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Editor’s note: This story is based on an interview at Abarca Forward, a conference that was hosted by Abarca Health, a pharmacy benefit manager last week in San Juan, Puerto Rico. MedCity News’ Editor-in-Chief Arundhati Parmar and Senior Reporter Katie Adams were invited to attend and speak at the conference. All travel and related expenses for the team were covered by Abarca. However, company officials had no input in editorial coverage.
In the U.S., there’s Big Tech whose unfettered growth and inability to regulate how users post inaccurate content has undoubtedly contributed to misinformation such that everyone is discombobulated over the future of democracy.
Then, there are Big PBMs (pharmacy benefit managers) — the three biggest are CVS Health’s CVS Caremark, Cigna’s Express Scripts, and UnitedHealthcare’s Optum — who find themselves in the hot seat in state legislatures, Congress, and at the Federal Trade Commission. Why? Many people — including those who are part of a new breed of PBMs — accuse the larger players of anti-competitive practices that drive up the cost of prescription drugs.
On Friday, a day after the Senate Commerce Committee held a hearing on the proposed Pharmacy Benefit Manager Transparency Act, I had a chance to sit down with JC Scott, president and CEO of the Pharmaceutical Care Management Association (PCMA) at the Abarca Forward conference that discussed the future of healthcare, including pharmacy benefit management. Scott is managing not only Congressional scrutiny but also state attempts to bypass PBM-owned or affiliated pharmacy networks, which states like Oklahoma believe provides more choice to consumers. (PCMA sued Oklahoma arguing that its Patient’s Right to Pharmacy Choice Act violated the federal ERISA law that preempts state law. The lobby group largely lost the battle in a lower court and is now appealing the case to the 10th Circuit Court of Appeals)
The following is a slightly edited Q&A with Scott.
MedCity News: JC can you give an update on the Oklahoma lawsuit? The last I read was the court wanted input from the feds. I don’t know what that means. Is it that the Labor department needs to come and explain ERISA to the court?
Scott: Yes, more or less. So in any litigation, just by way of background, the court can seek amicus briefs. Briefs from different parties who aren’t actually parties to a lawsuit to help inform their thinking. And in this case, they approached the US government broadly because of the nature of the underlying substance. We’re talking about whether the ERISA law, preempts Oklahoma, and whether Medicare, preempts, Oklahoma. So they’ll be looking for input from a combination of the Department of Labor, the Department of Health and Human Services, and the Department of Justice as the government’s lawyers. And I think the most recent development was that the government basically said, ‘Gee, this is complicated. Can we have more time?’ So it’s been granted an extension of an additional 30 days to decide what and if they may submit back to the court. And so everything’s been the schedule for everything has been shifted out.
MedCity News: There were 35 state attorney generals including from Minnesota who agreed with the lower court and have filed amicus briefs. Do you have anyone on the PBM side that has put in an amicus brief?
Scott: There are a number of organizations. I don’t know that any amicus briefs have been filed yet at this stage of the appeal. But there are a number of plan sponsor-related organizations that are sort of looking at this from the other side. They would be most directly impacted by the lack of uniformity in terms of the regulation of pharmacy networks.
MedCity News: How confident are you that the federal court will overturn the lower court decision down and rule in your favor?
Scott: I took off my lawyer hat many years ago, so I will hesitate to give you any specific prediction without the presence of our actual lawyer to help with that. But from my perspective, this is a fairly narrow and discrete issue. The piece of the law that is being examined by the courts is specific to pharmacy networks. Which is, which is like a provider network for any health plan and the notion of ERISA, which is to protect and have uniformity across benefit design and plan design. To me, provider networks are sort of foundational to that idea. So I would hope and expect that the court would see it the same way that this is the most basic of basics when it comes to the types of plan design issues that that federal law is intended to govern.
MedCity News: Oklahoma wants people to go to whichever pharmacy they want to and not be dictated to or not told where to go by the PBM, which is providing the benefit plan to the employer right?
Scott: Yeah. Generally, plan sponsors through their PBMs like to use pharmacy networks to help encourage people to go to pharmacies that are going to be in-network, meaning lower cost and higher quality. And so generally speaking, the pharmacies that participate in the network their reimbursements are going to be lower, but they’re going to see higher volume, which on net is a benefit for the business. And it’s better for the patient because generally, it’d be a lower cost for the patient going to one of those preferred network pharmacies. And then there are also quality measures around it that help to encourage, sort of the quality delivery on behalf of the patients.
MedCity News: Yesterday there was a panel at this conference called Virtual PBM where they the general sense was that vertically integrated PBMs have largely failed in providing cost and efficiency improvements. And so, insurance companies need to look at moving away from a single large PBM to service them and have various different capabilities that the single PMM provides from different vendors. This would give the insurance plans greater flexibility, more choice, and a better patient experience. I’m guessing you disagree.
Scott: It’s good to have a diversity of different types of PBM offerings. Traditionally, the larger the company, the more scale they have the better able they are to negotiate with the big drug company, the big pharmacy chain to drive deeper discounts. Those go back to the plan sponsor. The rebate gets delivered back to you if you’re an employer sponsoring a healthcare plan, using that is key to keeping premiums down for everybody.
MedCity News: I’m curious about Congress and legislative action. It is quite amazing to see that this is one topic around which Republicans and Democrats that generally cannot stand each other coalesce. I’m expecting legislative action this year. Are you expecting something as well?
I would expect — there’ll definitely be hearings. We already saw one hearing yesterday in the Senate Commerce Committee. Legislation has been introduced as it has been in past years. I think that the bigger question mark, and it’s not unique to our sector is can Congress get much of anything done given the very narrow majorities in each chamber, the division of power that we see between the two. Generally speaking, that kind of a political dynamic does not set up well for moving a lot of large legislation.
MedCity News: This is bipartisan though.
Scott: Right. But if you look at the way, for example, we’re talking about legislation in the Senate, the way that the Senate operates, right? If you were to move a piece of healthcare legislation to the Senate floor, you have an open amendment process. Which means the way that they govern how they bring bills to the floor is, is very relevant.
The cost impact of legislation matters too. We haven’t seen a congressional budget office estimate on the bill that was the subject of the hearing. This week. some of the economists who testified were trying to give game-outs, different behavioral choices the market might make if that legislation were to be enacted, and estimated anywhere from like $10 billion to $40 billion of impact on government costs. And so that kind of dynamics certainly influenced the likelihood or lack of likelihood of legislation moving forward.
MedCity News: I read the statement that PCMA put out yesterday where you are saying, ‘Hey, Congress take a look at drug manufacturers and what they’ve done to game the patent world and prevent biologics from entering the market.’ But it’s not exactly correct that the PBMs’ hands have been clean either. So do you think pointing fingers at another part of the healthcare ecosystem helps your case?
Scott: I would encourage you to look at what we’ve actually put out. Because from our perspective, the idea isn’t to point fingers. I think too much of that sort of groundless finger-pointing has undermined confidence in the private market system in a way that has led to the dynamic we have today. It led to the enactment of the Inflation Reduction Act last year. It led to the focus on PBMs that you’re, you’re talking about here this year. I think this needs to be about offering holistic solutions that involve every corner of the supply chain. That’s a that is a message we’ve been pushing for some time. And yes, addressing those companies that may take advantage of gaps in the patent law to prevent competition is a fairly foundational piece of that. But there are other pieces to our agenda as well. Including things that I would say are a little bit more self-reflective on our industry in terms of addressing the patient experience.
MedCity News: In that statement, you also talked about how PCMA can help Congress advance legislation that will make drugs affordable. Can you talk a little bit about what kind of policy shifts you’d like to see that would actually achieve that?
Scott: That’s where it gets to the issues in competition because ultimately some of the things we were just talking about this morning, like if a PBM is successful in negotiating a discount or a rebate on behalf of the plan sponsor, then there’s the tension of does it go to premium or does it go to out-of-pocket cost. What you’re really talking about is just where do you squeeze the balloon. Because if you take that away from helping to buy down premiums in order to defray people’s out-of-pocket costs, then premiums go up. But there’s a price of the drug that hasn’t changed. So at some level, we have to get at that underlying price of the drug issue, which to me is where we need even more robust competition in the marketplace.
MedCity News: So then you should actually applaud IRA because it gave Medicare the chance to negotiate drug prices, right?
Scott: I think I would concede that the IRA in spirit was trying to look at those places where there’s no competition. You’ve got a brand new blockbuster drug that has never existed before. Of course, we want to provide patients access to that, but there’s no competition. It’s harder to use that marketplace dynamic to bring down prices.
But generally speaking, we think that the private market is best situated to optimize those dynamics. So let’s get that competition into the marketplace sooner, prevent pay-for-delay settlements and the other things that, like we just experienced with Humira to make sure that that competition is coming forward sooner because when it does, combined with the work that our companies do, that is going to be the most, in our opinion, the most effective way to drive down cost.
Photo: Pharmaceutical Care Management Association
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