Finally, Big Insurance's Pharmacy Benefit Managers are being probed by Congress
It was gratifying last week to see our efforts to educate members of Congress about pharmacy benefit managers (PBMs) beginning to pay off.
Those of you who are regular readers of this newsletter know that I’ve written frequently about how the profit-focused business practices of PBMs and their insurance company owners are making it increasingly difficult for people with insurance to get the medications they need at a price they can afford.
PBMs and insurers determine how much patients have to pay out of their own pockets for medications before their coverage kicks in. To maximize profits, these companies in recent years have ratcheted up out-of-pocket requirements as part of an ongoing effort to shift more and more of the cost of care to patients. Deductibles alone have more than doubled over the past 10 years, which has led to millions of Americans walking away from the pharmacy counter without their medications.
In addition to our reporting and analysis – as president of the Center for Health & Democracy and the Lower Out-of-Pockets NOW Coalition (LOOP NOW)– I’ve also met with both Democratic and Republican members of Congress and staff over the past several months, encouraging them to scrutinize PBM business practices. On Wednesday, members of the Senate Health, Education, Labor and Pension Committee did just that in a much-anticipated public hearing that featured the top executives of the three biggest PBMs along with the CEOs of pharmaceutical companies that make insulin.
As a follow-up to that hearing, the committee approved on a bipartisan basis a number of bills that would increase access to generic medications and reform PBM business practices to better assure that rebates and discounts PBMs demand from drug makers are passed on to policyholders.
Notably, the committee voted 18-3 to advance a bill to increase transparency around PBMs and the insurers that own and use them. Among other things, the bill would ban a common practice called spread pricing in which PBMs charge their customers more than they pay pharmacies, often pocketing the difference.
It’s also gratifying to see that other reform advocates are going after PBMs. In a Kaiser Health News story, former Federal Trade Commission attorney David Balto, who now represents clients suing PBMs, likened the PBM business to large monopolies that controlled much of the U.S. economy in the Gilded Age of the early 20th century. As he told KHN:
John D. Rockefeller would be happy to be alive today. He could own a PBM and monopolize economic power in ways he never imagined.
Rockefeller’s Standard Oil Company and Trust controlled almost all of the oil business in the U.S. from 1870 to 1911. Reporter Ida Tarbell’s investigative reporting of Standard Oil’s business practices inspired Congress and the Theodore Roosevelt administration to enact antitrust laws and break up the company.
Last June, the FTC voted to launch an inquiry into PBMs. That inquiry is still underway.
As we’ve noted in this newsletter, big health insurers Cigna, CVS/Aetna, and UnitedHealth now own the three biggest PBMs, which collectively control 80% of the PBM market. At all three insurers, the PBMs are contributing as much if not more to profits than the health plans they operate. The CVS PBM, Caremark, now contributes more to the company’s revenues and profits than either, Aetna, which merged with CVS in 2018, or the company’s 10,000 retail stores. And at Cigna, its Express Scripts PBM now generates far more in revenues and profits than Cigna’s health plans.
And increasingly, the three companies are using their customers’ money to buy back shares of their own stock, which benefits shareholders and senior executives, instead of reducing premiums and out-of-pocket requirements.
As we reported earlier this month, Cigna, CVS/Aetna, and UnitedHealth, along with four other large for-profit insurers, have spent more than $140 billion buying back their shares over the past decade and a half.
We were pleased when Sen. Tammy Baldwin (D-Wisconsin), inspired by our reporting, grilled the executives on their companies’ share buyback practices. She got all of them to acknowledge that their companies spent several billion dollars last year alone buying back their shares instead of reducing the amount of money insured Americans have to shell out to get their prescriptions.
In 2020, Baldwin introduced a bill to ban stock buybacks. It did not pass, but this year there seems to be renewed interest on Capitol Hill to reform stock buybacks. She joined several other senators in February in sponsoring the Stock Buyback Accountability Act of 2023, which would quadruple the one percent excise tax on corporate stock buybacks that was put in place by the Inflation Reduction Act of 2022.
We’ll keep you posted on that bill as well as measures in both the House and Senate to rein in PBM practices.
Power back to the people! ✊
Good work exposing the evil practices of PBMs and their masters, the nation's richest private health insurance corporations. A more satisfying conclusion would have been to remind readers that the recently reintroduced single payer Medicare for All bills in the House and Senate would solve this problem once and for all by eliminating private insurers and PBMs altogether. Instead of private insurance corporations that profit by denying care, we would have a single public health insurer like Medicare, covering everyone fir all medical needs. Instead of PBMs, the single payer would negotiate cc all drug prices directly with pharmaceutical companies. There would be enormous savings, and people would have unimpeded access to the care and medications they need.
BOOM. Problem solved.