. Chairman, I yield back.
    Chairman Comer. The gentleman yields back. The Chair now 
recognizes Ranking Member Raskin from Maryland for 5 minutes.
    Mr. Raskin. Thank you, Mr. Chairman. I want to thank Mr. 
Palmer for his line of questioning and for that point that he 
just made because I agree very much that there is a real 
consensus on this Committee about a major problem the American 
people are facing. And I heard it in Ms. Bush's comments and 
Mr. Higgins' comments, too.
    Mr. Scott, let me ask you something. You said something 
that just struck me. You said that your mission was to lower 
prices for patients? Did I get you right when you said that?
    Mr. Scott. To lower costs.
    Mr. Raskin. To lower costs for patients. There is such 
confusion in this field, and I want to get it straight. You are 
a private for-profit company, right?
    Mr. Scott. The companies we represent are largely not----
    Mr. Raskin. The PBMs are private for-profit companies that 
you represent, so isn't everybody's mission really to make 
money? And if they can make money by lowering costs, they will 
do it, but your mission is really to make money for the 
shareholders, right, for your component members.
    Mr. Scott. Right. The companies are only going to be 
profitable if they are accomplishing the mission of lowering 
costs for the people who hire them.
    Mr. Raskin. So, I guess that is the question I want to ask 
you. In July, a MedPAC report found that PBMs had taken in over 
$50 billion in drug manufacturer rebates that were not shared 
with patients at the counter in 2021, $50 billion that were 
savings that were made, that it is rebates from manufacturers 
that were not passed on. And I know you made a very compelling 
case that there is a lot of money being made by the 
manufacturers and that represents most of the costs, and all 
that might be true. That might be a separate problem for a 
separate hearing, but isn't it the case that there were $50 
billion in 2021 that your members got in rebates that were not 
passed on to the patients?
    Mr. Scott. The rebate value can benefit patients in a 
number of ways. It is up to the plan sponsor to decide if that 
is by making their healthcare benefit more affordable and 
keeping their premium down, adding other elements to the 
benefit because they have those savings, like adding vision or 
dental, or applying that to help offset their out-of-pocket 
cost at the pharmacy counter. And that is a balancing act the 
plan sponsor has to determine as they are designing their 
benefit.
    Mr. Raskin. Yes. I mean, you are not disagreeing that 
sharing a greater portion of the rebate dollars would lower 
costs at the drug counter and, thereby, increase people's 
adherence to the drug protocols.
    Mr. Scott. I think it is a very reasonable conversation to 
have about whether those tradeoffs are being balanced correctly 
and all.
    Mr. Raskin. All right. A small handful of players dominate 
the PBM market and have outsized power. Three companies--CVS 
Caremark, OptumRx, and Express Scripts
    --control 80 percent of the PBM market. Each of the three 
holds a staggering amount of power. CVS Health reports to CVS 
Caremark. Its PBM provides pharmacy benefit services for more 
than 110 million people. The question is whether these 
companies use their market power to enrich themselves at the 
expense of the patients and other players in the healthcare 
system. And the high degree of market consolidation is 
intrinsically troubling, but we are also seeing increasing 
integration of PBMs with other institutional players in the 
healthcare system. Each of the three big PBMs are owned by a 
parent corporation that also owns a major health insurance 
company, a specialty pharmacy, and a medical services provider. 
We basically have something like government-controlled 
healthcare, but without the government, we are having entire 
systems grow up.
    Professor Conti, can you explain how this high degree of 
market concentration could allow PBMs to prioritize their 
profits over keeping prices low across the system? And I wonder 
if you could respond to Mr. Scott's point about how there might 
be other benefits that are masks that are actually being given 
to the patients?
    Ms. Conti. Sure. Our system is predicated on competition. 
Vertical consolidation between PBMs and plans can erode the 
competitive benefits to consumers both in terms of lowering 
costs but also expanding benefits. There is emerging evidence 
suggesting consolidation does not produce lower premiums, and 
it does not produce more expanded access to drugs, particularly 
drugs that people depend on to manage their current disease.
    Mr. Raskin. Isn't that the whole premise of antitrust 
economics?
    Ms. Conti. Sure. So, consolidation can improve access and 
lower costs, more bargaining power can produce lower price 
concessions that expands access. However, in this particular 
market, we are not seeing evidence that expanded consolidation 
is driving prices lower.
    Mr. Raskin. Do you have a theory as to why it is not 
working that way? And forgive me, Mr. Chairman, I will yield 
back after this?
    Chairman Comer. The Chair now recognizes----
    Mr. Raskin. If she could answer that question, yes, sir.
    Chairman Comer. Feel free to answer the question.
    Ms. Conti. Sure. Vertical consolidation is very tricky. 
There is a lot of economic theory that suggests it can be 
perverse.
    Mr. Raskin. Thank you. I yield back, Mr. Chairman.
    Chairman Comer. The Chair now recognizes Mr. Fallon from 
Texas for 5 minutes.
    Mr. Fallon. Thank you, Mr. Chairman. As a Member of 
Congress that represents a rural area and there are increasing 
numbers of people leaving to go into the suburbs in the cities, 
and the folks that are left that are representing rural areas, 
I think we need to increase our vigor and fierceness. And one 
of the concerns I have, of course, being a strong proponent of 
the free market is also the accessibility of rural healthcare. 
And the free market, as we all know, is founded on choice, and 
that choice is between products and services, and the consumer 
makes that choice ultimately. And why the free markets work is 
because it is working, in theory, the right way. The market is 
competitive, and the price is manageable.
    But when you have three PBMs controlling 80 percent of the 
prescription drug market and they are becoming larger every 
day, this is not really free market. It tends more to lean 
toward cronyism. And so, what is particularly hurting in the 
rural areas like my constituents are there are fewer pharmacy 
options, the medium and small pharmacies are being bought up by 
the larger ones, and the increasing vertical integration that 
we are seeing in the system exacerbates that issue.
    So, in fact, the big three PBMs controlling the market, 
each one of them is also integrated with an insurance company. 
So, one tool we are seeing PBMs use to manipulate the market is 
called co-pay accumulators. And essentially, real simple, I 
mean, it does not matter if I am paying out-of-pocket, say, 
$1,000, or I get a coupon, or a charity is paying for it. That 
$1,000 I spent should go toward my deductible. And that is, I 
think, one of the reasons why we have seen 20 states ban co-pay 
accumulators, and Puerto Rico and my home state of Texas just 
did the same thing. So the Texas legislature, of which I served 
there for 8 years, has recently banned them. And, Ms. Reilly, I 
wanted to ask you if you could speak to how co-pay accumulators 
are used by the PBMs, and how they impact what our constituents 
pay.
    Ms. Reilly. Yes, absolutely. Thank you for the question. 
So, the way co-pay accumulators work is that, at times, 
patients, as has been noted by the Committee, struggle to 
afford their medication. They may need a medicine that is on 
the high tier of a formulary where they are asked to pay 
oftentimes 40 percent based on the list price of the medicine. 
For many patients, that is not access. As a result, 
pharmaceutical manufacturers often provide assistance to 
patients in the commercial market to help better afford those 
medicines. And so, patients use that assistance when they go to 
the pharmacy counter to lower what they pay out-of-pocket in 
order for those patients to actually get the medicines they 
need.
    The way accumulators work is that the PBM siphon the money 
off of that assistance. They take it for themselves, and they 
do not allow those resources to count toward the patient ever 
getting through potentially their deductible or hitting their 
out-of-pocket max. So, what oftentimes happens is patients find 
themselves mid-year, they have exhausted all the financial 
assistance that is on the card that has been provided to them. 
They realize they have made no progress toward meeting their 
out-of-pocket cap, and they are left with the unenviable 
decision of whether or not they can take their medicine or not.
    As you noted, 18-plus states, including the state of Texas, 
have banned those. There is legislation in Congress called the 
HELP Copays Act, which would make this a Federal requirement 
that these types of programs can no longer be in existence to 
ensure that patients get the help they need because 
unfortunately, too often today, costs are left out of reach 
because of PBM formulary design because PBMs are demanding that 
patients pay either the full list price of the medicine before 
they reach their deductible or, after their deductible, asked 
to pay a percentage of the list price of their medicine, not 
getting the benefits of negotiation, and then they turn around 
and take the assistance from the patient as well. It is not a 
good system. It is not working on behalf of patients, and I 
would encourage this Committee and others to look at the HELP 
Copays Act to make this a national prohibition.
    Mr. Fallon. Do you think that it is fair to say that that 
the way in which the system works now, that the co-pay 
accumulators are essentially allowing the PBMs to double dip?
    Ms. Reilly. Yes, absolutely. They get discounts and rebates 
from the pharmaceutical manufacturer for that. They then take 
the resources that the patient is providing them as well as the 
money off of the copay card, and take that money, too. So, they 
are getting it from both ends, which is why study after study 
has found that patients are often being asked to pay more, 
sometimes significantly more than the insurance company or PBM 
has for that medicine.
    Mr. Fallon. Well, it makes sense that 18, 20-some-odd, 
something of that number of states have banned this practice.
    Ms. Reilly. Absolutely.
    Mr. Fallon. And hopefully we can look at that in a 
bipartisan fashion here in D.C. Mr. Chairman, I yield back.
    Chairman Comer. The gentleman yields back. The Chair now 
recognize Ms. Stansbury from New Mexico for 5 minutes.
    Ms. Stansbury. Thank you, Mr. Chairman, and thank you to 
the Ranking Member and to all of our witnesses.
    As somebody who is the primary caretaker of a member of my 
family, I have to say that this morning's Committee hearing has 
been pretty disturbing. And I think it is really important that 
the American people understand that there are private for-
profit corporations that are getting in the middle of our 
family members getting lifesaving care, getting access to 
medications that are necessary and that their doctors have 
prescribed, and that it is for profit. It is to line the 
pockets of private corporations. This is not about healthcare, 
but it is also important, and I want to take a moment as we 
return back to that issue, to acknowledge the work that we have 
been doing to take on Big Pharma.
    In fact, lots of folks have mentioned this this morning, 
but last year, we took on Big Pharma and we won, in fact, with 
the passage to the Inflation Reduction Act. We not only lowered 
certain prescription drug costs, like putting a cap on 
insulin--for example, if you live with diabetes, you now have 
your insulin capped at $35 a month--but it also empowered 
Medicaid to negotiate these certain prescription drugs and 
especially lifesaving drugs like blood thinners, which my 
family member who I take care of is on.
    And so, it is important that the American people know how 
important this is for tackling prescription drug costs, and 
because we know so many of our family members are living 
paycheck to paycheck or Social Security check or Medicaid/
Medicare reimbursements in order to survive. But that is why I 
find this practice of PBMs interfering in patient care so 
disturbing, and I really want to dig in and help people 
understand this because I think it is hard when you get into 
all the jargon to really understand the visceral aspect of 
this.
    So, Dr. Conti, I know, you have talked about this a lot 
this morning, but I want to take the American people on a ride 
to the doctor. In New Mexico, which is the state that I 
represent, sometimes it takes months to get in to see a 
specialist. We have a severe shortage of healthcare providers 
in our state, especially in our rural areas, so you are waiting 
months. You finally get in to see the doctor. You wait hours. 
You have driven hours to get to the doctor. You get your 
prescription. The doctor calls it into the pharmacy. You drive 
down to the CVS or the Walmart or wherever you pick up your 
prescriptions, and you get told at the counter that you can not 
have the medication that you have waited months to have 
prescribed--months.
    And what I do not think most folks understand is that there 
is some group of individuals sitting in a corporate boardroom 
somewhere in America making that call, telling your pharmacy 
that they can not give you that drug, that lifesaving drug that 
your mother, your father, your grandfather waited for months to 
get. I mean, it is really outrageous when you think about it 
that folks are putting profits over the health and livelihoods 
and well-being of our family members, so you go. You are about 
to pick up this prescription. You are told you can not have it, 
and let me understand this. So, these PBMs are negotiating 
directly with the drug manufacturers. Is that correct?
    Ms. Conti. That is correct.
    Ms. Stansbury. And part of why they determine whether or 
not a certain drug gets put available for a specific pharmacy 
is that they are making a claim that it saves costs for the 
pharmacy or for the doctor, for the patient. But at the end of 
the day, the drug manufacturers are actually providing rebates 
to these companies that they get to pocket as a part of the 
profit margin that they make on these drugs. Is that right?
    Ms. Conti. Yes. Drug makers set the list prices of their 
drugs, but the discounts and rebates accrue to the PBMs and 
their subsidiaries.
    Ms. Stansbury. Right. So here we are, we are at the drug 
counter, we are trying to pick up this lifesaving drug that we 
have waited months for, and I am told that I can not pick up 
this medication for my mom who needs it because some corporate 
company manager has said I am going to make more money if we do 
not allow this drug to be sold at that pharmacy. Is that 
correct?
    Ms. Conti. I would say formulary exclusions are actually 
quite rare, but what happens at the pharmacy counter is that 
the price that is charged the patient can be exorbitant. And 
that is a function of both drug makers setting very high prices 
and PBMs not preferencing those drugs and the formulary to 
provide access to patient.
    Ms. Stansbury. So, this is actually a really interesting 
point because I have had this exact experience. In fact, a 
family member of mine was recently in the hospital, and when we 
went to go get the drug that was prescribed for them, it was 
going to cost $400 out of pocket. And that was because a 
private for-profit corporation had made a decision that it was 
more profitable for them to pocket that profit than to serve 
our communities. So, Mr. Chairman, I am grateful that we are 
having this hearing. We desperately need to regulate and to 
address this issue because, as Representative Bush said, 
literally, lives depend on it. And with that, I yield back.
    Chairman Comer. Thank you. The Chair now recognizes Mr. 
Grothman from Wisconsin for 5 minutes.
    Mr. Grothman. Sure, we will go with Mr. Chancy. How do PBMs 
negotiate drug pricing and reimbursement rates with community 
pharmacies, and what factors influence these negotiations?
    Mr. Chancy. Well, we are not actually involved in any of 
the negotiation on the pricing, and I am not quite sure how 
they come about what they do. We have a pharmacy service 
organization that actually negotiates or works out the plans 
with them. We have very little negotiations at our point.
    Mr. Grothman. OK. Does Ms. Reilly want to answer that? 
Would you have an opinion on how this happens?
    Ms. Reilly. About how negotiation happens----
    Mr. Grothman. Right.
    Ms. Reilly [continuing]. Between PBMs and pharmaceutical 
companies?
    Mr. Grothman. Right. How do they arrive at it?
    Ms. Reilly. I am not party to those negotiations, but as I 
understand it, companies start with the list price, which is 
set by the manufacturer. They enter into a negotiation with the 
PBM. As I said before, the PBMs are solely responsible for 
setting the parameters of what their prescription drug benefit 
looks like. They determine if our medicine gets covered. I 
would just counter what Dr. Conti said about 850 medicines are 
actually excluded from formularies on a yearly basis. That 
number has shot up increasingly over the number of years, so it 
is actually a large number that is excluded.
    Mr. Grothman. Can you tell me why it shot up?
    Ms. Reilly. It is a way for PBMs to try and drive greater 
rebates. So, they tell a company if you do not give us a rebate 
of this amount, we will exclude you from the formulary so that 
will cover your competitor product. So, they set the terms for 
what their drug benefit looks like, how much patients pay out-
of-pocket, what tier of the formulary they are on, how much 
coinsurance they may have to pay. And then pharmaceutical 
manufacturers have to negotiate in order to try and get their 
drug approved in order to hopefully get their medicine on the 
preferred tier so that patients can actually access it at a 
reasonable price.
    Mr. Grothman. OK. I will give you another question. Insulin 
prices have been a growing concern for Americans. How have PBM 
practices, such as rebate negotiations and formulary 
replacements, impacted the affordability of insulin for 
patients with diabetes?
    Ms. Reilly. Thank you for that question. Actually, the net 
price of insulin has actually decreased from 2007. We are 
actually lower today in terms of the net price of insulin than 
we were in 2007. But most patients have not necessarily felt 
that, again, because PBMs insist on charging patients a full 
list price of the medicine, not the negotiated rate. The 
typical insulin has a rebate of about 84 percent lower than 
what many patients are being asked to pay.
    So, our companies have come forward. They have offered 
lower price versions of insulin in the hopes that those lower 
price versions would actually get covered on formularies, and 
typically, they have been rebuffed. The PBMs have not had an 
interest in putting lower price insulins on the market. All 
three of the insulin manufacturers earlier this year came 
forward and, starting January 2020, for all or offering insulin 
to patients, be it commercially insured or uninsured, for $35 a 
month as a way to circumvent the current system, again, where 
patients are often overcharged for medicines like insulin and 
made to pay the full undiscounted price when they go to the 
pharmacy counter.
    Mr. Grothman. Mr. Scott, how would you respond to that?
    Mr. Scott. I would say a couple of things on insulin and 
then on the negotiation process. On insulin, as Lori noted, 
drug companies did happily lower the list price on a number of 
those products. And my understanding is that there is access 
being provided to those through the PBM formularies.
    But essentially, what we are conflating here is not only 
did the list price come down, but did the net cost come down to 
the same low discount level because the PBM's job, when the PBM 
is negotiating with a drug company, is to try and get the 
competitors to each offer the discount. And whoever is going to 
take that net cost to the lowest point, that typically is what 
gets the formulary placement, if all the clinical 
considerations are equivalent. And a number of PBMs, I would 
also point out, have even, prior to those companies lowering 
their list prices, put programs in place to cap or limit out-
of-pocket costs for insulin specifically to patients on plans.
    If I could, Congressman, just respond to the earlier 
questions that you asked some of the other panelists. I have 
talked a little bit now about how we negotiate with pharma, and 
there is also a separate negotiation with the pharmacy. And Mr. 
Chancy makes a good point that oftentimes 83 percent of 
independent pharmacies are part of pharmacy services' 
administrative organizations that collectively bargain on 
behalf of thousands and pharmacies together with the PBM to 
help them negotiate favorable contract terms. So, I think that 
is a good point to highlight.
    Mr. Grothman. OK. The final question for Mr. Burton, how 
can Congress ensure that PBMs prioritize the inclusion 
biosimilars in formularies and promote their use to reduce 
healthcare costs?
    Mr. Burton. So, I think there are a number of 
opportunities. The simplest that we have encouraged that 
Representatives Kuster, Miller-Meeks, and others have 
introduced, would real simply require that Medicare plans 
prefer new generics and biosimilars when their price is less 
than the brand price. This still gives PBMs the opportunity to 
negotiate for a lower price. It still allows brands to exclude 
generics and biosimilars from the formulary. They just have to 
do so based on by lowering their price. So, I think what is 
getting lost in this discussion of lowest net is lowest net 
cost to whom. There is a lot of discussion of lowest net, but 
that is to the PBM, to the plan sponsor. That is not benefiting 
the patient, and I think we have to get this back to what gets 
the lowest cost medicine to the patient.
    Chairman Comer. The gentleman's time has expired. The Chair 
now recognizes Mr. Casar from Texas for 5 minutes.
    Mr. Casar. Thank you, Chairman. Today, I really appreciate 
that we are having this Committee hearing to investigate drug 
pricing and the role that different actors in the system play 
in the exorbitant drug costs that our constituents pay. 
Americans spent $333 billion on prescription drugs in 2017, and 
by 2027, that number, by some reports, is projected to increase 
by about 75 percent. To me, that shows, and this hearing shows 
how there being so much self-interest in the system can hurt 
the patient's interest and that this is something we have to 
reform at all levels.
    And so, before we get to my questions, I do want to go on 
the record about the important work that Democrats have done on 
this issue. The Inflation Reduction Act passed by Democrats in 
the Congress signed by President Biden, one, empowered the 
executive branch to negotiate drug prices paid by Medicare, and 
two, use those savings to cap out-of-pocket costs. That was an 
important step. There is more we need to do on issues of PBMs, 
on issues of drug pricing. But on this important bill that was 
signed and has gone into effect, so many people are going to be 
benefiting from these sorts of changes. But we hear oftentimes 
in the halls of Congress, from my colleagues on the other side 
of the aisle, that Medicare negotiating lower drug prices is 
going to reduce innovation because Big Pharma's profits may go 
down, and I just have trouble fully believing and understanding 
that. I appreciate that we have people from all across the 
industry here with us today.
    Ms. Reilly, if I understand correctly, you represent many 
of the large drug manufacturers. Do you know how much the top 
five pharmaceutical companies made in profit last year?
    Ms. Reilly. Not off the top of my head, I do not.
    Mr. Casar. The information that I have pulled up has that 
the answer is about $82 billion in profit last year from the 
top five pharmaceutical companies. Professor Conti, of the 210 
prescription drugs approved by the FDA between 2010 and 2016, 
do you have a sense about how many were supported likely by 
taxpayer funding?
    Ms. Conti. Likely all.
    Mr. Casar. Yes. My understanding is that it is all of them. 
To me, we need to both address any kind of self-dealing that we 
see in PBMs. I appreciate that we are tackling that issue, but 
I also think that we should be looking at the entire picture 
and making sure that we are making sure that we are investing 
in innovation and research but also the enormous amount of 
profit that we see is also directly impacting the huge prices 
that everyday people have to pay. Negotiating drug prices, it 
is going to reduce the deficit and save seniors money, and if 
we end up going to a Medicare-For-All system eventually, those 
savings will accrue overall to the American public.
    Now turning to the question of PBMs, we have heard that 
there can be these charges, direct and indirect remuneration 
fees, known as DIR fees, weeks after a medication is sold at a 
pharmacy. These can sometimes be unpredictable fees, can be 
challenging for independent and community pharmacies. DIR fees 
that PBMs charge have increased by large amounts, in some 
reports by thousands of percent, 100,000 percent in the past 10 
years by some reports.
    During Dr. Dwayne's testimony, it sounded like DIR fees and 
other fees that PBMs charge pharmacies can constrain the 
ability of independent pharmacies to stay in business. Dr. 
Chancy, how did DIR fees affect your members' ability to stay 
open and serve patients?
    Mr. Chancy. Thank you for the question. As I alluded to 
earlier, especially when the DIR fee started originally, they 
almost doubled every year. And in the last few years, from 2018 
to 2022, it almost completely doubled in our small business, 
and this year through July, it is almost where it was last 
year, so we have seen a huge increase in DIR fees this year. 
This is the first year I think I have gotten calls from eight 
or nine of my colleagues in the Georgia area, they do not know 
how they are going to make it. They are already concerned about 
the underwater reimbursement they are getting, and they are 
real concerned about what is going to be happening in 2024. We 
already are seeing the plans with lower reimbursement next 
year, and they are having a hard time surviving this year. So, 
it is critical because there are going to be small businesses 
like mine that are not going to make it through this situation.
    Mr. Casar. Well, I appreciate it, and I look forward to 
working with anyone on this Committee on bipartisan efforts to 
address all of the different parts of the system that need to 
be addressed. Thank you to each of you for your testimony, and 
I yield back, Mr. Chairman.
    Chairman Comer. The Chair now recognizes Mr. Biggs from 
Arizona for 5 minutes.
    Mr. Biggs. Thanks, Mr. Chairman. Ms. Reilly, can you tell 
us what the profit was for PBMs last year?
    Ms. Reilly. No, but it was higher than for pharmaceutical 
companies.
    Mr. Biggs. Mr. Scott, what was PBMs' total?
    Mr. Scott. PBMs represent about 6 percent of the drug 
dollar. Four percent of that goes to paying----
    Mr. Biggs. Yes. What I want to know is how much did you 
guys make last year.
    Mr. Scott. I do not have a dollar figure. I can tell you it 
is about a two-percent margin on average.
    Mr. Biggs. Did you make more than the Big Pharma?
    Mr. Scott. I do not know the answer to that question.
    Mr. Biggs. OK. I had hoped that you would respond. Mr. 
Chancy, you said that you guys are in the community pharmacy or 
you guys use a pharmacy service organization. How many 
community pharmacies are in this pharmacy service organization?
    Mr. Chancy. I think, and the one that I am involved in, it 
is over 7,000.
    Mr. Biggs. Seven thousand, and who do they negotiate with? 
Are they negotiating with PBMs? Are they negotiating directly 
with pharmaceutical companies?
    Mr. Chancy. They are negotiating directly with the PBMs.
    Mr. Biggs. With the PBM themselves. OK. Great.
    Mr. Chancy. Correct.
    Mr. Biggs. Thank you. I have got questions for everybody. I 
just do not have time for everybody. Sorry about that. And 
then, Dr. Conti, in your written testimony, you said PBMs act 
as intermediaries that bargain on behalf of payers for lower 
prescription drug prices while receiving payments from drug 
makers, right?
    Ms. Conti. That is correct.
    Mr. Biggs. And then you said that PBMs create an arena for 
retail prescription drug maker competition. How do they create 
that arena for drug retail competition?
    Ms. Conti. Essentially, drug manufacturers bid using 
rebates to enter into coverage on the formulary.
    Mr. Biggs. OK. And you mentioned some benefits to consumers 
and payers through promoting access to drugs. Can you expand on 
that a little bit?
    Ms. Conti. Sure. Formularies push patients to use low-cost, 
safe, and effective drugs, largely generics and biosimilars 
when they are available. That reduces costs for us all and also 
expands access.
    Mr. Biggs. And yet, this is not a foolproof system, 
especially, I take it, from reading what you said what some of 
the others have included is this vertical integration. Is that 
the biggest problem with the PBM system?
    Ms. Conti. I would say that patients not being able to 
access drugs that are most beneficial for their specific 
condition is the most pressing concern.
    Mr. Biggs. I am sorry. I was going to ask is that because 
of the vertical integration, or is that because the PBMs are 
engaged in some kind of conduct, or is that because of the Big 
Pharma engaged in some kind of conduct? Where does that lie?
    Ms. Conti. Sure. I would say the blame lies in multiple 
places. No. 1, drug manufacturers set the list prices of their 
drugs many times at prices that are just simply too affordable 
for us all.
    Mr. Biggs. You mean unaffordable for us all?
    Ms. Conti. Right. Sure. So, I mean, so there are drugs that 
are now priced at higher than a college education, for example. 
That is excessive.
    Mr. Biggs. Does that have anything to do with these 
discounts or rebates that they are giving, or what is the 
feature for that?
    Ms. Conti. Drug prices are set high in the United States 
because simply drug manufacturers can charge them, and we will 
pay them.
    Mr. Biggs. And who pays that? Is that through the insurance 
companies themselves, or is that through the government paying? 
Is it both?
    Ms. Conti. Yes, it is both.
    Mr. Biggs. OK. We have talked about Medicare being able to 
negotiate for drugs directly. Is that any way analogous to PBMs 
negotiating?
    Ms. Conti. Yes. Essentially, our system is based on this 
competition. PBMs are acting as agents for us all, negotiating 
lower drug prices, and getting patients to use lower price just 
as safe and effective drugs when available. However, our system 
is eroding that activity by expanding or forestalling generic 
competition altogether or, frankly, not providing access to 
drugs that are needed at the pharmacy counter.
    Mr. Biggs. And, Mr. Burton, you included something. I am 
glad Dr. Conti touched on generics because you said patients 
are increasingly facing barriers to access to new generics and 
biosimilars as a result of formulary decisions to delay or 
block coverage. Expand on that, please.
    Mr. Burton. Let me give you two examples. We have tracked 
coverage of first generics. These are the first generics on the 
market in the Medicare program over the last 6 years. It now 
takes at least 3 years for new generics to achieve formulary 
coverage on as much as half of Medicare formularies.
    Mr. Biggs. OK. So, you have talked about formularies.
    Mr. Burton. So, they are launching. They are not being 
covered for 3 years.
    Mr. Biggs. Right. OK. And you are attributing that to PBMs, 
if I am not mistaken.
    Mr. Burton. Absolutely.
    Mr. Biggs. I am sorry, Mr. Chairman. How about the 
development of generics in and of itself? We have got problems 
with the development of generics on the front end and then 
listing in the formularies.
    Mr. Burton. Yes. So, a lot of this comes back to the 
incentives. And if a new generic or a new biosimilar is not 
going to be able to be covered, if a biosimilar that cost $300 
million to develop is not going to be able to get the market 
adoption necessary to get that return on investment, then it is 
not going to be developed, and we have seen manufacturers exit 
the biosimilar market. We have seen them decide it is actually 
easier to develop a brand drug and get their return on 
investment there because they are not getting the adoption in 
the commercial market to date.
    Mr. Biggs. Mr. Chairman, thank you so much.
    Chairman Comer. The Chair now recognizes Mr. Garcia from 
California for 5 minutes.
    Mr. Garcia. Well, thank you, Mr. Chairman. Thank you to our 
witnesses that are here.
    Certainly, there has been a lot of finger pointing that is 
going on between the PBMs, of course, and our big 
pharmaceutical companies. It has happened here today at this 
hearing. I just think it is important also to note who the big 
PBMs are. We have been hearing the term ``PBM'' a lot. We are 
talking about CVS Health, Cigna, United Health, a lot of these 
large PBM companies.
    We know that last year, the three major PBMs, which I just 
mentioned, here in the U.S. made almost $30 billion in profits. 
That is a 483-percent increase over just the past decade. And I 
am glad there has been bipartisan support and input on how to 
deal with this approach and ensure that the American public, of 
course, gets better cost for them when they are receiving the 
medication that they deserve and need.
    These are serious conversations about antitrust 
regulations, about enforcement. It has been noted multiple 
times that PBMs control almost 80 percent of the entire market, 
which is enormous. PBMs also integrate with insurance companies 
and pharmacies to funnel businesses to their own pharmacies and 
retailers, but the big picture here is a lot of finger 
pointing. I want to share, you guys, one of my absolute 
favorite memes, which, to me, this is a perfect example what 
has actually been going on as it relates to the American 
consumer.
    [Chart]
    Mr. Garcia. We have our pharmacy benefit managers pointing 
at Big Pharma and Big Pharma pointing back at our pharmacy 
benefit managers. Now, there is also a reason why Pharma is 
spending millions of dollars over here to trash PBMs. Let us 
also distract the American people from their central role in 
driving up costs while stuffing their own pockets. The eight 
Big Pharma players--AbbVie, Amgen, Bristol Myers Squibb, Eli 
Lilly, Gilead, Johnson & Johnson, Merck, and Pfizer--earned 
$110 billion in profits in 2022 and, by the way, according to 
the Senate Finance Committee, paid only 2 percent in taxes. And 
so, I want to make sure that these companies are called out by 
name on both the Big Pharma side and also the PBM side.
    On the 5-year period, from 2016 to 2020, pharmaceutical 
companies raised the prices of branded prescription drugs by 36 
percent. That is 4 times the rate of inflation. From 2016 to 
2020, the 14 leading drug companies spent $577 billion on 
buybacks and stocks, which is $56 billion more than they spent 
on research and development over the same period of time. In 
2021, 10 major pharmaceutical companies that made over $100 
billion in profits--$100 billion in profits--that is a 137-
percent increase from the previous year. So, both Big Pharma 
and PBMs are at fault, as we saw in that meme, so I want to 
make that just clear today for this hearing.
    Professor Conti, isn't it true that pharma manufacturers 
have specifically collaborated with PBMs to block generics from 
coming to the market and leaving consumers with higher prices?
    Ms. Conti. Yes.
    Mr. Garcia. And is it also not true they use their market 
power to obtain contract terms with payers, PBMs that limited 
or blocked generic competitors from being covered?
    Ms. Conti. We believe exclusions are rare. There are 
approximately 20,000 drugs sold in the United States every day 
and only a handful are excluded. However, generic forestalling 
of competition is real, and the GAO has just produced a report 
suggesting that it is increasing over time.
    Mr. Garcia. And I think what is really critical here is 
that if we are going to have actually reform here within this 
incredibly important part of the kind of American economy and 
people's healthcare, that reform is going to happen on both 
sides. It has got to happen on both sides. One thing that is 
concerning, and that has been about this hearing and other 
conversations around this topic, is that pharma and House 
Republican allies have also fought meaningful action on drug 
price reform and negotiation for decades.
    Now, President Biden and House Democrats passed the biggest 
prescription drug reform in decades in the Inflation Reduction 
Act that was brought up multiple times today, and every, by the 
way, single Republican voted against it. So, all of these 
comments about some of my colleagues feeling bad or sad for our 
American seniors or those that need medications, they voted 
against actually the Inflation Reduction Act, would actually 
help and it is helping this issue today.
    Now, Democrats have expanded negotiating for the best price 
for prescription drugs and Medicare. Again, Republicans opposed 
that. And Big Pharma, as we have heard today and have heard in 
their former public statements, are suing to overturn that, 
which is quite shameful, honestly. We have capped the cost of 
insulin at $35 for those on Medicare. To remind you folks, all 
the leading Republicans running for President, including Donald 
Trump and Ron DeSantis, have promised to repeal that, and so we 
have a lot of work to do here.
    I want to finally, Professor Conti, can you reiterate again 
why negotiating drug prices is so critical?
    Ms. Conti. Bottom line, it will reduce the price of drugs 
at the pharmacy counter and expand access. This should improve 
individual's lives and also population health.
    Mr. Garcia. Thank you so much. That concludes my time. I 
want to submit to the record of this article by the Wall Street 
Journal, which came out September 11, 2023, just recently on 
generic drugs, why they should be cheap, but why insurers are 
charging thousands of dollars for them, and so let us submit 
that. Mr. Chairman, I yield back.
    Chairman Comer. Without objection, so ordered, entered into 
the record.
    Chairman Comer. The Chair now recognizes Mr. Perry from 
Pennsylvania for 5 minutes.
    Mr. Perry. I thank the Chairman. Ladies and gentlemen, 
appreciate your time. I am not here to vilify anybody. I am 
trying to figure out some answers. My bosses, the people I 
represent, want access to affordable pharmaceutical products, 
and they know that the cost keeps going up. It has become 
unaffordable, and they do not know why. They just know that 
they can not afford it. And so, I am not here to point fingers 
at anybody. I am here to try and get a couple of answers.
    I represent a few independent pharmacies that are still 
hanging on, and we are not saying anything bad about the other 
ones that do good work as well for the community. But for 
independence, where people find value in seeing the same person 
that their parents saw or that they went to when they were a 
child, there is a trust there, but the independence, seem like 
they struggle. Well, I know they struggle, right, with the DIR 
fees, changes to Federal programs like TRICARE, and it does not 
seem fair.
    My question on behalf of, I think, these independent 
pharmacies to both the manufacturers and the PBM, so this is 
directly to you, Ms. Reilly and Mr. Scott. Why do PBMs, or 
maybe the PBMs do not. I do not know who does. Why is it that 
pharmacies are required to dispense brand when approved generic 
is a fraction of the cost? How does that happen? Why does that 
happen?
    Ms. Reilly. Well, as I have mentioned before, the PBMs are 
solely responsible for setting the formularies that exists for 
a health plan, so they decide what medicines get covered. They 
decide how much patients ultimately pay for those medicines, 
and oftentimes they make a choice to cover a medicine. And 
there are lots of government reports to show this where they 
prefer medicine with a high list price over a lower price 
generic or biosimilar medicine.
    Mr. Perry. I am sure Mr. Scott has an opinion.
    Mr. Scott. I do, Congressman. Thank you. In fact, generics 
are not usually placed on higher formulary tiers. Our companies 
have championed the dispensing of generics, which has 
contributed greatly to the fact that 90 percent of 
prescriptions dispensed today are for generic drugs. And in 
fact is, our companies contract with independent or chain 
pharmacies. One of the things that we are incentivizing through 
value-based contracts is for them to encourage more uptake of 
generics, so we have a very proven track record on that front.
    Mr. Perry. So, who is requiring? How does the brand get put 
into this is what the person can get and not the generic? How 
does it happen then?
    Mr. Scott. There may be instances where the first generic 
comes to market and has the positive competitive effect of 
having the originator drug, cut their cost down to a lower 
level, and the PBM is always going to favor the lowest net 
product.
    Mr. Perry. Because I will tell you, sir, my pharmacists are 
telling me there are countless--I do not know, right
    --but they are telling me, and I trust them. I do not know 
why they would tell me otherwise, but there are countless 
examples where the brand is the one that is prescribed as 
opposed to the generic. And it sounds like you are saying this 
is an episodic thing, but it sounds to me, according to them, 
like this is an epidemic issue. And, ma'am, do you have 
something to weigh in on here?
    Ms. Conti. Sure. The preponderance of evidence suggests 
that that behavior is actually quite rare.
    Mr. Perry. So, what would you contend? Is it the 
manufacturer? The next question, I will tell you, and maybe you 
can, Mr. Burton, you can weigh in here is, if you watch TV, and 
probably all do, sadly, you are going to be deluged with ads 
about things that you can not pronounce. You have no idea what 
the heck they do. And I just did a little research, and we are 
talking about hundreds of millions of dollars in prices for 
ads. We are encouraging people to go talk to their doctor and 
get this drug for this malady, and, of course, it is the list 
of all the things that are going to go wrong with you if you 
take it and so on and so forth.
    But where does that money come from, right? They come from 
customers, right? Doesn't it come from customer? Ma'am, Ms. 
Reilly, doesn't that come from customers who are, some are on 
the margins, right, can barely afford the medicine. They are 
being prescribed the brand instead of the generic, and the 
brand is on TV spending hundreds of millions of dollars saying 
buy this brand.
    Ms. Reilly. I do not know of any instance where a company 
is advertising a brand medicine when there is a generic that is 
available. That typically does not happen. The purpose of 
advertising is to make people aware of new drugs that may come 
to the market. It is intended to make people aware of symptoms 
that they may have but may not know why, in fact, they have the 
symptoms, to encourage a conversation with the doctor. At the 
end of the day, though, it is up to the doctor to make the 
decision about what medicine is most appropriate for that 
patient, and we think it is important for people to have 
conversations with the doctor.
    Mr. Perry. Sure. So do I.
    Ms. Reilly. But ultimately, the doctor should be in charge.
    Mr. Perry. I agree. Mr. Chairman, with your indulgence. Mr. 
Burton, can you weigh in on this whole conversation here?
    Mr. Burton. Absolutely. So it is, in a lot of cases, coming 
back to lowest net cost to whom: cost to the PBM or cost to the 
patient. So, there has been a lot of discussion of insulin.
    Mr. Perry. I notice that instead of price, it was cost, 
cost to whom. That is important.
    Mr. Burton. Right.
    Mr. Perry. Can you elaborate on that?
    Mr. Burton. So, if we look at the biosimilar insulin 
market. Biosimilar insulin is priced two-thirds, 65 percent 
lower list price than the brand insulin. And if we look at the 
best way to judge adoption in this market is looking at new-to-
brand prescriptions, new-to-brand prescriptions in that Lantus 
market are 65 percent of those prescriptions are written for 
the biosimilar, but only 30 percent of the prescriptions that 
are actually filled are for the biosimilar, because what is 
happening is those prescriptions for the biosimilar are hitting 
blocks and utilization management from the PBMs that push the 
patient to the branded product.
    Mr. Perry. All right. Well, thank you. My time has expired. 
I just do want to say this. We appreciate what you do in the 
larger sense because we all want to have access to these 
lifesaving treatments. That having been said, having government 
intervention and price fixing only discourages the research and 
development necessary to have things that saves people's lives, 
and so none of us here want our constituents, our bosses, to 
pay higher prices. But I would think that on my side of the 
aisle, and I will speak for myself in particular in my case, I 
do not think that government determining these things is the 
answer. And on the insulin front, we had companies that were 
willing to manufacture below the cap, who are maybe now being 
put out of business because of the cap. That is the beauty and 
the fallacy of government. They solve a problem by making 
another problem, and that is why we are opposed to government 
price fixing, not because we want our constituents and our 
bosses to pay more. That is indeed the exact opposite. With 
that Mr. Chairman, I yield.
    Chairman Comer. The Chair now recognizes Mr. Frost from 
Florida for 5 minutes.
    Mr. Frost. Thank you, Mr. Chairman. One moment. All right. 
Everyone in this country deserves access to medicine at a price 
they can afford. PBMs are one part of the problem, but we 
should not forget the massive role that Big Pharma plays in 
this, and my colleague, Mr. Garcia, had the very funny meme 
that he put up, which is 100 percent true. Big Pharma drug 
companies are watching this hearing, relieved that Republicans 
are putting all the blame on PBMs and that the $9 million spent 
in attack ads on PBMs is paying off.
    Mr. Chairman, I seek unanimous consent to enter into the 
record the Oversight Committee's Democratic staff report 
culminating the Committee's 3-year investigation into the 
pharmaceutical industry, which found that drug companies engage 
in anti-competitive behavior and exploit our healthcare system 
to make record profits at the expense of sick Americans.
    Chairman Comer. Without objection, so ordered.
    Mr. Frost. Thank you. With this investigation, they found 
some very important information. I think it is important people 
read about it. Professor Conti, as an expert on drug pricing 
and affordability, can you tell us, would breaking up PBMs 
without addressing the drug manufacturers' role guarantee that 
drug list prices will fall to more affordable levels?
    Ms. Conti. No. In fact, we expect prices will go up.
    Mr. Frost. OK. What are some of the tactics that drug 
companies have used to enrich themselves?
    Ms. Conti. Certainly, setting list prices and taking year-
over-year price increases on these list prices is enriching 
themselves and harming seniors and other Americans who depend 
on those drugs. In addition, forestalling competition in the 
form of generic and biosimilar competition is, again, enriching 
themselves without providing benefit to the American public.
    Mr. Frost. President Biden's Inflation Reduction Act 
allowed Medicare to negotiate directly with drug manufacturers, 
kept out-of-pocket patient costs, and put a life-changing 
monthly cap on insulin of $35. Professor, how can this 
Committee build on the work of President Biden's Inflation 
Reduction Act to help make prescription medication even more 
accessible and affordable?
    Ms. Conti. Two ways. First, expand access to all insured 
individuals and uninsured individuals for those lower prices, 
and second, by promoting transparency and competition 
throughout the system.
    Mr. Frost. Thank you so much. I would love to hear my 
Republican colleagues commit to holding a hearing on both PBMs 
and drug companies. I think it is important that we hold both 
accountable, and there is a lot of work that needs to be done 
there. Last year, drug companies, like Johnson & Johnson and 
others, continued to launch medicines at sky high prices, with 
the average cost of a new drug being more than $220,000 a year. 
And just last week, Republicans on this Committee sympathized 
with Johnson & Johnson, allowing them a representative to sit 
here and complain and air out complaints on citizens, holding 
them accountable.
    So, I think it is important that we look at all the bad 
actors in this, and I think PBMs and drug companies are both 
bad actors and part of the reason why we have Americans 
deciding between medicine and rent, medicine and food. And we 
can not talk about the people who negotiate the prices without 
talking about the people who set the prices, and I think both 
are very important. Thank you. I yield back.
    Chairman Comer. The gentleman yields back. I will recognize 
myself now for 5 minutes of questioning.
    Mr. Scott, I want to reexamine what Mr. LaTurner briefly 
touched upon, and that is just a question why one of your 
members CVS would charge $17,700 for a 30-day supply of 
Imatinib when transparent pharmacies charge $72 and still make 
a profit. Is that normal behavior by the PBMs? Is that an 
anomaly? Why would that scenario happen?
    Mr. Scott. I believe it is an outlier situation, 
Congressman. As I mentioned to Congressman LaTurner, the job of 
the PBM is to manage to the lowest net cost across all the 
drugs that they are negotiating for. Of course, they have to 
take into account other issues about supply and clinical 
effectiveness and all of those other questions. I can not speak 
to that specific drug. I know for Gleevec, that there are any 
number of different generic competitors at different price 
points out in the market at different levels of supply, but I 
think it is an outlier.
    Chairman Comer. When it has been mentioned earlier about 
PBMs--fill in the brand name--when they could fill a generic 
instead that would be cheaper and save money for everyone, is 
that because the PBMs get a higher DIR fee from the brand name?
    Mr. Scott. No. Typically, what I would assume would be 
happening there is that the actual net cost of the brand is 
coming in lower than the cost of the alternative and then lower 
net cost drug is being favored. And that net cost benefits the 
plan sponsor, the employer, who is deciding then how to use 
that savings to benefit the patients they represent.
    Chairman Comer. Well, we will touch on that----
    Mr. Raskin. Mr. Chairman, could I followup on your 
question?
    Chairman Comer. Go ahead.
    Mr. Raskin. Thank you for yielding for a second. You keep 
talking about lowest net cost, and it is been pointed out that 
that is different from lowest consumer price. If we are 
interested in benefiting patients and consumers, why should we 
care about lowest net cost to you? Would you explain that?
    Mr. Scott. Right. It is not lowest net cost to the PBM 
because the PBM is essentially negotiating those savings for 
the employer, whoever hires them, and the amount that the 
patient pays out of pocket at the pharmacy counter is a 
function of that employers benefit design. So, are they using 
the savings from that lower net cost drug to try and make the 
benefit affordable for everybody that benefits the patient, or 
are they using it to say you are not going to have out-of-
pocket cost on these particular drugs? It is the tradeoff that 
is been decided there.
    Chairman Comer. Mr. Scott, that is not consistent with 
anything that our research has found, and we are going to 
continue to investigate PBMs. And I know you represent the 
PBMs, and we wanted you to be here at the table because you all 
made some tweets in the last Committee hearing. We will mention 
one of those momentarily. But in communicating with all the 
stakeholders that we have communicated with and met with and 
spent hours, and we do not agree on a whole lot on this 
Committee, but we agree that PBMs need to be reformed 
significantly, especially from a transparency standpoint.
    Ms. Reilly, I want to turn to you now. Generics are usually 
less expensive than brand name, right? Why is that?
    Ms. Reilly. Well, you know, when a brand name medicine 
comes to market, it often takes 10 to 15 years, often in excess 
of $2 billion, to bring a product through. Ninety percent of 
what we do fails, so the likelihood of bringing a brand name 
product to market is quite low. On the contrary, generic 
medicines, they do invest some money, obviously, to bring a 
medicine to market, but it is almost as if we have baked the 
cake, and we hand over the recipe. And then----
    Chairman Comer. Let me ask you this. What role do drug 
manufacturers have in setting drug prices?
    Ms. Reilly. We set the list price of a medicine, which is 
the starting point for negotiation with a pharmacy benefit 
manager. And then we have to negotiate with PBMs, some of which 
negotiate, you know, for more people than entire countries like 
France. They have a lot of leverage, as we have talked about 
earlier today because----
    Chairman Comer. OK. Let me cut you off for time sake.
    Ms. Reilly. Sure.
    Chairman Comer. In our last hearing, we heard expert 
witness testimony on how PBMs use rebates and formularies to 
steer patients to certain drugs and that high rebates lead to 
high list prices. PCMA, represented by Mr. Scott, tweeted 
during our first hearing that rebates are completely unrelated 
to high drug prices, and I believe he said that. Now, Ms. 
Reilly, is that accurate that rebates have no impact on drug 
prices?
    Ms. Reilly. That is contrary to lots of folks, including 
the OIG, the Federal Trade Commission, Senate Finance Committee 
report, and others.
    Chairman Comer. Can you explain how rebates impact the 
price of pharmaceuticals?
    Ms. Reilly. Well, as I said before, you know, we do set the 
list price, but the preferences of PBMs do matter. They set the 
terms of negotiation. And again, there have been multiple 
studies that have shown that PBMs typically prefer medicines 
with high list prices, in part because they make their 
compensation in part based off of the list price. Whether that 
is a rebate or a fee, it is tied to the list price of the 
medicines. The higher the list price, the more money in their 
pocket.
    Chairman Comer. Exactly. And just to be clear, who in the 
market benefits the most from rebates?
    Ms. Reilly. I would argue the PBMs, insurers.
    Chairman Comer. PBMs benefit the most from the rebates, and 
that is something that I believe there is bipartisan support in 
this Committee at least to reform that, and we would love to 
continue to have discussion with all the stakeholders. Both 
Republicans and Democrats on this Committee are going to 
continue to work to try to come up with a meaningful solution.
    I do not believe just increasing transparency is going to 
do a whole lot. We are in close communication with our friends 
on the Energy and Commerce Committee. I know there are several 
bills over there. We are waiting to see what happens over 
there, while at the same time we are going to continue to 
investigate and try to come up with meaningful solutions to 
reform the PBMs and all the problems that we have heard today 
from both sides of the aisle about PBM abuse. And I believe 
that we can hopefully get something done in a bipartisan 
manner.
    My time has expired. The Chair now recognizes Mr. Mfume 
from Maryland for 5 minutes.
    Mr. Mfume. Thank you. Mr. Chairman, I want to thank you and 
Ranking Member Raskin for calling us back together on this 
issue. The first hearing was an eye opener, and this one seems 
to be the same way. I think there is a lot of finger pointing 
here, but what we are not seemingly able to do is for anybody 
to take any real blame or responsibility for a terrible, 
terrible situation that is affecting people all across this 
country. As I said during that last hearing, people are hurting 
while companies are profiting.
    PBM profits have increased rapidly even as lifesaving 
medications continue to be unaffordable and inaccessible for 
many people across this country. However, because PBMs operate 
in this opaque and impenetrable manner, the specifics about PBM 
practices are not well understood, such as their contracts with 
pharmaceutical companies, such as their rebate structures, such 
as their spread pricing. It is all kind of hocus-pocus for the 
average citizen, who just knows that they are paying more and 
are often told that they can not get a drug that has been 
prescribed by their doctor because some other party has made a 
decision that that is not to be the case.
    PBMs, in my opinion, sometimes have more to say about drugs 
than the actual doctors, so I am going to do a couple of things 
here. Professor Conti, I want you to think for just a minute. I 
am going to come back to you about specific PBM business 
practices that you believe can increase transparency as we know 
it. I am one of those that believe you open the window and you 
let the sun shine in, and so I am a big advocate for 
transparency. I want you to think about your own suggestions in 
that regard and your own considerations.
    I do want to make it clear, though, that it seems that from 
our discussion today and our previous discussion that we know 
two things that we knew before: PBM profits are soaring, and 
second, PBMs' position in the drug supply chain puts them in a 
place where they can and do exert enormous influence on all the 
players who are part of that. Dr. Chancy, two quick things from 
you, and I would appreciate if you could, because of time, a 
``yes'' or ``no'' answer. Renumeration fees have increased 33 
percent in 2 years. Yes or no?
    Mr. Chancy. Yes.
    Mr. Mfume. And how much of a burden has that put on you and 
others like you in a very short amount of time?
    Mr. Chancy. It is a huge burden.
    Mr. Mfume. And I want to ask you also as we think about 
those renumeration fees, you had mentioned in your testimony, 
as I understood it at least, that your perspective is a 
drowning perspective, and that what is happening in rural 
America and what is happening even in urban America has brought 
together two sets of constituents that want real relief. Could 
you just tell me for a quick second if you have got an idea 
about how to break that or what this Congress ought to be doing 
with respect specifically to renumeration fees?
    Mr. Chancy. Well, I think the remuneration fees are 
critically impacting the small businesses. We are going to see 
a change of that come first of the year. What my colleagues are 
concerned about is what that is going to do the first 3 to 6 
months of the year when they have those fees that are added 
back, but they are also reducing the cost of the reimbursement 
on the drugs.
    Mr. Mfume. OK. And one other quick thing here. Mr. Scott, I 
appreciate your testimony. I know who you are representing, but 
I really got offended when you said that drug companies happily 
lowered the cost of insulin. That is an outright 
misrepresentation. If they were happy about doing it, it would 
not take the U.S. Government to make them to do it. They fought 
every step of the way. So, I want to correct that aspect of the 
record. While that may be your opinion, it is not one that I 
share, and it is not akin to what the truth is as we know it.
    Mr. Chairman, I am holding a report as a comprehensive 
overview of the healthcare industry and our society released 
last year that says a number of things that underscore what we 
are hearing today that I would like to have unanimous consent 
to be entered into the record. And I have a study of the 
operation of the generic drug market by the Maryland 
Prescription Drug Affordability Board that I also would ask 
unanimous consent to have entered into the record.
    Chairman Comer. Without objection on both requests.
    Mr. Mfume. Ms. Conti, would you take a second to respond?
    Ms. Conti. Sure. Formulary replacement behavior that erodes 
the use of generic and biosimilar drugs should be investigated. 
Other contracting practices that, again, contribute to the 
forestalling of generic and biosimilar competition should also 
be investigated; and then, finally, most favored nation clauses 
in contracts that reduce the ability of generic drugs to enter 
the market or to compete and/or reduce PBMs' ability to 
negotiate the lowest prices on behalf of America.
    Mr. Mfume. Thank you, and thank you, Mr. Chairman. My time 
has expired.
    Chairman Comer. The Chair now recognizes Ms. Harshbarger 
from Tennessee for 5 minutes.
    Ms. Harshbarger. Thank you, Mr. Chairman. Thank you for the 
panelists for being here today. Mr. Scott, I will start with 
you. Would you agree that lowering prices paid by prescription 
drug plans is not the same as lowering prices that patients pay 
at the counter? Yes or no.
    Mr. Scott. Not always.
    Ms. Harshbarger. And, in fact, pharmacy and drug 
manufacturer discounts treated as DIR do not lower drug prices 
at the counter. Isn't that correct? Yes or no.
    Mr. Scott. They can in some instances, and others they do 
not.
    Ms. Harshbarger. If Congress' goal is for seniors to 
benefit from drug manufacturer and pharmacy discounts 
negotiated by PBMs at the pharmacy counter, then would you 
agree that patient cost shares or deductibles should be based 
on the drug's net cost? After all, pharmacy discounts and drug 
manufacturer discounts are paid to PBMs and their affiliates.
    Mr. Scott. I think we need to continue to provide choice 
and flexibility to employers when they are designing their 
benefit and making decisions about premium and out-of-pocket 
cost.
    Ms. Harshbarger. OK. Ms. Reilly, while rebates have grown 
and net prices continue to fall, patient out-of-pocket costs 
are increasing. To illustrate this, despite a 62-percent 
decrease in the net price of a leading insulin since 2012, the 
average out-of-pocket cost for commercially insured and 
Medicare Part D patients taking this insulin increase by 60 
percent over this period. And my question is, what impact do 
you think that requiring rebates to be passed on to patients 
would have on the pharmaceutical market?
    Ms. Reilly. I think you would see many patients, insulin-
dependent patients, but many others would find significant 
savings at the pharmacy counter if rebates were actually being 
passed on to the patients.
    Ms. Harshbarger. Yes. Would it start to address some of the 
distortions seen in the market today?
    Ms. Reilly. Absolutely.
    Ms. Harshbarger. Thank you. I will go back to you, Mr. 
Scott. According to a December 2021 study by the drug pricing 
research nonprofit, 46brooklyn Research, in October 2021, 
competition among new generic manufacturers brought the median 
list price of generic Tecfidera, a blockbuster MS drug, down to 
$900 per prescription. The average pharmacy acquisition cost at 
that time was $184 per prescription. Considering the brand 
version of that drug, it had a list price of more than $8,200 
per prescription at that time. So, my question is, what do you 
say to the more than half the seniors who were stuck in 
Medicare Part D plans whose PBMs forced them to buy the more 
expensive brand version when they could have saved thousands of 
dollars by taking the generic?
    Mr. Scott. So, without knowing the specifics on that drug, 
I would operate off an assumption that the brand was able to 
bring, not the price, but the cost of that drug down below the 
cost of the competitor, and so it made the cost for the 
Medicare plan less expensive.
    Ms. Harshbarger. You know, I just left another hearing on 
Energy and Commerce with CMS, and we talked about these things, 
and there is a lot of work to be done. And the GAO just did a 
study that proves that there is a lot of work to be done, and I 
am going to suggest that the GAO study that they did complete 
goes to the FTC to do their inquiry, investigation, whatever 
you want, on PBMs. But there is a lot of disparity there, and I 
know as a pharmacist and as a compounding pharmacist what the 
cost of these drugs are. So, a lot of work to be done, and I 
appreciate you all being here today. And thank you, Mr. 
Chairman, for letting me waive on. Thank you, sir.
    Chairman Comer. The Chair now recognizes Mr. Auchincloss 
from Massachusetts.
    Mr. Auchincloss. Thank you, Chairman. I appreciate you 
allowing me to waive on. I wish that the gentleman from 
Missouri had stayed. We could have had a good colloquy because 
he brought up Netflix as an analogy, and it is a shame because 
it is actually a terrific analogy. And yet, he derived the 
exact wrong conclusion from that analogy, but it is a useful 
case study because we get drawn into all this jargon to help us 
think through what is really happening here.
    Netflix is actually kind of exactly how we would hope that 
insurance companies and PBMs would work. You pay a subscription 
fee every month, $11 for Netflix. That is like your premium to 
an insurance company. They have a catalog of shows. Some of 
them cost a lot to make, some of them cost nothing at all to 
make, blockbusters or indie films, and yet because you pay that 
subscription fee, you get to watch the whole catalog, which is 
like their version of a formulary. And they even have, like, a 
specialty pharmacy kind of where you can get mail order DVDs if 
you really want something esoteric that they can not supply off 
of the streaming service. So, I wish insurance companies would 
look like Netflix. It actually has a good competitive model, 
and they have got Disney Plus and Paramount, and they got a 
nice competitive marketplace there. It is keeping the premiums, 
as in the subscription fees, on a monthly basis low.
    Now, let us actually use the Netflix analogy to describe 
how PBMs actually work. Let us say you wanted to watch Real 
Housewives. They would instead say, oh, that actually costs a 
lot of money to make. Could you try Gilmore Girls first? We 
need you to watch that and see if you like it. That is called a 
step edit. That is what the PBMs do there, or they would say, 
you know what? We need a written permission from your wife to 
go watch Real Housewives because we will not let you watch it 
otherwise. That is called a prior authorization. Now, let us 
say that you wanted to watch Pirates of the Caribbean. And they 
said, well, wait a minute. That costs $250 million to make. We 
are going to need you to pay co-insurance on that. So, can you 
fork over $25,000 to help us cover the cost of that production?
    Now, of course, consumers would say get lost, right? They 
would unsubscribe immediately. They would go to Disney. You do 
not have that kind of behavior. Why doesn't that happen in 
PBMs? Why don't we have that same kind of competition? Now, 
there are a lot of reasons. I do not want to overexert the 
analogy. There are legitimate differences, particularly with 
genericization, et cetera. But a big one is that wanting to 
watch Pirates of the Caribbean is different than having cancer. 
When you have cancer, you do not get to just say actually, I 
would rather not pay that co-insurance. What you have to say 
is, oh my goodness, my husband has to quit his job to take care 
of me, and I have to sell my car, and we are going to have to 
sell the house, and we are going to go into medical debt, which 
is one of the leading causes of bankruptcy in this country.
    We have a system where the insurance companies, through 
formulary design, have put the onus of out-of-pocket costs 
squarely on the patients in this country in a way that is 
driving people to despair and debt. Now, PBMs like to claim 
over and over that drug manufacturers alone are responsible for 
high drug prices and for setting drug prices, but it is just 
not true. A 2022 report from 3 Axis Advisors' single plan 
analysis found a 51-percent increase in prices at the counter 
for generic medications in a 30-month period in Medicare Part 
D, despite the fact that NADAC saw 8.7 percent deflation for 
the same basket of generics, so the actual cost versus the 
billed cost.
    Now, also in a newly released report by 3 Axis Advisors, 
their analysis found that one PBM reimbursed an independent 
pharmacy at five different prices for an antidepressant 
medication, duloxetine, dispensed by the pharmacy on the same 
day. Five different prices the same day, same pharmacy. The 
prices range from $9.30 to $96, a tenfold difference in price 
for the same drug at the same pharmacy on the same day. Mr. 
Chancy, would you agree that based on the foregoing, it is the 
PBMs that are driving drug prices up for American seniors?
    Mr. Chancy. Yes.
    Mr. Auchincloss. And then, Mr. Scott, can you explain 
please how generic medications, where the market is supposed to 
work efficiently, can decrease by 9.1 percent, yet their costs 
for seniors increase by 51 percent?
    Mr. Scott. I am sorry. Congressman, could you say that 
again? How generics----
    Mr. Auchincloss. Can decrease by 9.1 percent as measured by 
NADAC. That is the actual cost, that we have to improve NADAC 
to get more transparent reporting, but even so it is still the 
best measure, yet the cost for seniors increase by 51 percent. 
This is an independent analysis.
    Mr. Scott. Depending on the generics question, I think it 
gets back to the issue we have discussed for much of the 
hearing around whether the competitor drugs are coming in at a 
lower net cost and, therefore, getting favorable formulary 
replacement.
    Mr. Auchincloss. Well, we are talking about generics here.
    Mr. Scott. Right, and generics normally get that favorable 
formulary replacement the vast majority of the time, and that 
is why we have seen that 90 percent dispensing rate for 
generics.
    Mr. Auchincloss. Well, the vast majority of time except, it 
seems, from this analysis. Would you agree that we need better 
NADAC reporting as a basis for pharmacy reimbursement for those 
claims?
    Mr. Scott. We certainly would be open to talking about 
that.
    Mr. Auchincloss. Would you be open to having out-of-pocket 
cost predicated on NADAC as opposed to on the list price?
    Mr. Scott. I think you have to involve plan sponsors in the 
conversation about how they want to design benefit for the 
unique populations they represent.
    Mr. Auchincloss. No, no, no, that is a circumlocution. Do 
you agree as a representative of the PBM that it would be more 
fair to predicate out-of-pocket cost for what the actual 
pharmacy paid for that drug?
    Mr. Scott. The PBM is there to work on behalf of the 
employer or the plan sponsor who is going to make the 
determination about those questions on out-of-pocket cost.
    Mr. Auchincloss. OK. I am here to work on behalf of the 
patient, OK? And what is good for the patient is that they are 
not paying co-payment rates that are predicated on the list 
price that nobody pays. It is a made-up price, it is literally 
fiction, and the only person who is exposed to it are my 
constituents. Why shouldn't they have an out-of-pocket cost 
that is based on what the actual transaction and payment is for 
goods delivered?
    Mr. Scott. To the extent that we are deploying the savings 
delivered by the PBM, if you put all of that toward out-of-
pocket cost, then you risk the potential of having an impact on 
the affordability of the benefit. It is a tradeoff. As long as 
the cost or price is high----
    Mr. Auchincloss. Over and over again you point to the 
premiums going up. There is just no evidence to support that. 
It is not true that the premiums have to go up, and, indeed, 
what we have seen is out-of-pocket cost going down, improving 
medication adherence, and it will lead to an overall healthier 
risk population.
    Mr. Scott. And I know----
    Mr. Auchincloss. It is a false assertion.
    Mr. Scott. And I know when you and I last visited, we 
talked about the static versus dynamic scoring issues that have 
come around some of the estimates. But prior estimates, for 
example, around the Trump Administration's rebate rule 
demonstrated a fairly dramatic effect on premiums, so it is 
something I think we have to be sensitive to.
    Mr. Auchincloss. I am over my time. Chairman, thank you.
    Chairman Comer. The gentleman's time has expired. A very 
good analogy there. I enjoyed that. Now, our questions have 
concluded. And prior to adjournment, the Ranking Member and I 
are going to give brief closing statements. I now yield to the 
Ranking Member for his closing statement.
    Mr. Raskin. Mr. Chairman, first of all, thank you for 
calling us together for this important hearing. Thanks to the 
witnesses. I want to thank my friend, Mr. Auchincloss, for the 
great insight he brings to this problem.
    I appreciate the insights of all the witnesses and the ways 
that different players in the healthcare system, from the 
pharmaceuticals to the PBMs, may be placing barriers in the way 
of people just getting affordable medication. And it is 
troubling to me that three companies dominate the PBM market, 
giving them outsized influence in the healthcare system that is 
replete with actors, who, if we are being honest, are all 
incentivized to put their profits over the needs and the 
interests of the patients, our constituents. I do not want to 
lose sight of the role that Big Pharma plays in this complex 
and multifaceted pharmaceutical supply chain. Mr. Scott makes 
some fine points about that. Drug companies have spent years 
making billions off of patients, and PBMs are now just one 
piece of the puzzle. They have gotten in on the action.
    The Inflation Reduction Act has already begun to create 
savings for seniors because we made sure that the market works 
by giving Medicare the power to negotiate with Big Pharma for 
lower drug prices, and President Biden is now working to expand 
these wins for people covered in the commercial markets as 
well. We have got to figure out a way to make sure that the 
patients are not paying exorbitant, bloated, inflated prices so 
different actors within the medical system can get rich off of 
them. We got to put the patients first.
    I am glad for this hearing, and I am glad to continue our 
work of investigating ways that we can be prioritizing the 
needs of the American people first. Mr. Chairman, I look 
forward to working with you on legislation to that effect. I 
yield back to you.
    Chairman Comer. Thank you. You want to ask questions, Ms. 
Porter? Is that OK? Ms. Porter, go ahead. She has been an 
advocate on this issue. I will make an exception. You have 5 
minutes.
    Ms. Porter. Thank you very much, Mr. Comer. I am sorry. I 
was coming from a hearing that was not run as well as you do 
here in Oversight. Ms. Reilly, we can both agree that pharmacy 
benefit managers, PBMs, are not working for patients, but I 
really want to illustrate the problem for the American people. 
What are pharmacy benefit managers supposed to do?
    Ms. Reilly. The goal of a pharmacy benefit manager is to 
negotiate on behalf of employers and plan sponsors to lower the 
net cost of drugs, and I actually think they do that very 
effectively. I think the challenge is those rebates and 
discounts, which often exceed 50 percent of the list price, do 
not make their way back to the patient to lower the price that 
they ultimately pay.
    Ms. Porter. Are PBMs transparent about how much savings 
they negotiate and where those savings are realized?
    Ms. Reilly. Typically, not. I think that is one of the big 
challenges in the system today, is that it is hard for 
employers and plan sponsors to understand where the money goes. 
Increasingly, employers are demanding passthrough of almost all 
the rebates, but as a response, PBMs have shape-shifted and 
they have started transferring and getting more revenue off of 
fees they create, which are often opaque. They get them not 
just from pharmaceutical manufacturers, but from pharmacies as 
well.
    Ms. Porter. So as a patient, do patients have a way to 
know----
    Ms. Reilly. No.
    Ms. Porter [continuing]. Whether they are getting cheaper 
prices because their insurance plan uses a PBM?
    Ms. Reilly. No.
    Ms. Porter. OK. So, if PBMs were more transparent, it is 
possible that patients would know, and employers would know. We 
would have this data, and we would be able to figure out 
whether patients are really benefiting from PBMs and which 
PBMs. I have seen your ads, by the way, that you run about 
PBMs, and your ads say that transparency is key. And many of 
your members, large pharmaceutical companies, advertise their 
medications on TV. Even though only doctors can prescribe these 
medications, these companies advertise directly to consumers. 
What is the purpose of those ads?
    Ms. Reilly. The purpose of those ads is to raise awareness 
for patients about medicines that may be available to treat 
conditions that they either know they have or know that they do 
not have yet. They raise symptom awareness to prompt a 
conversation between a doctor and the patient. But ultimately, 
the decision about what medicine gets prescribed is up to the 
doctor and oftentimes the PBM or an insurer depending on 
whether that medicine is actually on the formulary or not.
    Ms. Porter. So, there are lots of disclosures, though, that 
are made in these ads. We have all seen----
    Ms. Reilly. Yes.
    Ms. Porter [continuing]. That virtually every drug is going 
to give you a headache and constipation and who knows what 
else. Those disclosures do not include in these direct to 
patient ads any disclosure about price? There is no price 
transparency in those ads, correct?
    Ms. Reilly. Well, that is in part because the price paid 
depending on the consumer can vary. A patient on Medicaid may 
pay a different price than a patient with commercial insurance, 
so no, they do not, but those ads do direct patients back to 
those companies' websites to find out more information about 
pricing and what prices might be applicable for them.
    Ms. Porter. Are the companies' websites required to 
disclose the pricing?
    Ms. Reilly. They are not, but our companies have 
voluntarily agreed to do that.
    Ms. Porter. The list price?
    Ms. Reilly. Yes.
    Ms. Porter. OK. So, can you commit today to change in 
policy that your organization will disclose pricing? I realize 
there are multiple prices, but we could come up with a rule 
that says you have to disclose a range, you have to disclose 
the median price, the average price. Will you commit to that?
    Ms. Reilly. I believe our companies are already and have 
committed to doing that. They direct patients back to their 
website, where patients can find more information about the 
prices of the medicines. It is important as a patient, first of 
all, to not be scared off. They may go to the website and say, 
well, that is the list price. That is what I am going to have 
to pay, which may not be the case.
    Ms. Porter. I am reclaiming my time. I mean, they may be 
scared off by the headaches and constipation, too. I mean, the 
idea here is to give people information. You said transparency 
was key. I think it would be key for people to have a sense of 
the possible range of cost. Not everyone is going to get the 
side effects either. Let me make you list those, and so the 
idea here is you would give some information about price to 
give some idea. I mean, I think the problem here is that you 
are arguing for transparency in the case of PBMs on price, but 
then your company is not willing to--your organization, excuse 
me--is not willing to commit for transparency in your own 
advertisements. Now, as you know, the Trump Administration----
    Ms. Reilly. I would disagree that we have not been willing 
to advocate for transparency. We supported the Trump rebate 
rule, which would have provided transparency across every 
single medicine sold in the Part D program. The only entities 
that opposed that were the pharmacy benefit managers, who did 
not want transparency into those prices.
    Ms. Porter. OK. I want to make sure we are talking about 
the same thing because I do not want to talk past to. The Trump 
Administration rule that would have required drug manufacturers 
to disclose list prices in TV ads, your organization and its 
members supported that? Yes or no.
    Ms. Reilly. Our organization did not support that, no.
    Ms. Porter. So, you spent time and money and your 
organization spent time and money opposing transparency for 
pricing when you advertise, but you want to hold PBMs to make 
those disclosures?
    Ms. Reilly. In part because the list price is not a price 
that nearly any one pays. Patients should know the price that 
they are going to pay when they go to the pharmacy counter, not 
the list price of a medicine. It is important for patients to 
have transparency in terms of their insurance design and how 
much they are going to be asked to be paid when they go to the 
pharmacy counter. And our companies' websites provide much more 
detailed information because it is not as simple as one number 
to be disclosed.
    Ms. Porter. I would just argue that, and I appreciate your 
indulgence, Mr. Chair. I would just argue that, you know, none 
of the disclosures that we are making when we are advertising 
directly to patients about something as complicated as 
prescription medicine, which they are not even authorized to 
prescribe to themselves, I think we could come up with a 
disclosure amount.
    What I want you to think about and what I really appreciate 
your good faith engagement with me on is that I feel a little 
bit like the pharma industry is pointing a finger at PBMs 
saying they are not disclosing enough about price, but you are 
not leading the way on price disclosures either. And I 
respectfully say that when people are watching a TV ad and they 
are in the middle of ``O-O-Ozempic'', they are not running to 
their website and looking up the price. Like, you put the 
important information for a market in an ad, and I think that 
with a lot more transparent drug pricing, we should have more 
transparency across the board. I yield back.
    Chairman Comer. OK. The gentlelady yields back, and I will 
conclude by saying I think this was a very substantive hearing, 
a very bipartisan hearing, a lot of different ideas and 
opinions. And the role that this Committee is going to play is 
we are going to continue to shine a light on this. We are going 
to continue to investigate. We are going to continue to 
brainstorm.
    We are watching our friends in Energy and Commerce very 
closely on this issue. We expect something to be done. There is 
support for something to be done, something meaningful. We want 
to increase transparency, and I think we all have the goal of 
lowering the cost of prescription drugs for consumers, and that 
is what PBMs were supposed to do, but we do not believe that 
that is happening. And when you have Republicans complaining 
about excessive profits, that is pretty bad because most 
Republicans are for the free market, and Republicans want to 
see companies succeed and we want to reward risk takers and 
innovation in research and development.
    But that is not what the PBMs are supposed to do. The PBMs 
are supposed to lower the price of prescription drugs, and I do 
not think when PBMs were created anyone ever envisioned the 
PBMs to become such massive vertically integrated companies. 
And that is a problem, and that is a problem that I think there 
is overwhelming bipartisan support to solve.
    You know what I was thinking? Congress passes lots of 
bills, and every bill that is passed is well intended, but 
oftentimes what happen are unintended consequences. And I was 
thinking about a couple of issues and bills that I have a 
pretty good amount of knowledge on in banking: Dodd-Frank. You 
know, Dodd-Frank was passed after the banks failed. The goal 
was to hold the banks accountable and to not have any more 
banks that are too big to fail, and what has happened since 
Dodd-Frank, there have been no new banks created. All the small 
banks are consolidating or being taken over by big banks, so we 
have less choice out there, and it has not reduced the price of 
banking. I would argue it has increased the price of banking, 
more fees because there is less competition.
    The Farm Bill. I am a farmer by trade. I am going to 
support the Farm Bill, but the Farm Bill has a lot of policy in 
there in my opinion, and I have argued and argued, that gives 
the large farmer a competitive advantage over the smaller 
farmer. It is almost impossible for a small farmer to get 
started in agriculture today, but the big farmers keep getting 
bigger every day.
    Then you look at healthcare. We have legislation that is 
passed and written in the legislation. There are higher 
reimbursements to larger medical providers with respect to 
Medicare and Medicaid reimbursements. And what has happened is 
it has almost forced every small family physician to join a 
larger network, and you have less choice out there, and it has 
not reduced the cost of healthcare. It has reduced competition. 
It has reduced choice and options for people, especially in 
rural America. And then PBMs. As I said earlier, no one ever 
envisioned PBMs to get to where they are today and be such 
massive vertically integrated companies.
    So, we need to have robust debate about this, we need to 
continue to have dialog, we need to start exploring options, 
and we need to get something done because healthcare is one of 
the biggest, if not the biggest, problems we have in America. 
And a very few times in Congress is there bipartisan agreement 
to fix something in healthcare, so I welcome the opportunity to 
continue to work with my Democrat colleagues to try to come up 
with a solution to fix this problem, to add transparency, and 
to lower the cost of prescription drugs for every American.
    With that, I want to again thank our panelists once again 
for their important and insightful testimony today.
    With that and without objection, all Members will have 5 
legislative days within which to submit materials and to submit 
additional written questions for the witnesses, which will be 
forwarded to the witnesses for their response.
    Chairman Comer. If there is no further business, without 
objection, the Committee stands adjourned.
    [Whereupon, at 1:08 p.m., the Committee was adjourned.]

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