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The Health 202: Pharmacy middlemen are under scrutiny for pushing up drug prices

with Paulina Firozi


Welcome to “PBM Week” in Washington.

The middlemen who negotiate the prices paid by consumers at the pharmacy counter — known as pharmacy benefit managers — face their own Senate grilling tomorrow over the role they play in making drugs more expensive in the United States than anywhere else.

And comments are due today on draft rules announced in February by Department of Health and Human Services head Alex Azar, taking sharp aim at the discounts obtained by PBMs. The rules, which HHS aims to finalize in June, would ban the rebates PBMs are paid by drug manufacturers in Medicare plans and Medicaid managed-care plans — savings that aren’t always passed along to consumers. The rules are among a bucket of changes proposed by the Trump administration as part of its promise to lower drug prices.

The story of U.S. drug costs is a hugely complicated one and its villain shifts depending on which part of the drug supply chain is telling the tale. When pharmaceutical executives had their turn at the Senate Finance Committee in February, they characterized the PBMs as the bad guys, complaining that these third-party negotiators don’t pass drug discounts along to consumers but pocket them instead.

Expect an opposite narrative tomorrow, when executives for the country’s top three PBMs — CVS Health, UnitedHealth’s OptumRx and Cigna’s Express Scripts — will sit before the Finance Committee for its latest hearing on the high cost of prescription drugs. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and ranking Democrat Ron Wyden (Ore.) have made drug costs a top priority this year, stirring widespread hope Congress will find a bipartisan way to get at the problem.  

These three companies play an outsize role in the country’s drug prices, as they negotiate payments between insurers and pharmaceutical companies for medications used by about 180 million Americans. They’ll undoubtedly characterize the drugmakers as the villains who push list prices ever higher, while arguing their own role is crucial for obtaining rebates and other savings that ultimately result in consumer savings.

“This is the opportunity for PBMs to explain how they bring value and savings to the system,” said Jon Conradi, spokesman for the Campaign for Sustainable Rx Pricing, an advocacy group whose members include pharmacy benefit managers. “Big Pharma has done a fairly good job, because of the clout they bring, in trying to define PBMs as unnecessary middlemen.”

Executives for Humana’s in-house PBM and Prime Therapeutics, which is owned by several Blue Cross plans, will also be present at the Tuesday hearing.

There’s plenty to criticize about PBMs, to be sure. While they obtain rebates from drugmakers to ultimately lower drug spending – a worthy goal – there’s incentive for them to favor the most expensive drugs when creating the list of drugs covered by an insurance plan. That’s because they’re allowed to keep a share of the rebate, which is based on a drug’s list price.

Several PBMs have also been purchased in recent years by health insurers, raising questions about whether they can play an independent role in negotiating between the two parties. And, their negotiations are secretive and opaque, making it nearly impossible for consumers to find out whether they’re sharing in the rebate savings.

“We know they don’t pass those rebates on — or at least fully — to the consumers for whom they’re intended,” Jack Mozloom, vice president of advocacy communications at the National Community Pharmacists Association, told me. “They’re basically scooping the savings off the top and keeping it for themselves, and that’s keeping the drug prices high.”

Yet here’s an important piece of context to keep in mind, one that PBMs are likely to share with senators tomorrow: It’s the pharmaceutical makers who pocket by far the largest share of gross revenue from drug sales. Two-thirds of U.S. spending on pharmaceutical drugs in 2016 were captured by drug companies, while just 4 percent were captured by PBMs.

So while many drug policy experts have praised the administration’s proposed rebate ban as a strong first step, it wouldn’t by itself solve the problem of drug prices in the United States.

Some PBMs have been taking steps lately to remake their public image, which has taken a beating in the past year as they’ve been blasted by Azar and President Trump. OptumRx announced it will pass along rebate savings to all new employer-sponsored plans, starting in January. Express Scripts, recently acquired by Cigna, announced last week it will ensure that patients in commercial plans will pay no more than $25 for a 30-day supply of insulin.


AHH: Now Trump’s chief of staff Mick Mulvaney says the White House is hoping to run on the issue of health care ahead of the 2020 election -- a topic that Democrats used to ride to their House majority last year.

During an interview on Fox News, Mulvaney said a group of administration officials, including HHS SecretaryAzar and CMS administrator Seema Verma met at Camp David and discussed the issue. “We spent the time this weekend saying, okay, what have we done, what can we talk about that’s a success, what do we need to work on going forward?"

He insisted a plan would emerge before the presidential elections. “We want to run on this,” he said. “Democrats have already admitted that Obamacare doesn’t work. That’s why they’re out there talking about this sort of amorphous Medicare-for-all. They’re not talking about how great … Obamacare is because they know it’s broken.”

Yet Senate Majority Leader Mitch McConnell (R-Ky.) ha said there would be no vote in the Senate on a Republican health-care plan ahead of the 2020 election. Mulvaney acknowledged McConnell's stance.

“That’s fine … it shouldn’t surprise anybody that we’re not going to get to this before the 2020 election, but that doesn’t mean we shouldn’t be talking about it — and we will,” he said.

— Health care is one of several issues Trump vowed in 2016 to fix that he wants to revive ahead of the 2020 election. But the real issue is whether the president can win a second term on issues he promised he would resolve in the first term, as our colleagues Ashley Parker and Toluse Olorunnipa write.

“Trump allies are betting the strategy will work again by bolstering enthusiasm among his most avid supporters, particularly older white voters in the upper Midwest who clinched his victory the last time,” Ashley and Toluse write. “But the approach also risks alienating moderate suburban voters, including those who took a chance on Trump’s candidacy in hopes that his dealmaker persona would overcome Washington gridlock.”

“President Trump has delivered and will continue to on the issues of health care, border security, and trade,” Trump campaign spokeswoman Kayleigh McEnany said. “To suggest otherwise is to deny the facts. We will be running on the president’s successes on these issues and a myriad of others.”

“Trump’s twin reversals on health care and immigration show his ability to drive enthusiasm in his political base while bowing to the reality of governing," said Doug Heye, a former spokesman for the Republican House leadership and the Republican National Committee.

OOF: National Institutes of Health Director Francis Collins has apologized to the two Iranian graduate students who were blocked from entering the agency’s campus because of a new security policy that requires visitors to disclose their citizenship.

Collins told the “NIH Family” in an email that he is “deeply troubled” that one of the graduate students was interrupted during a presentation and escorted from the NIH campus, and he said he sent an “extended personal apology” to that student. He added he "learned of another non-U.S. citizen who had to miss the first day of a two-day meeting because of visitor clearance issues. I am also reaching out to that person to express regret."

“In the email, Collins said the visitor clearance process ‘was mishandled by security staff’ and that officials are reviewing recent changes to the way visitors and patients are screened to ‘ensure that all of our guests, regardless of where they are from, are treated with the utmost respect and consideration,’ ” as our colleagues Lena H. Sun and Lenny Bernstein report.

Collins said in an interview he first learned about the incidents because of The Post’s inquiries related to a report last week of an unannounced start of measures requiring security staff to ask visitors about their citizenship.

“It was not communicated in a systematic and effective way,” Collins told our colleagues, adding the reported incidents signal the agency is “erratic” in complying with the relevant 2011 HHS policy. “We need to straighten that out,” he said.

An estimated 265,000 people report suffering from E. coli infections each year in the U.S., according to the Centers for Disease Control and Prevention. (Video: Monica Akhtar/The Washington Post)

OUCH: There have been 72 people sickened in a five-state E.coli outbreak, and officials from the Centers for Disease Control and Prevention said they have yet to determine the source, our colleague Michael Brice-Saddler reports.

The incidents are related to an E.coli strain known as “O103,″ according to the CDC. Eight people have been hospitalized but no deaths have been reported in the outbreak, which has affected Ohio, Virginia, Kentucky, Tennessee and Georgia.

A food safety lawyer in Seattle, Bill Marler, expressed concern that the CDC hasn’t pinpointed a source of the infection.

“Given the size and the number of states that are involved, what you’re seeing is very unusual,” Marler told Michael. “If it was five people or 10 people, that’s a little harder to figure out. But when there’s 72 people and they’re being interviewed by epidemiologists, it’s pretty unusual you don’t have a culprit.”


— Two Republicans on the House Oversight and Reform Committee sent a letter to a dozen pharmaceutical manufacturers expressing concern that the panel’s chairman was pursuing a “partisan investigation” over drug prices.   

Rep. Jim Jordan (R-Ohio), the committee’s top Republican and Rep. Mark Meadows (R-N.C.) wrote chairman Elijah Cummings (D-Md.) did not consult with Republican members before starting the investigation.

“Although addressing rising drug prices should be a bipartisan issue, Chairman Cummings did not consult with Republican Members before launching his investigation. Now, in light of Chairman Cummings’s recent boast that his investigation has affected pharmaceutical ‘stock prices ’- and the Chairman’s decision to unilaterally release sensitive information obtained by the Committee in another investigation — we feel obliged to inform you about these matters,” they wrote in the letter.

“While we cannot speculate about Chairman Cummings’s motives, we believe the Committee should not pursue an investigation to ‘impact . . . stock prices with regard to drugs’ — especially when there is bipartisan interest in real oversight of rising prescription drug prices.”


— A state judge said a New York county can’t block unvaccinated children from public spaces, a ruling that came 10 days after county officials put the controversial ban in place in an effort to address a major measles outbreak there.

“Children are hereby permitted to return to their respective schools forthwith and otherwise to assemble in public places,” Judge Rolf Thorsen wrote in his decision, as our colleague Frances Stead Sellers reports.

The ban had been put in place after officials in the county declared a state of emergency, announcing it would remain in place for 30 days or until unvaccinated minors got the vaccine for measles, mumps and rubella. There have been 167 confirmed cases of measles in Rockland County as of Friday.

The judge’s ruling followed a lawsuit from parents at a private school who said the county acted beyond its legal authority. “They said the declaration caused ‘children to be denied attendance at nursery programs and schools and has effectively prohibited their movement and denied them the right to congregate and assemble in public places,’ ” Frances writes.

—And here are a few more good reads: 


Protestors slam FDA with claims it did too little on opioids (Stat)

Homeland Security Secretary Kirstjen Nielsen leaving Trump administration amid surge of migrants (Nick Miroff, Josh Dawsey, Seung Min Kim and Maria Sacchetti)

U.S. Government Says It Could Take Two Years to Identify Families Separated at Border (Reuters)

Watchdog to examine Medicare chief’s publicity spending (Associated Press)


After major mass shootings, communities shifted slightly to the left, Post analysis finds (Tim Craig and Scott Clement)

Sandy Hook Families Want to Hobble the Gun Industry With Tactics From Tobacco Litigation (New York Times)

Michael Bennet Says He’s Planning 2020 Democratic Bid Despite Cancer (Bloomberg)


Federal Judge to Hold Hearings on Decision to Allow CVS-Aetna Merger (Wall Street Journal )

For CBD food craze, regulations and restrictions are all over the map (Sophie Quinton)

D.C. hospital reports norovirus outbreak in three young patients (Donna St. George)

In a Poor Kenyan Community, Cheap Antibiotics Fuel Deadly Drug-Resistant Infections (New York Times)

Major California hospital warns 200 people of potential measles exposure (NBC News)

95% of Oregon parents who exempt kids from vaccinations use do-it-yourself option, new data shows (Kaiser Health News)


Florida abortion bill would require minors to obtain consent (Associated Press)



  • The Senate Judiciary Committee holds a hearing on "The Need to Pass the Pain-Capable Unborn Child Protection Act" on Tuesday.
  • The Senate Finance Committee holds a hearing on drug pricing on Tuesday.
  • The House Energy and Commerce Subcommittee on Oversight and Investigations holds a hearing on the rising cost of insulin on Wednesday.

DHS Secretary Kirstjen Nielsen is leaving the Trump administration:

President Trump announced on April 7 that Homeland Security Secretary Kirstjen Nielsen would be leaving her position. (Video: Patrick Martin, Joyce Koh/The Washington Post, Photo: Jabin Botsford/The Washington Post)

Former president Barack Obama said he worries progressives could potentially undermine Democratic allies

Former president Barack Obama on April 6 addressed divisions within the Democratic party and how he feared progressives could end up undercutting allies. (Video: Reuters)