WASHINGTON — House members did a deep dive Wednesday into soaring prescription drug prices across the US and took turns slamming so-called “middlemen” for anti-competitive practices — despite raking in hundreds of thousands of dollars in campaign cash from them and other key industry players.
During a hearing on Capitol Hill, members of the House Energy and Commerce Committee probed pharmaceutical benefit managers’ (PBMs) business practices, which have drawn bipartisan accusations of forcing insurance prices higher.
Records show that the top four US-based PBM firms have donated at least $21,000 to the top Republican and Democrat on the panel — Reps. Brett Guthrie (R-Ky.) and Frank Pallone (D-NJ) — over the past two years.
Meanwhile, the same two lawmakers took in $52,500 from the top four pharmaceutical companies during the same period.
“The problem with PBMs begins and ends in Congress,” Michael Cannon of the libertarian-leaning Cato Institute told The Post. “Everyone in the health sector is trying to take more from consumers than they give, and government is letting them all get away with it.”
“[PBMs and pharma companies] are two rent-seeking special interests that are jockeying to capture as much of the ill-gotten rents as they can,” Cannon added. “They’re instead pouring lots of money into lobbyists to try to make money by pleasing members of Congress rather than consumers.”
During the 2024 election cycle, all but four Democratic lawmakers on the House Energy and Commerce Committee received a total of at least $500,000 in donations from the top pharmaceutical political action committees (PACs) of Pfizer, Merck, AbbVie and Johnson & Johnson, among others.
The four Democrats were Reps. Kim Schrier of Washington State, Lizzie Fletcher of Texas, Greg Landsman of Ohio and Alexandria Ocasio-Cortez of New York.
In recent years, PBMs and pharmaceutical companies have engaged in a blame game, attempting to paint the other as the boogeyman responsible for jacking up drug prices and ripping off consumers.
But efforts to reform PBMs have gained traction in Congress, which nearly passed sweeping reform legislation in a government funding bill that was ultimately scrapped at the eleventh hour last year.
Some experts fear that focusing too much on PBMs and could become a boon for pharmaceutical companies who resent the “middlemen’s” antics to negotiate larger rebates on drug prices.
“When people are complaining about PBMs, it’s usually because they think the PBMs are taking some of their share,” Cannon warned.
“Everyone in the health sector is trying to take more from consumers than they give, and government is letting them all get away with it. Pharma is doing it. Insurance companies are doing it, PBMs are doing it, and this is all just a spat over who gets to carve up consumers.”
The way the process works is that pharmaceutical companies release a list price for a drug while PBMs negotiate rebates on that price.
From there, PBMs can skim money by not passing the full rebates they’ve earned onto insurance companies and charging various fees against pharmaceutical companies and other key players.
All of that can pose problems for consumers because insurance premiums and co-payments are usually based on the list price. So, even if PBMs pass off their savings through rebates, consumers will get hit with higher out-of-pocket costs for the list price of a particular drug.
“PBM reform is one piece of the puzzle, but perhaps not the most important one,” Matthew Fielder, a senior fellow in economic studies at the Brookings Institution, argued during the House hearing.
PBM profits constitute only several percent of overall drug spending, so even eliminating these profits would only modestly reduce overall costs,” Fielder added.
“Achieving larger savings would require reducing the revenue captured by other entities in the prescription drug supply chain, particularly manufacturers.”
Pharmaceutical firms have also been bankrolling nonprofit research efforts to defer responsibility to PBMs for the soaring costs, the Washington Examiner reported earlier this month.
“Drug companies seek to shift the scrutiny and blame but ultimately they are the ones who take advantage of our system to set high initial prices and then routinely increase them far faster than inflation,” added Anthony Wright, the executive director of the health care consumer group Families USA.
“To counter these ever-increasing costs, Congress should continue its bipartisan efforts to stop the gaming of patents and also to protect and expand Medicare’s ability to negotiate drug prices.”
But top members of the House Energy and Commerce Committee insist they can walk and chew gum at the same time.
“Ranking Member Pallone led the fight to empower Medicare to negotiate lower prescription drug prices,” a spokesperson for the Democratic minority told The Post when asked about the donations
“He believes we need an all-of-the-above approach to lowering drug prices, including both negotiating with pharmaceutical companies for lower prices and ensuring PBMs aren’t taking advantage of Americans at the pharmacy counter.”
A spokesman for the Republican majority stressed the bipartisan nature of concerns about PBMs but underscored that the panel intends to “examine challenges and opportunities across the entire medical supply chain.”
“The Committee has a long history of pursuing legislative solutions to lower the cost of prescription drugs for patients, including in areas like PBM reform that enjoy broad bipartisan support,” the spokesperson told The Post.
Efforts to target pharmaceutical companies have been known to divide lawmakers.
Development of new drugs can cost more than $2 billion, according to data from the Congressional Budget Office. Not all drugs being developed make it to market and there are concerns that government-imposed pricing caps could sap innovation or cause shortages.
On the other hand, some research suggests that pharmaceutical companies use their high prices for marketing and stock buybacks. One 2021 study of 10 pharma firms concluded that sales and marketing expenses blew past research and development by $36 billion.
A Senate Committee on Health, Education, Labor and Pensions Committee report in 2022 found that two leading pharma companies dished out $6.4 billion on “stock buybacks, dividends, and executive compensation.”
