WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Finance Committee, today questioned witnesses during a hearing entitled “Consolidation and Corporate Ownership in Health Care: Trends and Impacts on Access, Quality, and Costs,” about the impacts vertical integration of pharmacy benefit managers (PBMs), pricing transparency, and insurer consolidation have on health care consumers.
“Today, the top three PBMs control 80 percent of the market. PBMs, which are vertically integrated with the largest Part D plan sponsors, entice plans to incentivize beneficiaries to use pharmacies that are owned and operated by the PBM,” Menendez said. “With vertical integration both upstream and downstream, no one is protecting patients from paying too much at the counter. A recent MedPAC presentation indicated that vertically integrated PBMs in Medicare Part D may be benefiting from higher reimbursements to their own pharmacies while increasing costs to the Part D program. This has created a perverse incentive for PBMs to drive up costs for patients and limit patient access to pharmacies of their choice.”
Sen. Menendez asked Dr. Zack Cooper, Associate Professor of Public Health and Economics at Yale University and one of the witnesses at today’s hearing, if he agreed with MedPAC that vertical integration of PBMs could be causing patient harm and raising costs. He also questioned how this issue should be addressed to protect patients from consolidation and PBM anticompetitive tactics that are resulting in overcharging for prescription drugs.
The Senator also asked Caroline Pearson, Executive Director of the Peterson Center on Healthcare, about what hospitals, insurers, and providers can do to further improve transparency of health care prices for patients. A number of studies, including those authored by Caroline Pearson, have found that there are a number of reasons why price transparency itself does not materially influence consumer behavior, including patients tending to stick to the medical providers they know and trust, regardless of price.
“Since health care price transparency rules were implemented by the federal government in the past few years, Americans have access to more information than they’ve ever had about the cost of health care,” Menendez said. “However, you’ve observed that transparency around health care prices in and of itself does not significantly impact consumer behavior. Specifically, you’ve written that simply making prices transparent does not cause consumers to change their providers or their hospitals.”
The Senator concluded his questioning by inquiring if Dr. Cooper viewed that insurer consolidation leads to lower physician earnings and decreased work opportunities for physicians throughout the country.
“Last year, the American Medical Association released a study outlining health insurance concentration across the country. Notably, AMA found that 75 percent of local markets were considered highly concentrated according to federal guidelines,” Menendez said. “Further, in 91 percent of markets, at least one insurer had a market share of at least 30 percent and in 48 percent of markets, one insurer had a share of 50 percent or more. With increased consolidation, health insurers amass more power in the market and have greater ability to lower payments to physicians.”
In May, during a Senate Finance Committee hearing entitled, “Barriers to Mental Health Care: Improving Provider Directory Accuracy to Reduce the Prevalence of Ghost Networks,” Sen. Menendez highlighted how the harmful effects of ghost networks are exacerbated by their disproportionate burden on marginalized groups, and how paying unexpected bills or paying for out-of-network care adds increased hardship to low-income communities.
In March, Sen. Menendez questioned witnesses during a Senate Finance Committee about the impact pharmacy benefits managers (PBMs) have on the prescription drug supply chain and how their warped incentive structure drives up prices for patients and consumers. The Senator emphasized how PBMs prefer prescription drugs with a higher list price versus those with a lower list price, as appears to be the case for Humira biosimilar drugs introduced into the market to treat rheumatoid arthritis, because they can obtain larger rebates.
PBMs do this even though the patient would pay significantly less if they selected the drug with the lower list price.