Editor’s Note: The following is testimony delivered by Karen Van Nuys to the U.S. House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust on Sept. 11, 2024. More information about the hearing can be found here.
Key Points
- The PBM industry is highly concentrated and vertically integrated: Three PBMs control about 80% of the market, raising concerns about limited competition and innovation. Major PBMs are part of conglomerates including insurers, pharmacies, and healthcare providers, creating potential conflicts of interest and opportunities for self-dealing.
- This market structure allows for problematic drug pricing practices: PBMs often increase costs for generic drugs, inflate brand drug list prices through the rebate system, steer patients to higher- rather than lower-cost drugs, and engage in opaque spread pricing. These practices obscure drugs’ true costs and lead to higher drug expenditures.
- PBMs’ unique market powers can impact patient access to medications: PBMs are increasingly restricting patient access to therapies through utilization management policies like prior authorization and formulary exclusions.
- As a result, many stakeholders are negatively impacted: These practices negatively affect federal programs, employers, consumers, and uninsured individuals by increasing costs and potentially reducing access to medications.
- Policy recommendations: Suggestions include increasing transparency, reevaluating the rebate system, scrutinizing vertical integration, and better aligning PBM incentives with patient and payer interests.
Full testimony is available here.