An unlikely duo has teamed up to craft legislation targeting pharmacy benefit managers (“PBMs”). Senators Josh Hawley (R., M.O.) and Elizabeth Warren (D., M.A.) may not agree on much, but it appears that both agree that consolidation within the pharmaceutical industry is hurting the average consumer. The bill targets vertical integration within the prescription drug industry with supporters calling it the “Glass-Steagall” of health care (referring to the 1930s-era act that separated commercial and investment banking after the stock market crash).
Consolidation within the industry has seen large health companies, such as CVS Health and UnitedHealthCare (“UHC”), own or control various parts of the health care supply chain, such as physician’s offices, pharmacies, insurance companies, and even pharmacy benefit managers (“PBMs’”). For example, UCH operates as a health insurance company and owns several medical offices, pharmacies, and Optum Rx. Similarly, CVS Health operates a pharmacy chain, owns the PBM CVS Caremark, the insurer Aetna, and its own supply of medical offices. Optum, Caremark, and ExpressScripts are the three largest PBMs in the country, managing nearly 80% of prescription drug claims.
Lawmakers and proponents of the bill argue that consolidation encourages companies to focus on profit as opposed to effective treatment. They also argue that vertical integration enables companies to boost payments from government programs such as Medicare and Medicaid and leaves independent pharmacies unable to compete. Lastly, they contend that these business models allow companies to hide charges and increase costs:
- “Americans are paying more and more for healthcare while the quality of care gets worse and worse. In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent healthcare provider and pharmacy they can find.”
- Josh Hawley (R., M.O.)
- “The only way to make health care more affordable is to break up these health care conglomerates. Our bill would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system.”
- Elizabeth Warren (D., M.A.)
PBMs are one of the few industries that have sparked ire from both sides of the aisle, and new rules targeting these companies were included in the latest appropriations package signed into law by President Trump in February. Senators Hawley and Warren have both staked out populist positions within their parties and have crossed the aisle on other legislation. The bill would not directly impact health plans, but supporters contend that regulation would lower costs for both fully insured and self-insured health plans thereby benefiting both the plans and their participants.