AYE WE ARE GOING TO GET STARTED
IN ABOUT 1520 SECONDS IF YOU
WANT TO FIND YOUR SEATS.
THE INSIDE OF YOUR. THANK YOU.
AND GOOD MORNING. I'D LIKE TO
CALL TO ORDER THE SELECT
COMMITTEE ASSEMBLY SELECT
COMMITTEE ON BIOTECHNOLOGY FOR
FEBRUARY. 6 2024. THERE ARE ANY
COMMITTEE MEMBERS OR THEIR STAFF
LISTENING. PLEASE MAKE YOUR WAY
TO CAPITOL ROOM. 126 WE ARE HERE
AFTER A NUMBER OF CONVERSATIONS
OVER THE FALL AS THIS COMMITTEE
THIS IS OUR SECOND COMMITTEE
HEARING THE SESSION IN THE
CAPITAL, BUT WE HAD A NUMBER OF
ROUNDTABLE DISCUSSIONS ACROSS
CALIFORNIA DURING OUR FALL
RECESS AND ONE OF THE ISSUES
THAT HAS CONTINUED TO COME UP AS
WE'VE BEEN MEETING WITH THE
BIOTECHNOLOGY INDUSTRY SECTOR IS
DISCUSSION AROUND PHARMACY
BENEFIT MANAGEMENT AND THE
ENTIRE SYSTEM AND HOW THAT
INTERSECTS WITH DRUG
MANUFACTURING AND PRICING TO
CONSUMERS. AND SO WE WANTED TO
USE THIS OPPORTUNITY. WE HAVE
THE ROOM UNTIL 11 O'CLOCK, SO
IT'S GOING TO BE A BRIEF HEARING
, BUT JUST TO KIND OF SHOWCASE
AND OVERVIEW, PBMS AND AH, WHAT
THEY ARE HOW THEY INTERSECT WITH
THE HEALTH CARE SYSTEM AND
INTERPLAY WITH THE INDUSTRY AND
PRESCRIPTION PRESCRIPTION DRUG
MANUFACTURERS. SPECIFICALLY WE
HOPE TO UNDERSTAND THE ORIGINS
OF PBMS AND HOW THEIR BUSINESS
MODEL HAS EVOLVED AND FURTHER.
WE HOPE THAT THIS HEARING WILL
HELP SEEK ANSWERS TO QUESTIONS
ON THE CHANGING NATURE OF THEIR
RELATIONSHIP WITH MANUFACTURERS
AND WHAT IMPACT THAT IS HAVING
ON PRESCRIPTION DRUG ACCESS AND
PRICING. FINALLY AND PROBABLY
MOST IMPORTANTLY, WE WANT TO
UNDERSTAND WHAT IS THE IMPACT
THAT THIS CHANGING RELATIONSHIP
IS BETWEEN PBMS AND DRUG
MANUFACTURERS AS IT PERTAINS TO
PATIENTS, AND SO I'D LIKE TO
INVITE UP TO OF OUR PANELISTS
WHO WILL HELP TO GIVE US A BROAD
OVERVIEW ON PBMS AND THEIR
INTERPLAY WITH ABROAD WITH THE
BIOTECHNOLOGY INDUSTRY FIRST, IF
YOU WANT TO APPROACH THE WITNESS
STAND, WE HAVE ANTONIO CHA CHA,
WHO IS THE PRESIDENT OF THREE
ACCESS ADVISORS. AND SECOND. DR
AARON TISH, THE CO DIRECTOR WITH
THE UNIVERSITY OF SOUTHERN
CALIFORNIA SCHAEFFER CENTER.
THANK YOU. THANK YOU FOR
TRAVELING TODAY, AND WE
APPRECIATE YOU BEING HERE IN
YOUR TESTIMONY, AND LIKE I SAID,
IF YOU CAN, I KNOW YOUR
PRESENTATIONS THAT WILL TRY TO
KEEP UP AS WELL. BUT WE'RE
HOPING MAYBE EACH OF YOU CAN
TAKE ABOUT 10 TO 12 MINUTES TO
BE ABLE TO PROVIDE SOME BROAD
OVERVIEW AND LOOK FORWARD TO
SOME Q AND A THAT THAT WILL
GENERATE GREAT. THANKS FOR
HAVING US UM MY NAME IS ANTONIO
TRACTOR FROM COLUMBUS, OHIO. AH
UM I STARTED A CONSULTING FIRM
CALLED THREE ACCESS ADVISORS.
AFTER WE LEARNED ABOUT HOW
OPAQUE DRUG PRICING WAS WITHIN
THE OHIO MEDICAID MANAGED CARE
PROGRAM. UM IN MY BACKGROUND IS
IN PHARMACY AND IN OHIO, WE
DISCOVERED THAT WHILE PAYMENTS
TO PHARMACIES WERE DECLINING
WITHIN THE MEDICAID MANAGED CARE
PROGRAM. THE COST OF THE STATE.
WE'RE NOT GOING DOWN.
COMMENSURATE WITH THAT DECLINE.
SO THOSE THOSE TWO THINGS DIDN'T
ADD UP. HOW COULD THE UNDERLYING
COSTS OF MEDICINES GO DOWN? BUT
THE COST OF STATE CONTINUE TO GO
UP WE FOUND WAS THAT PHARMACY
BENEFIT MANAGERS HAVE A REALLY
CRUCIAL ROLE IN DETERMINING WHAT
THE END PRICES THAT WE ALL PAY
AS PATIENTS OR AS PLANT SPONSORS
NEXT SLIDE. SO I LAUNCHED MY
CONSULTING FIRM IN 2019. WE DO
WORK FOR MEDICAID PROGRAMS.
MEDICAID FRAUD CONTROL UNITS, UH
, STATE AUDITORS PLANT SPONSORS
ANYBODY WHO'S IMPACTED BY THE
CONVOLUTED NATURE OF DRUG
PRICING, AND I STRESS IT IS
CONVOLUTED. NEXT SLIDE. SO IN
ORDER TO UNDERSTAND PBMS, LET'S
FIRST UNDERSTAND WHERE THEY
EXIST WITHIN THE ARCHITECTURE OF
OUR DRUG SUPPLY CHAIN. DRUG
MANUFACTURERS SELL DRUGS TO
WHOLESALERS LIKE CARDINAL HEALTH
AMERISOURCEBERGEN MCKESSON
PHARMACIES BY THEIR DRUGS FROM
THOSE WHOLESALERS, AND THEY ARE
COMPENSATED BY PBMS ON BEHALF OF
HEALTH INSURANCE COMPANIES.
THERE'S OTHER LAYERS OF THE DRUG
CHANNEL, BUT LET'S JUST FOCUS ON
THESE FIVE NEXT SLIDE. WELL
WE'RE GOING TO TALK ABOUT PBMS
TODAY. IT'S REALLY IMPOSSIBLE TO
THINK OF THEM AS STANDALONE
ENTITIES ANY LONGER. UM WHAT WE
HAVE HERE IS A BREAKDOWN OF THE
FORTUNE 50 LIST AND WE BASICALLY
CREATED A COLOR CODE THAT
DEMONSTRATES WHICH LAYERS EACH
ONE OF THESE COMPANIES MAKES UP
AND AS YOU CAN SEE, WITH
COMPANIES LIKE UNITEDHEALTH
GROUP, UH, CBS HEALTH AND CIGNA,
YOU'RE LOOKING AT COMPANIES WHO
REPRESENT FOUR DIFFERENT LAYERS
OF THE DRUG DISTRIBUTION
CHANNEL. AND THOSE ARE THE
PRIMARY ONES DECIDE, INCLUDING A
LOT OF THE OTHER THINGS THAT
THEY DO. PBMS ARE CERTAINLY
IMPORTANT. IT'S IMPOSSIBLE TO
VIEW THEM THROUGH THE LENS OF
JUST THE PBM BECAUSE THEY HAVE
BECOME VERTICALLY INTEGRATED,
AND WE'RE TALKING ABOUT FORTUNE
15 COMPANIES AT THIS POINT NEXT
SLIDE. SO WHILE THERE'S A LOT OF
INDEPENDENT INDEPENDENT PLAYERS
AT EVERY LAYER OF THE DRUG
DISTRIBUTION CHANNEL, LET'S FOR
THE SAKE OF THIS DISCUSSION. S¼
MARKET CONCENTRATION AT EVERY
LAYER OF THE DRUG SUPPLY CHAIN
IS VERY CONCENTRATED WITHIN A
SMALL NUMBER OF PLAYERS. AND
THOSE SMALL NUMBER OF PLAYERS
ARE PUBLICLY TRADED. COMPANIES
THAT ARE WHO'S FIDUCIARY
OBLIGATION IS TO MAKE MORE MONEY
TODAY THAN THEY MADE YESTERDAY.
AND SO THAT'S NOT EXCLUSIVE TO
PBMS. IT'S EVERY LAYER OF THE
DRUG CHANNEL, SO UNDERSTANDING
THEIR NATURE IS REALLY IMPORTANT
TO UNDERSTANDING, PERHAPS WHERE
THINGS START TO GO AWRY WHEN IT
COMES TO PRICING NEXT SLIDE. SO
PBMS, UH, STARTED REALLY BACK IN
THE 19 SIXTIES AND 19 SEVENTIES
PHARMACY DIDN'T USED TO BE PART
OF OUR HEALTH INSURANCE BENEFITS
. IT WAS CONSIDERED OPTIONAL,
BUT UNDERSTANDABLY BECAUSE
MEDICINES ARE SO VITAL TO OUR
OVERALL WELL BEING. IT WAS
UNDERSTOOD THAT BY INTEGRATING
PHARMACY BENEFITS INTO OUR
OVERALL HEALTH INSURANCE
MEDICINES COULD BE A GREAT
MECHANISM TO CONTROL OVERALL
MEDICAL COSTS. SO IN THE OLD
DAYS, WE ESSENTIALLY HAD PBMS
ACTING AS ESSENTIALLY CLAIMS
PROCESSORS OR VISA OR MASTERCARD
FOR YOUR MEDICINES. NEXT SLIDE.
SO IT ACTUALLY WAS STARTED WITH
THE UNITED AUTO WORKERS. THEY
WERE THE FIRST REALLY TO START
BRINGING PHARMACY BENEFITS INTO,
UH, INTO THEIR OVERALL BENEFITS
PACKAGES. AND SO AS AGAIN PBMS
ACTED LIKE ESSENTIALLY A CREDIT
CARD TO PAY FOR THOSE MEDICINES
NEXT SLIDE. THEN IN THE 19
EIGHTIES, THE FIRST MAIL ORDER
PHARMACY STARTED TO ARISE AND
PBM START TO USE MAIL ORDER
PHARMACIES AS A WAY OF PERHAPS
PROVIDING MORE COMPETITION WHEN
IT CAME TO BUYING THE DRUGS FROM
THE PHARMACIES. AH! IN 1987. WE
STARTED GETTING REAL TIME CLAIMS
ADJUDICATION, MEANING THAT
RATHER THAN JUST COLLECTING
PAPER WERE ACTUALLY FACILITATING
THE TRANSACTION ELECTRONICALLY.
NEXT SLIDE. SO OVER TIME, OUR
RELIANCE ON PBS GROUP RATHER
THAN JUST SAY, HEY, PBM. GO PAY
WHATEVER THE PHARMACY CHARGED.
WE STARTED TO SAY, HEY, MAYBE
THE PBM COULD START NEGOTIATING
ON OUR BEHALF. AS MET AS MORE
MEDICINES CAME TO MARKET AS THEY
BECAME MORE EXPENSIVE.
UNDERSTANDABLY UNIONS EMPLOYERS
GOVERNMENT PROGRAM SAID MAYBE WE
SHOULDN'T JUST PAY WHATEVER WERE
INVOICED. MAYBE WE CAN RELY ON
THAT PBM HAS BECOMING
INCREASINGLY INVOLVED IN THE
TRANSACTION TO ACT AS A
NEGOTIATOR TO ESSENTIALLY ERODE
OUR COST EXPOSURE. NEXT SLIDE.
UH ULTIMATELY, A LOT OF THINGS
CHANGED IN 1990 DURING THE
OMNIBUS RECONCILIATION ACT OF
1990, WHICH CREATED THE MEDICAID
DRUG REBATE PROGRAM. I WANT TO
FOCUS ON THE WORD REBATE BECAUSE
IT'S VERY IMPORTANT WHEN WE TALK
ABOUT PBMS. IN THE UNITED STATES
. WE DO NOT HAVE THE PRICE OF
THE MEDICINE. THERE ARE PRICES
FOR MEDICINES MANUFACTURERS SET
A LIST PRICE AND THAT LIST PRICE
IS MEANT TO BE THE STARTING
POINT FOR THEIR EXPERIENCE.
MEDICAID PROGRAMS ARE REQUIRED
BY LAW TO GET THE BEST
NEGOTIATED DISCOUNTS, WHICH
MEANS MEDICAID GETS A BETTER
PRICE THAN PERHAPS ANYBODY ELSE.
SO THAT WAS REALLY THE START OF,
I THINK A SIGNIFICANT DISPARITY.
BETWEEN WHO GETS WHAT DRUGS AT
WHAT PRICE? SO WHEN DRUGMAKERS
STARTED PRICING MEDICINES THEY
HAD TO START CONSIDERING THE
MANDATORY GIVEAWAYS TO MEDICAID
PROGRAMS SO PERHAPS RATHER THAN
SETTING THE PRICE AT A CERTAIN
RATE THAT THEY WOULD IN A
TRADITIONAL MARKETPLACE, THEY
NOW HAVE TO FACTOR IN A
MANDATORY GIVEAWAY TO MEDICAID
PROGRAMS. PBMS EVENTUALLY
STARTED NEGOTIATING THEIR OWN
REBATES AS WELL. SO
MANUFACTURERS SET THEIR LIST
PRICES. PBMS AND OTHER
PURCHASERS ARE GETTING A
NEGOTIATED EXPERIENCE OFF THOSE
LIST PRICES NEXT SLIDE. SO IN
1993 PHARMACEUTICAL MARKETPLACE
REALLY STARTED CHANGE. SO WHEN
YOU ASK, WHAT IS THE INTERPLAY
BETWEEN MANUFACTURERS AND PBMS
UNDERSTAND? AT ONE POINT, PBMS
AND MANUFACTURERS WERE ONE IN
THE SAME COMPANY. UM YOU HAD
MANUFACTURERS HAVE STARTED TO
BUY PBMS. WHY WOULD THEY DO
THAT? WELL AMONG THE MANY THINGS
THAT PBMS Dð PBMS ARE CREATING
ESSENTIALLY A MENU OR A
FORMULARY OF DRUGS THAT WE AS
COVERED BENEFICIARIES CAN GET
ACCESS TO UNDER OUR BENEFITS
PLANS. AS YOU MIGHT IMAGINE, AS
PBMS GROW IN TERMS OF SIZE AND
STATURE. THEY CAN BE THE
GATEKEEPERS FOR THE MEDICINES
THAT WE DEMAND AS CONSUMERS OR
THE MEDICINES THAT ESSENTIALLY
ARE SOLD THROUGHOUT BENEFITS
PROGRAMS. THINK OF IT FROM A
MANUFACTURER'S PERSPECTIVE IF
THE PBM GETS TO CHOOSE WHICH
DRUGS ARE COVERED IN WHICH ONES
AREN'T AND WE AS CONSUMERS
EXPECT THAT OUR MEDICINES WE
COVERED, THAT MEANS THE PBM HAS
A SIGNIFICANT OPPORTUNITY TO
GRANT MARKET SHARE TO WINNERS
AND LOSERS WITHIN THE
PHARMACEUTICAL MARKET PLACE.
USUALLY MANUFACTURERS RECOGNIZED
THAT MEET THE PBMS AT THEIR
INTERESTS AND PAY THEM BIG
REBATES IN EXCHANGE FOR COVERAGE
. AS YOU MIGHT IMAGINE, IF ONE
MANUFACTURER BUYS A PBM, WHAT
DOES THAT DO TO THE COMPETITIVE
LANDSCAPE WHEN OTHER
MANUFACTURERS ARE SEEKING TO GET
ON THAT FORMULA AREA AS WELL? SO
OVER TIME, THE IDEA OF
MANUFACTURERS AND PBMS BEING
INTERTWINED WAS AN OBVIOUS
CONFLICT OF INTEREST. SINCE THE
MANUFACTURER OWNED A PBM WOULD
LOVE TO FAVOR ITS OWN MEDICINES
RELATIVE TO THEIR COMPETITORS.
SO OVER TIME, ESSENTIALLY, THE
MANUFACTURERS DIVORCED THEIR
RELATIONSHIPS FROM PBMS NEXT
SLIDE. UM. OVER TIME. YOU'VE
SEEN VARYING DEGREES OF SCRUTINY
REGARDING THE MARKETPLACE AND
REALLY BY 2003. THE
MANUFACTURERS COMPLETELY WALKED
AWAY FROM THEIR PBM
RELATIONSHIPS. NEXT SLIDE. THE
AFFORDABLE CARE ACT IS A REALLY
IMPORTANT MILESTONE IN SHAPING
WHAT THIS MARKETPLACE LOOKS
LIKE. FOR BETTER OR WORSE, THE A
C A IMPACTED ALL ASPECTS OF
HEALTH CARE DIRECTLY OR
INDIRECTLY. THE A C, A REQUIRED
PBMS TO MANAGE DRUG COVERAGE
UNDER A CONTRACT WITH MEDICARE
PART D PLANS, SO IT REALLY
BROUGHT ABOUT A MORE COMMON USE
OF PBMS. RELATIVE TO WHERE THEY
WERE IN THE PAST, SO I'VE BROKEN
DOWN ESSENTIALLY SOME OF THE
RESPONSIBILITIES I THINK THE
REALLY IMPORTANT THING TO
REMEMBER ABOUT THE A IS THAT
THERE IS A DOUBLE EDGED SWORD IN
THE POLICY. UNDER THE A. C. A
WERE ESSENTIALLY MANDATING
COVERAGE, SO EVERYBODY HAS TO
HAVE INSURANCE BENEFITS AT THIS
POINT. WELL UNDERSTAND THAT AS
SOON AS YOU MANDATE THAT
EVERYBODY HAS TO HAVE A CERTAIN
PRODUCT MEANING INSURANCE, THOSE
INSURANCE COMPANIES NEED TO HAVE
SOME ACCOUNTABILITY AND HOW
THEY'RE SPENDING THOSE DOLLARS.
SO THE OBAMA ADMINISTRATION
CREATED WHAT WE CALL MEDICAL
LOSS RATIO. THE MEDICAL LOSS
RATIO REQUIRES THAT FOR EVERY
DOLLAR THAT'S INVESTED INSURANCE
PREMIUMS, A CERTAIN PERCENTAGE
HAS TO GO TO THE ACTUAL COVERAGE
OF CARE. WELL. AGAIN, IF NOW
INSURANCE COMPANIES ARE
ESSENTIALLY PROFIT CAPTAIN TOLD
THAT THEY HAVE TO SPEND A
CERTAIN PROPORTION OF THEIR
MONEY THAT THEY GET ON CARE.
WELL NOW YOU SEE AN IMPETUS FOR
VERTICAL INTEGRATION. IF I'M IF
I'M A HEALTH INSURANCE COMPANY.
IF I CAN CONTROL THE PBM, I CAN
START OWNING MY OWN PHARMACIES
OWNING MY OWN CLINICS. I GET TO
START PAYING MYSELF. FOR CERTAIN
THINGS THAT I'M COVERING UNDER A
BENEFITS PLAN, PBMS HAVE BECOME
A HUGE PART OF THE STRATEGY FOR
HEALTH PLANS TO MANAGE AND
ADHERE TO MEDICAL LOSS RATIO
REQUIREMENTS, AND THAT CAN BE A
GOOD THING AND A BAD THING,
MEANING THAT HEALTH PLANS MAY
NOT HAVE ADEQUATE INCENTIVES TO
CONTROL THINGS WHEN THEY'RE
PAYING THEIR SUBSIDIARY
COMPANIES. NEXT SLIDE. SO THIS
IS A LOOK AT HORIZONTAL
CONSOLIDATION. TODAY WE HAVE
THREE PBMS THAT ESSENTIALLY MAKE
UP ABOUT 80 TO 85% OF THE
MARKETPLACE. THAT'S THAT'S
THAT'S A NATIONAL STATISTIC, BUT
UNDERSTAND. THAT'S JUST ONE
LAYER OF THESE VERTICALLY
INTEGRATED COMPANIES. YOU HAVE
EXPRESS SCRIPTS. IT'S PART OF
CIGNA, OPTIMAL EXITS, PART OF
UNITED HEALTHCARE AND CVS.
CAREMARK IS PART OF CBS HEALTH
AND AETNA. NEXT SLIDE. THIS MAP
IS REALLY CONFUSING AND HAS A
LOT OF LOGOS, BUT IT SHOWS YOU
HOW SIGNIFICANT VERTICAL
CONSOLIDATION THIS MARKETPLACE
HAS BECOME. AS I SAID AT THE
BEGINNING, WE CAN'T JUST THINK
OF PBMS AS STANDALONE ENTITIES.
THEY'RE PART OF LARGE, PUBLICLY
TRADED VERTICALLY INTEGRATED
COMPANIES WHO HAVE A VESTED
INTEREST IN MAKING MONEY AT
EVERY LAYER OF THEIR
ORGANIZATION. MUCH OF WHICH IS
CAN BE CAN BE ENGAGING IN
ARBITRAGE ON THE SALES OF
PRESCRIPTION DRUGS. NEXT SLIDE
TWO MINUTES. YEP. THESE ARE
REALLY IMPORTANT THING TO
UNDERSTAND HERE IS THAT WE HAVE
A SYSTEM OF BOGUS INFLATED DRUG
PRICES IN THE UNITED STATES. AS
I SAID EARLIER, THOSE LIST
PRICES ARE THE STARTING POINT
FOR OUR EXPERIENCE AND MEDICAID
PROGRAMS NOW. MEDICARE FEDERAL
GOVERNMENT FEDERAL PROGRAMS,
STATE PROGRAMS ALL ARE SUPPOSED
TO GET SOME NEGOTIATED
EXPERIENCE OFF THAT LIST PRICE.
AND THE WAY THAT WE EXPERIENCE
PRICE WILL BE HIGHLY INEQUITABLE
AMONG PURCHASERS, SO PBMS
PROVIDES SAVINGS IN THIS
MARKETPLACE, BUT THEY PROVIDE
SAVINGS RELATIVE TO THE BOGUS
INFLATED PRICES THAT IN SOME
WAYS, BOTH GOVERNMENT AND PBMS
ARE RESPONSIBLE FOR THE BIG
CHALLENGE WITH PBMS AARON WILL
GET INTO THIS IS THAT WHILE PBS
WILL ACT AS A NECESSARY FRICTION
AGAINST MANUFACTURERS,
WHOLESALERS AND PHARMACIES
BECAUSE THEY NOW MAKE MONEY
BELOW THE LINE OR MAKE MONEY OFF
THE EXACT TRANSACTION THEY WERE
HIRED TO CONTROL CONFLICTS OF
INTEREST THAT HAVE ALLOWED THEM
TO GAUGE IN A NUMBER OF SCHEMES
THAT CAUSED COST A BALLOON. THEY
MAKE MONEY OFF REBATES. THEY
MAKE MONEY OFF PRACTICES LIKE
SPREAD PRICING. THEY MAKE MONEY
OFF THEIR OWN SPECIALTY
PHARMACIES IN MAIL ORDER
PHARMACIES AND A LITANY OF OTHER
WAYS THAT I THAT I'M SURE WE
COULD GET INTO QUESTION AND
ANSWER. BUT I THINK IT'S A
REALLY IMPORTANT UNDERSTAND THAT
PBMS ARE SUPPOSED TO BE A FORCE
FOR GOOD, BUT THE SECOND THAT
THEY MAKE MONEY OFF THE
TRANSACTION, THEIR INCENTIVES
BECOME HEAVILY SKEWED AND START
TO CONTRIBUTE TO THE VERY
PROBLEM THEY WERE HIRED TO
CONTROL. OKAY THANK YOU. MR
TASHA AND DR TRISH, LOOK FORWARD
TO YOUR PRESENTATION. GREAT
THANK YOU VERY MUCH. AND WHILE
WE'RE GETTING UP THE SLIDES,
THANK YOU, ANTONIO FOR VERY
HELPFUL HISTORY AND INTRODUCTION
OF THIS VERY COMPLICATED MARKET.
SO I AM AARON. TRISH I'M A
PROFESSOR AT THE USC MAN SCHOOL
OF PHARMACY AND THE CO DIRECTOR
OF THE SCHAEFFER CENTER FOR
HEALTH POLICY AND ECONOMICS. OR
A RESEARCH CENTER THAT'S BASED
JOINTLY IN THE SCHOOL OF
PHARMACY AND THE SCHOOL OF
PUBLIC POLICY AT U. S. C AND I
HAVE THE GOOD FORTUNE THAT THAT
ME AND MY COLLEAGUES HAVE BEEN
STUDYING THE PHARMACEUTICAL
SUPPLY CHAIN AND IN PARTICULAR
THE ROLE OF PBMS FOR ALMOST A
DECADE NOW, SO I WANTED TO SHARE
SOME OF THE FINDINGS AND
INTERJECT SOME ADDITIONAL
EVIDENCE INTO THIS CONVERSATION
THAT WE'VE BEEN HAVING SO NEXT
SLIDE, PLEASE. NEXT SLIDE,
PLEASE. AND THIS ONE ACTUALLY
HAS, YOU KNOW PERFECT. OKAY SO
YOU KNOW, THIS IS ALL PUT UP A
SYSTEM OF BOXES AND ARROWS ABOUT
THE PHARMACEUTICAL SUPPLY CHAIN.
I WILL. FIRST OF ALL, JUST POINT
OUT THAT THIS IS ACTUALLY A
SIMPLIFIED VERSION OF THIS
MARKET. THERE'S A LOT OF OTHER
THINGS THAT COULD BE UP THERE.
WHICH I THINK SPEAKS TO, YOU
KNOW, JUST THE COMPLICATION OF
UNDERSTANDING WHAT'S GOING ON
HERE, AND SOME OF THE THINGS
THAT HAVE ENABLED THE TYPES OF
BEHAVIORS THAT ANTONIO WAS
DESCRIBING IS REALLY THE
COMPLEXITY AND THE OPACITY OF
THIS MARKET. SO IF YOU THINK
ABOUT A PATIENT SHOWING UP AT A
PHARMACY TO PICK UP THEIR THEIR
PRESCRIPTION, RIGHT, THIS WAS A
PHYSICAL PRODUCT. GENERALLY
SPEAKING, THAT WAS PRODUCED BY A
MANUFACTURER DISTRIBUTED THROUGH
A WHOLESALER TO A PHARMACY IN
THE PATIENT GOES AND PICKS UP
THAT PRODUCT. THAT'S YOU KNOW,
KIND OF A NORMAL FLOW OF GOODS,
BUT SO WHAT IS THE PBM DOING
HERE? THEY'RE REALLY INVOLVED
PRIMARILY, YOU KNOW, PUTTING
ASIDE SOME EXCEPTIONS OF IF
THEY'RE INVOLVED IN THE MAIL
ORDER OR SPECIALTY PHARMACY, BUT
OTHERWISE THIS BLUE BOX AT THE
BOTTOM. THE PBM IS REALLY
CONTROLLING PRIMARILY THREE
IMPORTANT FINANCIAL TRANSACTIONS
OR NEGOTIATIONS OR CONTRACTS.
ONE IS WITH THE HEALTH PLAN
RIGHT THERE NEGOTIATING THE
PROVISION OF DRUG BENEFITS ON
BEHALF OF THE HEALTH PLAN OR THE
EMPLOYER IN TURN ON BEHALF OF
THEIR EMPLOYEES ARE ENROLLEES.
CHOO THEY'RE TURNING AROUND AND
NEGOTIATING WITH THE DRUG
MANUFACTURER AND SAYING, YOU
KNOW, ENGAGING IN THIS COME IN
THIS NEGOTIATION AND BASICALLY
SAYING, LIKE ANTONIO WAS
DESCRIBING THERE IS A LIST PRICE
OR A STICKER PRICE OF THE DRUG.
THAT IS NOT AT THE END OF THE
DAY HOW MUCH THE MANUFACTURER IS
GOING TO RECEIVE. THE PBM IS
THERE IN LARGE PART TO NEGOTIATE
AFTER THE FACT DISCOUNTS OR
REBATES AND BASICALLY SAY, IF
YOU GIVE ME A BETTER PRICE OF
THAT DRUG, I'LL PUT YOU ON A
PREFERRED TIER IN MY FORMULARY
AND ENCOURAGE MORE PATIENTS TO
USE YOUR PRODUCT RELATIVE TO
YOUR COMPETITORS RIGHT THERE.
THEY'RE AN IMPORTANT PART OF
THIS NEGOTIATION. THERE ARE ALSO
AN IMPORTANT PART OF THE
NEGOTIATION WITH PHARMACIES AND
ACTUALLY, HOW MUCH PHARMACIES
ARE GOING TO GET PAID WHEN A
PATIENT GOES AND FILLS THAT
DRUG. AND SO I THINK ONE THING
THAT'S IMPORTANT TO NOTE IS THAT
THERE'S NOTHING THAT GUARANTEES,
FOR EXAMPLE, THAT THE AMOUNT OF
MONEY THAT THE PBM IS GOING TO
PAY THE PHARMACY FOR THE DRUG.
IS THE SAME PRICE THAT THEY'RE
GOING TO CHARGE THE HEALTH
INSURER THE EMPLOYER FOR THE
KIND OF PLEASURE OF THEIR
ENROLLEE FILLING THAT DRUG RIGHT
? THERE'S A PBM IS SITTING,
CONTROLLING A LOT OF THE
INFORMATION AND CONTROLLING THIS
TRIANGULATION OF TRANSACTIONS
AND YOU KNOW THAT THERE'S
NOTHING THAT KIND OF DIRECTLY
TIES ANY OF THESE TWO TO
NECESSARILY BE THE SAME AS EACH
OTHER. ANTONIO HAS, YOU KNOW
DONE QUITE A BIT OF WORK,
HIGHLIGHTING THE PRACTICES OF
SPREAD PRICING, WHICH IS WHAT WE
CALL IT WHEN ESSENTIALLY,
THEY'RE THE PBM IS PAYING THE
PHARMACY ONE PRICE AND TURNING
AROUND AND PAYING THE HEALTH
PLAN OR THE MEDICAID PROGRAM,
HIGHER PRICE AND KEEPING THAT
DIFFERENCE. SO IF YOU COULD GO
TO THE NEXT SLIDE, PLEASE. I
THINK JUST TO TOUCH ON THIS KIND
OF THESE REBATE NEGOTIATIONS
WITH MANUFACTURERS. IF YOU THINK
ABOUT A MINUTE GIVE SOME
EXAMPLES FROM THE MEDICARE PARTY
PROGRAM, THE PRESCRIPTION DRUG
PROGRAM FOR OUR MEDICARE
BENEFICIARIES. UH THERE'S SOME
BETTER DATA FROM THIS PROGRAM
RELATIVE TO COMMERCIAL MARKETS,
AND, YOU KNOW, IT'S AN IMPORTANT
PART COVERING TENS OF MILLIONS
OF BENEFICIARIES IN THIS
COUNTRY. IF YOU THINK ABOUT YOU
KNOW, YOU MAY HAVE SEEN PICTURES
OF THE KIND OF STANDARD BENEFIT
DESIGN, WHICH IS INTENDED TO
EXPOSE PATIENTS TO 25% COST
SHARING, SO THEY'RE SUPPOSED TO
PAY ABOUT 25% OF THE COST OF
THEIR DRUGS. ON THE RIGHT IS
ACTUALLY, YOU KNOW, IN PRACTICE,
THESE PARTY PLANS DON'T ACTUALLY
HAVE THEIR PATIENTS GENERALLY
PAY 25. COINSURANCE. THEY GO AND
NEGOTIATE THESE FORMULARIES AND
THEY SAY GIVE US A BIGGER
REBATE, AND WE'LL PUT YOU ON A
PREFERRED TIER. AND IF YOU COULD
GO TO THE NEXT SLIDE, THESE
REBATES HAVE ACTUALLY BECOME A
HUGE PART OF HAVE BECOME
INCREASINGLY IMPORTANT IN THIS
SEGMENT, SO IT'S A LITTLE HARD
TO SEE THE NUMBERS. MAYBE, BUT
WHAT YOU CAN SEE IS THAT OVER
THE LAST DECADE, THESE REBATES
HAVE GROWN TO ACCOUNT FOR NEARLY
A THIRD OF THE TOTAL GROSS
SPENDING IN THE MEDICARE PART D
PROGRAM. SO WHAT THAT MEANS IS
THE LIST PRICES OF DRUGS THAT
YOU SEE ON THE RECEIPT AT THE
PHARMACY COUNTER OR THAT YOU SEE
ON THE HEADLINES IN THE NEWS ARE
OFF, ON AVERAGE IN THE PART D
PROGRAM BY ABOUT 33% HIGHER THAN
THEY SHOULD BE RIGHT IN TERMS OF
WHAT THE MANUFACTURERS ARE
ACTUALLY RECEIVING FOR THOSE
PRODUCTS AT THE END OF THE DAY.
AND THIS HAS GROWN QUITE A BIT
OVER THE LAST DECADE IF YOU
COULD GO TO THE NEXT SLIDE. YOU
KNOW, IT IS THE CASE THAT THAT
PBMS HAVE EFFECTIVELY BEEN
NEGOTIATING THESE REBATES,
RIGHT? I MEAN, YOU SAW THE
SLIDE. THE NUMBERS HAVE
INCREASED QUITE A BIT ON THE
LAST SLIDE. AND A PORTION OF
THOSE REBATES ARE IN TURN BEING
USED TO SUBSIDIZE PREMIUMS FOR
THE MARKET. THEY HAVE BEEN AN
IMPORTANT PART OF KEEPING THE
PREMIUMS OF THOSE PLANS
RELATIVELY LOW AND STABLE OVER
THE LAST DECADE OR 15 YEARS. BUT
THAT'S COME AT THE COST OF
INCREASED OUT OF POCKET SPENDING
FOR THE BENEFICIARIES WHO ARE
TAKING THOSE HIGHLY RELATED
PRODUCTS. THIS IS KIND OF THE
OPPOSITE OF HOW WE THINK
INSURANCE IS SUPPOSED TO WORK
RIGHT? THIS IS INSTEAD CREATED A
WORLD WHERE BENEFICIARIES WHO
ARE SICK AND NEED ACCESS TO
THESE MEDICINES ARE PAYING MORE
OUT OF POCKET AT THE PHARMACY
COUNTER TO SUBSIDIZE INSURANCE
PREMIUMS FOR THE MARKET OVERALL.
SO I CAN POINT TO YOU IF YOU
COULD GO ACTUALLY TO SLIDES
AHEAD. UM YOU KNOW, WE MY
COLLEAGUES AT THE SCHAEFFER
CENTER REALLY WANTED TO LOOK
UNDER THE HOOD TO UNDERSTAND.
WHAT IS IT THAT'S GOING ON IN
THE SUPPLY CHAIN AND WROTE KIND
OF ONE OF THE SEMINAL PAPERS IN
THIS FIELD SEVERAL YEARS BACK
AGO, WHERE THEY STUDIED THE
FLOW. OF DOLLARS AND CALL. YOU
KNOW THE OUR OUR NICKNAME FOR IT
IS THE FOLLOW THE MONEY PAPER.
IT'S GOTTEN QUITE A BIT OF
ATTENTION AND INTEREST AND WHAT
THEY FOUND AT THE TIME WAS THAT
INTERMEDIARIES IN THE
PHARMACEUTICAL SUPPLY CHAIN
INCLUDING PBMS, ACTUALLY, THIS
IN THESE DATA ARE A BIT OLD AT
THIS POINT, BUT WE'RE CAPTURING
41 OF EVERY $100 THAT WE SPENT.
ON PRESCRIPTION DRUGS IN THE US,
RIGHT? AND SO THAT THAT ALONE
SHOULD HELP YOU UNDERSTAND OR
REALIZE THAT THE LIST PRICES ARE
DRUG PRICES THAT YOU HEAR ABOUT
ARE QUITE DISTORTED FROM THE
REVENUES THAT DRUG MANUFACTURERS
AND INNOVATIVE COMPANIES ARE
ACTUALLY RECEIVING. AT THE END
OF THE DAY. UM IF YOU COULD GO
TO THE NEXT SLIDE, WE MY
COLLEAGUES LEAD BY KAREN VAN
NUYS AND OTHERS THAT THE
SCHAEFFER CENTER DID A FOLLOW UP
STUDY SPECIFICALLY DIGGING IN ON
INSULIN, WHICH WAS REALLY THE
POSTER CHILD OF A LOT OF THESE
MARKET DISTORTIONS. OBVIOUSLY
THINGS HAVE CHANGED QUITE A BIT
WITH INSULIN IN THE LAST TWO
YEARS OR SO, BUT BACK LOOKING AT
DATA FROM 2014 TO 2018. THIS
UNDERSCORES SOME OF THE KIND OF
WE HAVE MANY DIFFERENT PRICES
HERE THAT ANTONIO WAS DESCRIBING
. SO THE GRAY BARS WHAT YOU CAN
SEE IS THAT THE LIST PRICE OR
THE STICKER PRICE OF INSULIN DID
INCREASE QUITE YOU KNOW, IT'S
QUITE NOTABLY OVER THIS FIVE
YEAR PERIOD, SO IT WAS THE CASE
THAT THE LIST PRICES OF INSULIN
WE'RE INCREASING OVER THIS TIME.
BUT IF YOU LOOK AT THE BLUE BARS
ON THAT CHART, THIS IS THE NET
REVENUE THAT INSULIN
MANUFACTURERS RECEIVED FOR
SELLING THOSE INSULIN PRODUCTS
INTO THE MARKET. AND THOSE
PRICES. THE NET PRICES THAT
MANUFACTURERS RECEIVED WERE
ACTUALLY DECLINING OVER THIS
TIME, PERIOD. SO YOU HAVE THIS
INCREASING GAP OR INCREASING
WEDGE WHERE THE LIST PRICES ARE
GOING UP, BUT THE NET PRICES ARE
GOING DOWN. NOW INTERESTINGLY,
THESE RED BARS IN THE MIDDLE,
THIS IS THE KIND OF NET
EXPENDITURES ON INSULIN. SO HOW
MUCH ACCOUNTING NOT JUST FOR THE
DRUG, BUT ALL OF THE OTHER KIND
OF DISTORTIONS IN THE SUPPLY
CHAIN OR ALL OF THE OTHER PART
OF THE SPENDING THAT'S GOING TO
ENTITIES IN THE SUPPLY CHAIN.
THAT WAS ACTUALLY WHICH, AT THE
END OF THE DAY IS WHAT WE CARE
ABOUT, RIGHT? WE CARE ABOUT HOW
MUCH ARE WE SPENDING TO GET THIS
DRUG AS A SOCIETY, RIGHT? AND
THAT WAS ACTUALLY PRETTY FLAT
OVER THIS TIME PERIOD, SO NET
SPENDING WAS ABOUT FLAT, AND SO
IF YOU GO TO THE NEXT SLIDE WHAT
THAT MEANS IS THAT OVER THIS
TIME PERIOD, INCREASING SHARE OF
THE SPENDING ON INSULIN WAS
ACTUALLY ACCRUING NOT TO THE
MANUFACTURERS WHO WERE CREATING
AND PRODUCING THAT PRODUCT. BUT
RATHER TO THE INTERMEDIARIES,
INCLUDING PBMS IN THE SUPPLY
CHAIN TO THE POINT WHERE BY THE
END OF THIS STUDY PERIOD IN
2018, MORE THAN HALF OF THE
TOTAL DOLLARS THAT WE WERE
SPENDING ON INSULIN, WE'RE NOT
GOING TO THE DRUG MANUFACTURER
BUT RATHER TO THESE OTHER
PLAYERS IN THE SUPPLY CHAIN. SO
I THINK THAT'S AN IMPORTANT KIND
OF TREND AND DISTORTION AND KIND
OF THING OR A PHENOMENON THAT'S
BEEN GOING ON. THAT'S THAT'S
IMPORTANT TO UNDERSTAND AND HOW
IT'S IMPACTING MANUFACTURERS
REVENUES. I THINK IF YOU COULD
GO TO THE NEXT SLIDE, PLEASE.
THERE'S ALSO BEEN A REALLY
IMPORTANT ASPECT OF THIS IN
TERMS OF ITS IMPACT ON PATIENTS.
SO WHEN PATIENTS ARE PAYING COST
SHARING THAT'S TIED TO THE LIST
PRICE OF THESE DRUGS IF IT'S IF
THEY'RE IN A DEDUCTIBLE, OR IF
THEY HAVE COINSURANCE. THEN
THEY'RE EXPOSED TO A PERCENT OF
THIS LIST PRICE. AND THAT LIST
PRICE AS I WAS JUST SAYING IS
INCREASINGLY DISTORTED FROM THE
NET PRICE OF THE DRUG. SO WHAT
DOES THAT MEAN IS THAT THEY'RE
PAYING MORE OUT OF POCKET AT THE
PHARMACY COUNTER THAN THEY
SHOULD BE. WHAT'S PARTICULARLY
SO, UH, AT THE SHAVER CENTER.
SOME OF MY COLLEAGUES DID A
STUDY AND SHOWED THAT INSTEAD OF
PAYING ON THE ORDER OF ROUGHLY
25% OF THE COST OF THE DRUG AND
MEDICARE PARTY, WHICH IS WHAT
THEY WERE SUPPOSED TO BE PAYING
RELATIVE TO THE NET PRICE, SO
THE NET REVENUES THAT
MANUFACTURERS WERE ACTUALLY
RECEIVING OUT OF POCKET SPENDING
WAS RANGING SOME IN CERTAIN KIND
OF MONTHS OF THE YEAR. THEY WERE
SPENDING THEY WERE BENEFICIARIES
WERE PAYING OUT OF POCKET UP TO
TWO THIRDS OR EVEN 90% OF THE
NET PRICE OF THE DRUG. RIGHT SO
THIS IS A HUGE OVERPAYMENT FROM
THESE BENEFICIARIES THAT'S GOING
BACK TO IN PART SUBSIDIZED
PREMIUMS FOR THE MARKET. BUT YOU
KNOW AGAIN, IT IS CREATING THIS
PARTICULAR DISTORTION WHERE
SICKER BENEFICIARIES ARE PAYING
MORE. AT THE AT THE POINT OF
SALE BECAUSE OF THESE
INCREASINGLY INFLATED LIST
PRICES. WHAT'S PARTICULARLY
CONCERNING FROM AN ECONOMIST,
POINT OF VIEW IS THAT THE DRUG
CLASSES THAT ARE MOST
COMPETITIVE ARE THE ONES WHERE
THERE'S DISTORTION HAS BIGGEST.
SO THERE'S THE BIGGEST REBATES.
THE LIST PRICES ARE THE MOST
INFLATED. THOSE ARE THE ONES
WHERE THE BENEFICIARIES ARE
PAYING THE HIGHEST OUT OF POCKET
RELATIVE TO WHAT THEY SHOULD BE
PAYING FOR THOSE DRUGS. SO
THAT'S NOT THE WAY WE THINK
MARKETS SHOULD WORK RIGHT?
GENERALLY SPEAKING MARKETS,
IMPROVE PRICES AND QUALITY AND
OUTCOMES FOR CONSUMERS, AND THIS
CONVOLUTED SET OF PERVERSE
INCENTIVES HAS CREATED THE
OPPOSITE OF THAT, WHERE MORE
COMPETITION IS ACTUALLY HARMING
THESE PATIENTS THROUGH HIGHER
OUT OF POCKET SPENDING. I'LL I
KNOW WE WANT TO WRAP IT UP FOR
QUESTIONS, SO I'LL JUST GIVE A
COUPLE LAST DATA POINTS. IF YOU
COULD ACTUALLY JUST SKIP FORWARD
TO SLIDES, PLEASE. I WANTED TO,
YOU KNOW, WE'VE BEEN TALKING SO
FAR, PRIMARILY ABOUT BRANDED
DRUGS, BUT I WANTED TO NOTE THAT
THESE OVER PAYMENT ISSUES EXIST
FOR GENERIC DRUGS AS WELL. RIGHT
GENERICS ARE MUCH MORE COMMONLY
DISPENSED THERE ABOUT 90% OF
PRESCRIPTIONS DISPENSED IN THE
U. S. AND MY COLLEAGUES AND I
DID A STUDY WHERE WE COMPARED
THE PRICES THAT MEDICARE PART D
PLANS WERE PAYING FOR JIN COMMON
GENERIC DRUGS TO THE PRICES THAT
THOSE YOU COULD COSTCO MEMBERS
COULD PURCHASE THOSE SAME DRUGS
ARE FOR CASH PAYING PRICES SO
BYPASSING THE KIND OF PBM
DISTRIBUTION MODEL ALTOGETHER.
AND WHAT WE FOUND WAS THAT IN
2018 MEDICARE OVERPAID BY ABOUT
$2.5 BILLION FOR THOSE COMMON
GENERIC DRUGS RELATIVE TO THE
PRICES THAT YOU COULD HAVE
GOTTEN BY JUST GOING TO THIS AND
BUYING THEM AT COSTCO INSTEAD,
RIGHT, AND SO I THINK THIS
SPEAKS TO THESE ISSUES OF THINGS
LIKE SPREAD PRICING AND OTHER
TYPES OF DISTORTIONS OR ADDED
KIND OF FLUFF. THAT'S BEING
ADDED BY THE SUPPLY. JEAN IF YOU
CAN GO AND PURCHASE THESE AT
COSTCO FOR A CONSIDERABLE
DISCOUNT RELATIVE TO WHAT YOU'RE
GETTING THEM FOR IN THE
MEDICARE, PART D PROGRAM I THINK
YOU KNOW, COMING BACK TO THE
FOCUS ON BIOTECHNOLOGY. I THINK
THIS IS ALSO YOU KNOW, THIS IS
IMPORTANT FROM AN AFFORDABILITY
PERSPECTIVE AND FOR PATIENTS IN
OUR COUNTRY. BUT IT'S ALSO
IMPORTANT FOR THE KIND OF GRAND
BARGAIN THAT WE AS A COUNTRY UH,
YOU KNOW, ADOPTED THROUGH THE
HATCH WAXMAN ACT, WHICH WAS
REALLY THIS NOTION OF PROTECTING
AND INVESTING IN INNOVATIVE
MEDICINES THROUGH YOU KNOW,
PATENTS AND THOSE TYPES OF
SYSTEMS WITH THE EXPECTATION
THAT ONCE THOSE PATENTS WERE TO
EXPIRE, DRUGS WOULD GO GENERIC
AND BE WIDELY AVAILABLE AND
ACCESSIBLE TO AMERICANS THAT
VERY AFFORDABLE PRICES. AND BY
DISTORTING THAT KIND OF BACK END
OF THE BARGAIN BY INFLATING THE
COSTS OF THE OF THESE DRUGS UPON
GOING GENERIC WERE MESSING WITH
THAT THAT GRAND BARGAIN RIGHT?
AND SO IT HAS THESE SPILLOVER.
CONCERNS BACK TO YOU KNOW,
THERE'S A LOT OF REAL INNOVATIVE
BENEFITS OF THE MEDICINES THAT
HAVE BEEN DEVELOPED IN THE LAST
DECADE OR MANY DECADES. RIGHT
IT'S INCREDIBLE, REMARKABLE
BIOMEDICAL ADVANCES AND PROGRESS
AND SO I THINK TO BE ABLE TO
CONTINUE THAT INVESTMENT AND AS
A COUNTRY IN SUSTAINING THE
INCENTIVES AND REWARDS FOR THAT
TYPE OF INNOVATION. IT'S
IMPORTANT THAT WE DON'T KIND OF
MESS WITH THAT BALANCE THROUGH
DISTORTIONS CREATED BY THE
SUPPLY CHAIN ONE. THESE DRUGS DO
GO GENERIC. SO I THINK I'LL JUST
IF YOU WANT TO QUICKLY SKIP
THROUGH ABOUT THREE SLIDES, I'LL
SHOW YOU JUST THE VISUAL. UH,
ONE MORE. YEAH. THERE'S AS
ANTONIO MENTIONED QUITE A BIT OF
INCREASING CONSOLIDATION
INTEGRATION IN THIS INDUSTRY
AGAIN, AS SIMPLIFIED EXAMPLE,
DOESN'T EVEN INCLUDE ALL OF THE
SPECIALTY PHARMACIES AND MAIL
ORDER PHARMACIES THAT ARE
NECESSARILY PART OF IT. BUT NEXT
SLIDE, PLEASE. WE'RE AT A POINT
NOW WHERE THE BIG THREE PBMS ARE
PROCESSING ABOUT 80% OR MORE OF
THE CLAIMS IN IN THE U. S, UM,
NEXT SLIDE. WITH THIS INCREASING
CONSOLIDATION. WE'VE SEEN QUITE
A BIT OF INCREASING PRODUCT
EXCLUSIONS, SO LIMITING PATIENTS
ACCESS TO PARTICULAR DRUGS. AND
ON THE NEXT SLIDE, UM GROSS PBM
PROFITS HAVE INCREASED OVER TIME
, AND THE SOURCES OF THOSE
PROFITS ARE CHANGING. YOU KNOW,
AS WE START TO KIND OF SHINE A
LIGHT ON ONE ASPECT OR
CONCERNING BEHAVIOR. AS ANTONIO
MENTIONED, THERE'S A LOT OF
SCOPE AND OPPORTUNITY TO SHIFT
WHERE THE DOLLARS ARE GOING. AND
SO IF YOU CAN JUST GO THROUGH
TWO MORE SIDES OF THE SUMMARY,
I'LL JUST WRAP IT UP WITH
REBATES HAVE GROWN QUITE A BIT
OVER THIS TIME PERIOD. THINK
THIS IS REALLY SPILLING THROUGH
THE IMPACT PATIENTS,
AFFORDABILITY, CONCERNS AND
ACCESS TO MEDICINES. IT'S
BUILDING BACK TO CREATE THESE
IMPORTANT DISTORTIONS BETWEEN
THE LIST PRICES OF DRUGS AND THE
NET PRICES THAT MANUFACTURERS
ACTUALLY RECEIVED FOR THOSE
DRUGS. GAINED A LOT OF ATTENTION
FROM POLICYMAKERS LIKE
YOURSELVES, AND FROM REGULATORS
AND ALSO QUITE A BIT OF
ATTENTION. AND UM, MARKET
RESPONSES FROM WE'RE STARTING TO
SEE NOW, UM EMPLOYERS AND
INSURERS WHO ARE SAYING, YOU
KNOW, MAYBE I WANNA GO WITH A
DIFFERENT OPPORTUNITY OR A
DIFFERENT BUSINESS MODEL IN
TERMS OF SERVING MY PHARMACY
BENEFITS MANAGEMENT AND I THINK,
REALLY, STARTING TO REALIZE THAT
IT'S TIME FOR SOME SIGNIFICANT
CHANGE IN THIS INDUSTRY. SO
THANK YOU VERY MUCH, AND WE LOOK
FORWARD TO YOUR QUESTIONS. THANK
YOU, DOCTOR. TRICIA APPRECIATE
THE OVERVIEW AND I TRY TO YOU
KNOW, THIS IS A COMPLICATED AREA
WHEN WE'RE DEALING WITH HEALTH
INSURANCE AND HEALTH CARE, AND
ULTIMATELY, THE SUBSET OF THAT,
AS YOU SORT OF TALKED ABOUT WITH
ITS ORIGINS, YOU KNOW, HOW WOULD
YOU DELIVER PHARMACY BENEFITS TO
PEACE TO CONSUMERS TO PATIENTS,
I THINK IS A CRITICAL
INTEGRATION. AND I APPRECIATED
THE HISTORY THERE. WHERE
ORIGINALLY WE SAW SOMETHING THAT
WAS MEANT TO INVOKE COMPETITION
AND NEGOTIATION AND REALLY GOOD,
UM, FUNCTIONS OF SOMETHING THAT
SHOULD BE A PART OF A HEALTHY
MARKET AND MAYBE OVER TIME. IN
AN ALREADY VERY COMPLEX SYSTEM
WITH PHARMACIES AND WITH
WHOLESALERS AND WITH
MANUFACTURERS AND HEALTH PLANS,
AND EVERYBODY SORT OF INTEGRATED
HERE. IS THERE SOME DISTORTIONS
THAT HAVE REALLY PERCOLATED AS
YOU KNOW UNCHECKED AND ARE THERE
WINNERS AND LOSERS HERE THAT ARE
COMPLICATING? ULTIMATELY THE
PRICE THAT GOES TO CONSUMERS AND
THE COST THAT IT GOES. TO OUR
OVERALL HEALTH CARE SYSTEMS, AND
I APPRECIATE SORT OF TEASING OUT
THAT A LITTLE BIT AS WELL. ONE
OPEN IT UP FOR COLLEAGUES TO SEE
IF THEY HAVE ANY QUESTIONS. I'M
GRATEFUL THAT DR WEBBER AND MISS
WALDRON HAD BEEN ABLE TO JOIN US
TO NEIGHBORS FROM SAN DIEGO. UM
BUT I'LL JUST START OFF. MAYBE
JUST BY ASKING, YOU KNOW WHAT DO
YOU WHAT DO YOU SEE? AS YOU
KNOW, MAYBE SOME, UM, NECESSARY
TRAITS THAT PBM SORT OF BRING TO
THIS COMPLEX SYSTEM THAT WE
HAVE. THAT ARE HELPFUL IN
MAINTAINING I THINK
STABILIZATION. AND THEN WHERE
WOULD YOU SORT OF SUMMARIZE AS
YOU'RE TALKING? I THINK YOU'VE
TESTIFIED BEFORE CONGRESS AND
YOU SORT OF LOOKED AT THINGS
THAT ARE GOING ON WITH NATIONAL
TRENDS. YOU KNOW SOME AREAS OF A
POLICY REVIEW THAT WE MAY WANT
TO LOOK AT IT AS WELL. GO AHEAD.
I'LL START WITH, UM. YOU KNOW
THE QUESTION REGARDING POLICY
FIRST, SO POLICY, THERE'S A LOT
OF ACTIVITY AROUND TRYING TO
SNIP THE POOR INCENTIVES OF PBMS
. SO. DID YOU GO TO YOUR FIRST
QUESTION AS WELL? THE PBMS AGAIN
WERE BROUGHT IN TO BE THE GOOD
GUYS, RIGHT? THE IDEA THAN BEING
THE NOT PAYING WHATEVER THEY'RE
BEING INVOICED IS A GOOD THING,
RIGHT? WE HAVE A SYSTEM WHERE
NOT EVERY DRUG IS OF MAXIMUM
VALUE RELATIVE TO ITS PRICE.
WE'VE SEEN MANY INSTANCES OVER
THE LAST FEW YEARS WHERE THERE'S
DRUGS THAT I WOULD CONSIDER TO
BE, LET'S JUST SAY HIGH VALUE
THEIR DRUGS THAT COULD BE VERY
EFFECTIVE FOR A PATIENT. WELL
WHEN THAT PATTERN EXCLUDED,
EXCLUSIVITY RUNS OUT, SOMETIMES
YOU'LL SEE WHAT WE CALL FOLLOW
ON PRODUCTS THAT MIGHT HAVE AN
ADDITIONAL BENEFIT, BUT NOT
NECESSARILY COMMENSURATE WITH
THE NEW PRICE RELATIVE TO THE
GENERIC OF THE ONE THAT GOT
REPLACED. WELL. A GOOD PBM WOULD
SAY, LOOK, YOU'VE PRICED THIS
DRUG TOO HIGH. THERE IS AN
ALTERNATIVE THAT HAS
COMMENSURATE VALUE, ESPECIALLY
RELATIVE TO ITS UNDERLYING COST.
WELL LINED PBM WOULD SAY WE'RE
NOT COVERING THIS NEW FOLLOW ON
PRODUCT BECAUSE IT DOESN'T HAVE
AGAIN THAT INCREASED VALUE. WE
SEE THAT WITHIN SMALLER PBMS
THAT HAVE BETTER INCENTIVE
ALIGNMENT RIGHT AND THOSE WHO
ARE MORE TRANSPARENT, THE LARGER
PBMS WILL BE MORE PRONE TO
FAVORING THOSE HIGH PRICED
ALTERNATIVES BECAUSE THEY'RE
GETTING THAT BIG KICKBACK OR
REBATE FROM THE MANUFACTURER
THAT ENTICES THEIR DECISION
MAKING PROCESS. SO IT'S NOT TO
SAY PBMS ARE BAD. THE
FUNCTIONALITY OF A LOT OF THINGS
THAT THEY DO, I THINK ARE CAN BE
HEALTHY FROM A SYSTEM
PERSPECTIVE, BUT AGAIN IF WE'RE
TALKING ABOUT PUBLICLY TRADED
COMPANIES WHO CAN ENGAGE IN THE
SAME ARBITRAGE SCHEMES AS ONE
INTO THE SUPPLY CHAIN THAT WE
WANT TO CONTROL. AGAIN, THINGS
START TO BECOME A LITTLE BIT
COMPLICATED. IF YOU HIRED ME TO
GO GET YOU AFFORDABLE COFFEE,
OKAY? IT SOUNDS GOOD. I COULD GO
OUT ON THE ON THE STREET AND
FIND AFFORDABLE COFFEE. BUT WHAT
HAPPENS WHEN I START GETTING
KICKBACKS FROM PEOPLE THAT MAKE
COFFEE BEANS? MY DECISION MAKING
PROCESS IS GOING TO BE VERY
DIFFERENT. DOES IT MEAN THAT I
SHOULDN'T GO OUT AND FIND YOU
AFFORDABLE COFFEE? ABSOLUTELY
NOT. WHAT IT MEANS IS THAT
PERHAPS THE KICKBACKS AND
GETTING FROM A COFFEE BEAN
COMPANY ARE INAPPROPRIATE AND
NOT ALIGNED TO ACTUALLY GETTING
YOU THE BEST DEAL THAT YOU CAN
GET IN THE MARKET PLACE. A LOT
OF THE FEDERAL POLICIES THAT ARE
BEING PROMULGATED. ARE TRYING TO
ATTACK THOSE PERVERSE INCENTIVES
WHERE PBM CAN MAKE MORE MONEY.
OFF SOMETHING THAT IS NOT
ALIGNED WITH THE PATIENT OR THE
END PAYER. I THINK. THANK YOU,
DR WEBBER. GOOD MORNING. THANK
YOU. CHAIR THANK YOU SO MUCH
FOR, UM, HAVING THIS, UH, THIS
HEARING TODAY? I'M SURE IT MIGHT
BE ONE OF MANY ON PBMS BECAUSE
IT'S SUCH A COMPLICATED ISSUE.
UM SO I REALLY APPRECIATE YOU
ALL FOR BEING HERE. I HAVE
ACTUALLY A COUPLE OF QUESTIONS.
UM BUT I DO WANT TO PIGGYBACK
OFF OF WHAT YOU WERE JUST SAYING
AND YOU KNOW, DURING I BELIEVE
YOUR PRESENTATION YOU WERE
TALKING ABOUT HOW PBMS CAN HAVE
THREE DIFFERENT PRICES FOR THE
SAME DRUG. DEPENDING ON WHETHER
OR NOT THEY'RE DEALING WITH THE
PHARMACY OR THE MANUFACTURER OR
THE OR THE UNUSUAL. THE PATIENT
AND I'M JUST WONDERING, HOW IS
HOW CAN THAT POSSIBLY BE? THIS
IS I MEAN, IT'S A VERY COMPLEX
AND OPAQUE SYSTEM, AND THEY'RE
THE AS IN 20 WAS DESCRIBING. I
MEAN, I THINK THERE'S A LOT OF,
UM POTENTIAL BENEFITS OF
IMPROVING TRANSPARENCY AND
POLICIES ARE REFORMS THAT MIGHT
IMPROVE THAT TRANSPARENCY, BUT
ESSENTIALLY UNTIL YOU KNOW UNTIL
ESSENTIALLY THE OHIO ATTORNEY,
GENERAL OR STATE OR AUDITOR.
REPORT CAME OUT BACK IN 2018. I
DON'T THINK ANYBODY HAD KIND OF
REALIZED THAT THERE COULD BE
FATHOMED THAT THERE COULD BE A
WORLD WHERE ON AVERAGE PBMS WERE
PAYING PHARMACIES ONE PRICE FOR
MEDICINES AND TURNING AROUND AND
CHARGING THOSE STATE MEDICAID
PROGRAM ABOUT A 30% HIGHER
PRICES FOR THOSE SAME MEDICAID,
UH, FOR THOSE SAME DRUGS FOR
THOSE MEDICAID PATIENTS. AND YOU
KNOW, PART OF IT WAS JUST NOBODY
FATHOM THAT THAT WOULD BE THE
CASE OF WHAT WAS GOING ON. I
THINK UNTIL SOME OF THESE
REPORTS STARTED COMING OUT AND
IT IT JUST REALLY SPOKE TO THE
LACK OF TRANSPARENCY AND LACK OF
INSIGHT INTO THIS MARKET. AT THE
END OF THE DAY. WE'RE TALKING
ABOUT FINANCIAL ENGINEERING. I
MEAN, THERE IS WHEN THERE IS NO
SUCH THING AS THE PRICE FOR A
DRUG. WHAT THAT MEANS IS THAT
PRICE AND IS ULTIMATELY A
SLIDING SCALE. WE CAN'T JUST
BLAME PBMS FOR THAT ENTIRELY. AS
I POINTED OUT MY SLIDES THE
MEDICAID DRUG REBATE PROGRAM
MANDATED BY LAW THAT MEDICAID
PROGRAMS GET THE BIGGEST
DISCOUNTS IN THE MARKETPLACE.
ANYBODY ANYTIME ANYBODY GETS THE
BEST PRICE, EVERYBODY ELSE IS
GETTING A WORSE PRICE. WE'VE
DONE A LOT OF ANALYSES ON BEHALF
OF PLAN SPONSORS WHERE WE CAN
SEE A VERY DISPARATE EXPERIENCE
AND VERY INEQUITABLE EXPERIENCE,
WHERE THE LARGEST MOST
SOPHISTICATED PURCHASERS ARE
GETTING SOME OF THE BEST
NEGOTIATED DEALS. AND THE
SMALLER BUSINESSES AND THE
SMALLER PLANT SPONSORS OR
ESPECIALLY THE PATIENTS THAT ARE
PAYING OUT OF POCKET IS SHE
ALLUDED TO ARE GETTING STUCK
PAYING A DISPROPORTIONATELY HIGH
PERCENTAGE OR THE FULL AMOUNT OF
THE LIST? PRICE OF MEDICINE? IT
IS INHERENTLY INEQUITABLE. WE
TALK ABOUT DRUG PRICING IS IF
IT'S A BLACK BOX, AND IT IS
BECAUSE THE SECOND THAT YOU OPEN
IT UP TO THIS CONCEPT OF A
NEGOTIATED EXPERIENCE WILL THAT
NEGOTIATION IS PROPRIETARY
WITHOUT SAYING WHETHER
NEGOTIATION IS INHERENTLY WRONG
OR NOT. ANY TIME THAT YOU ARE
ALLOWING THAT NEGOTIATED
EXPERIENCE TO BE KEPT WITHIN A
PROPRIETARY BLACK BOX. YOU'RE
CREATING MYSTERY. YOU'RE
CREATING AN ELUSIVE PRICE. IN MY
EXPERIENCE. ANY TIME THERE IS
MYSTERY. THERE IS GREAT
OPPORTUNITY FOR MARGIN BECAUSE
PBMS GET TO SET THE PRICES ON
BOTH ENDS OF THE SPECTRUM. THEY
ARE IN THE BEST POSITION TO
ENGAGE IN ARBITRAGE. BUY LOW
SELL HIGH WITHOUT LETTING EITHER
SIDE UNDERSTAND WHAT'S HAPPENING
ON EITHER END OF THE
TRANSACTION. YEAH IT REALLY JUST
KIND OF BOGGLES MY MIND THAT WE
WOULD ALLOW A SYSTEM LIKE THIS
TO BE SET UP. UM WHEN WE'RE
TALKING ABOUT HEALTH CARE AND
YOU KNOW, YEARS AGO, UM MANY
MANY YEARS AGO, PHYSICIANS COULD
GIVE OUT SAMPLE PRESCRIPTIONS,
RIGHT? AND THEN THEY NO LONGER
ALLOW US TO DO THAT. BECAUSE
THERE WAS THIS THOUGHT THAT WE
WOULD BE MORE BIAS TOWARDS
WHATEVER PHARMACEUTICAL COMPANY
WAS COMING TO GIVE A SAMPLE. SO
THE THOUGHT THAT YOU CAN
NEGOTIATE BASED ON WHATEVER KIND
OF REBATES AND THAT'S THE KIND
OF DRUG THAT YOU WOULD PUT ON
THAT PARTICULAR FORMULARY. I'M
JUST A LITTLE DISAPPOINTED THAT
WE WOULD ALLOW FOR A SYSTEM LIKE
THAT TO BE ESTABLISHED HERE IN
THE UNITED STATES, SO WHO IS
OVERSEEING THIS. UH UM, I'LL
START. I MEAN, THE ANSWER IS
KIND OF NOBODY RELEVANT AT THIS
POINT. PBMS HAVE ENJOYED, UM,
GREAT ANONYMITY OVER THE LAST
FEW YEARS. THE FIRST TIME THAT I
THINK PBMS GOT ANY SORT OF
PUBLIC PROFILE. MEANINGFUL E WAS
IN 2016 CONGRESS HAD HEARINGS
REGARDING EPIPEN PRICING AND THE
THEN CEO OF MYELIN. HEATHER
BRESCH WAS HAULED BEFORE
CONGRESS AND THEY SAID, WHAT ARE
YOU DOING WITH THESE OUTRAGEOUS
PRICES? AND SHE WAS REALLY THE
FIRST ONE TO SAY, LOOK, YOU
COULD BE MAD AT THE PRICES ALL
YOU WANT WHAT IF I TOLD YOU THE
FULL VALUE OF THOSE PRICES ARE
NOT ACCRUING TO US? AND SHE
STARTED TO HAVE TO LET THE YOU
KNOW THE SECRET OF THE INDUSTRY
OUT IS THAT SHE WANTS TO SELL
DRUGS TO PATIENTS. WELL WE DON'T
SELL DRUGS TO PATIENTS ANYMORE.
WE SELL DRUGS TO PBMS, RIGHT. WE
SELL. WE SELL DRUGS TO HEALTH
BENEFIT PLANS. AND SO A LOT OF
TIMES WHEN I'M ASKED LIKE, WHY
IS THIS MARKETPLACE OUT OF
CONTROL? ONE OF THE FIRST THINGS
I SAY IS, IS THAT WE THINK THAT
THE SYSTEM SHOULD YIELD LOWER
PRICES. WE AS PATIENTS DEMAND
MORE AFFORDABLE OPTIONS. THE
EMPLOYERS THAT I WORK WITH THEY
WANT LOWER PRICES, BUT AT THE
END OF THE DAY WE'RE NOT
SELLING. WE'RE NOT SETTING
PRICES. TO SELL, AS IS WE'RE
SETTING PRICES AS A STARTING
POINT POINT FOR A NEGOTIATED
EXPERIENCE, INCREASED REBATES
AND DISCOUNTS, SO MANUFACTURERS
ARE CALIBRATING THEIR PRICES
BASED UPON THE INTERESTS AND
DEMANDS OF THEIR CLIENTS,
GOVERNMENT PROGRAMS IN PBMS AND
HEALTH INSURANCE COMPANIES HAVE
NOT ASKED FOR LOWER PRICES.
THEY'VE ASKED FOR BIGGER
CONCESSIONS OR DISCOUNTS OFF
THOSE LIST PRICES. AND I'LL JUST
ADD TO THAT. I MEAN, I THINK YOU
ARE STARTING, ESPECIALLY IN THE
LAST FEW YEARS TO HAVE
INCREASING INTEREST. THE FTC
OPEN TO SIX P STUDY THAT WE'RE
KIND OF ANXIOUSLY AWAITING THE
RESULTS OF THE HOUSE OVERSIGHT
COMMITTEE AND IN THE IN
WASHINGTON, D. C IS DONE SOME
INVESTIGATIONS. THINK WHAT
THAT'S YOU KNOW, AND I CREDIT A
LOT OF THAT INTEREST ALSO WITH
COMING FROM WE DIDN'T TALK AS
MUCH TODAY ABOUT THE IMPACT THAT
PBMS HAVE HAD ON PHARMACY
REIMBURSEMENT AND THE WAY THAT
THEY'VE IMPACTED, PARTICULARLY
COMMUNITY PHARMACIES, AND, UH,
INCREASING. UM DE IR FEES ARE
KIND OF AFTER THE FACT DISCOUNTS
THAT THEY'RE TAKING BACK FROM
PHARMACIES AS WELL. AND SO
THERE'S KIND OF POCKETS IN IN
MANY WAYS, BUT I THINK THE
IMPACT OF THESE BEHAVIORS ON UH,
PHARMACY CLOSURES AND THE
PROVISION OF CARE AND
COMMUNITIES IS REALLY HELPED
ELEVATE THE INTEREST IN THIS
ISSUE AS WELL AND REALIZE HOW
KIND OF UM, ENTERED TWINED AND
ENTANGLED. ALL OF THESE ISSUES
ARE I THINK THE THERE'S THIS
INTEREST IN FIGURING OUT YOU
KNOW, IT'S A COMPLICATED MARKET
BECAUSE IT'S EVOLVING AND IN
SOME CASES HAS BEEN LIKENED TO A
GAME OF WHACK A MOLE, RIGHT? AND
SO YOU KIND OF SHINE A LIGHT ON
ONE THING AND THEN, OKAY, FINE.
WE'LL STOP DOING THAT. BUT WE'RE
GOING TO START DOING SOMETHING
NEXT, AND THEY'RE JUST BECOME
MORE AND MORE PLAYERS, AND IT'S
KIND OF SPIRALING AND OPENING OF
OFFSHORE. UM AGENCIES TO KIND OF
SHIFT REBATES OVER THERE LIKE IT
BECOMES A COMPLICATED SYSTEM AND
EVEN AS YOU TRY TO SHINE A LIGHT
IN ONE AREA YOU REALIZE THAT
LIGHT NEEDS TO BE BIGGER AND
EVOLVING. THANK YOU. AND WHEN
YOU UH YOU KNOW, ON THE, UM,
SUBJECT OF THE HOUSE OVERSIGHT
COMMITTEE. COULD YOU COMMENT ON
THE FINDING IN 2021 THAT SAID
THAT UM, THAT THEIR REPORT
CONCLUDED THAT REBIRTH REBATES
EXCUSE ME, UM, WERE NOT
CORRELATED WITH WITH INCREASING
THE DRUG PRICES. SO I COULD
START ON THAT SO ITS CONTEXT IS
EVERYTHING WITHIN ANY ANALYSIS
REGARDING PRESCRIPTION DRUGS.
ONE OF THE THINGS THAT WE'VE
SEEN IS THAT THERE ARE FOR
SIMPLICITY SAKE, LET'S SAY
THERE'S TWO DIFFERENT TYPES OF
BRAND NAME DRUGS. THERE ARE
DRUGS THAT ARE TRUE INNOVATORS
AND THE CLASS OF ONE MEANING
THAT THERE'S NO MATERIAL
ALTERNATIVE THERAPY AVAILABLE.
THE DRUGMAKER IN THAT INSTANCE
HAS DONE WHAT THE WHAT THE
MARKETPLACE IS SUPPOSED TO
YIELD. WE'VE GIVEN THEM A
PATENT. EXCLUSIVITY INCENTIVE,
SO THEY BRING SOMETHING TO
MARKET THAT DIDN'T EXIST BEFORE.
SO HOORAY US. WE GOT A NEW A NEW
TREATMENT. THE TRADE OFF THERE
IS THE MANUFACTURER HAS A
MARKETPLACE RELATE TO ITSELF.
AND THEY COULD REALLY SET A
PRICE WITH WITHOUT ANY SORT OF
MEANINGFUL COMPETITION,
DICTATING OR CALIBRATING THAT
PRICE THAT THEY'RE SETTING NOW,
I DON'T KNOW ENOUGH ABOUT HOW
MANUFACTURERS ARE SETTING THOSE
PRICES. BUT FOR SIMPLICITY SAKE,
LET'S JUST SAY THE MANUFACTURER
HAS A GREAT AMOUNT OF LATITUDE
RELATIVE TO OTHER DRUGS TO SET
PRICES AND REALLY OWN THE MARKET
. BUT THEN THERE'S ANOTHER
CATEGORY OF BRAND NAME DRUGS.
THOSE THAT HAVE OTHER
COMPETITORS WHO CAN LEND
THEMSELVES TO MORE COMPETITION.
AS AS AARON POINTED OUT, THOSE
ARE THE DRUGS THAT ARE MOST
CONDUCIVE TO ARBITRAGE AND
REBATE HARVESTING FROM PBMS
COMPETITION AMONG THOSE DRUGS
CREATES INFLATED PRICES AND A
LOWER NET EXPERIENCE. SO WHEN
VIEWED AN AGGREGATE YOU COULD
SAY BRAND DRUGS HAVE THERE'S NO
REAL CORRELATION BETWEEN YOU
KNOW, LIST PRICES AND NET PRICE.
WELL, THE TRUTH IS, IS THAT
THERE IS TREMENDOUS CORRELATION
BETWEEN LIST PRICE GROWTH AND
NET PRICE DEFLATION. AMONG DRUGS
THAT ARE IN COMPETITIVE CLASSES.
THAT WILL NOT BE THE CASE FOR
DRUGS THAT DO NOT HAVE
MEANINGFUL COMPETITION AVAILABLE
TO THEM, JUST TO ADD TO THAT
ANOTHER STUDY THAT WE'VE DONE AT
THE SHAVER CENTER SHOWS EXACTLY
THAT POINT THAT ANTONIO WAS JUST
MAKING, WHICH IS THAT GROWTH IN
LIST PRICES AMONG COMPETITIVE
AMONG DRUGS AND COMPETITIVE
CLASSES IS HIGHLY CORRELATED
WITH GROWTH IN REBATES AND PRICE
CONCESSIONS FOR THOSE DRUGS AND
THAT THAT GROWTH IS ACTUALLY
EXPLAINED. THE BULK OF THE
GROWTH IN LIST PRICES OVER THAT
TIME. THANK YOU FOR THAT. AND MY
FINAL QUESTION. I'M SORRY. I'VE
ASKED SO MANY QUESTIONS, BUT YOU
KNOW THE ISSUE OF PATENT
TICKETS. UM WHAT IS YOUR? DO YOU
HAVE ANY CONCERN THAT THAT IS
ALSO, UH, LEADING TO INCREASED
COSTS WITHIN OUR HEALTH CARE
SYSTEM. SO I DO. YES I THINK I
THINK THAT PATENT THICKETS ARE
AWAY FOR MANUFACTURERS TO
SQUEEZE MORE JUICE OUT OF THE
OUT OF THE DEAL. ESSENTIALLY
THAT WE'VE BEEN ABLE TO CREATE
FOR THEM. I DO WANT TO STRESS,
THOUGH, THAT NOT EVERY PATENT
THAT'S A FOLLOW ON IS WHAT I
WOULD CONSIDER TO BE WASTEFUL.
WE'VE SEEN A LOT OF INSTANCES
WHERE SOME OF THE, UM
CONSTITUTION OF THAT TICKET IF
YOU WILL. IS WHAT I WOULD
CONSTITUTE, AS NOT NECESSARILY
IN KEEPING WITH THE DEAL THAT'S
SUPPOSED TO BE, UH, PROFFERED BY
HACKS. WAXMAN THERE ARE OTHER
PATENTS THAT ARE GOING TO BE
PART OF THOSE THICKETS THAT I
THINK COULD BE CONSTRUED AS
MAYBE MORE MATERIAL IN NATURE,
MEANING THAT MAYBE THE
MANUFACTURER HAS A MORE
LEGITIMATE CASE FOR THAT PATENT
THAT MAYBE YOU OR I MAY THINK OF
I THINK THE KEY IS THAT I THINK
WE NEED A MORE, UM, OBJECTIVE
APPROACH TO PATENT EXCLUSIVITY.
ONE THAT DOESN'T LEND ITSELF TO
THAT TYPE OF, YOU KNOW, POST
EXCLUSIVITY, YOU KNOW,
MANIPULATION IF YOU WILL, BUT I
THINK THAT ONE OF THE IMPORTANT
THINGS TO CONSIDER, THOUGH, IS
THAT IS AARON ALLUDED TO WE RELY
ON THAT PATENT CLIFF
SIGNIFICANTLY TO CREATE A
BALANCE. WE OVERPAY OVERPAY IF
YOU WILL FOR INNOVATIVE BRAND
DRUGS TO COME TO MARKET WITH THE
IDEA THAT THERE'S A TRADE OFF
THAT ONCE THAT EXCLUSIVITY RUNS
OUT, ESSENTIALLY, WE'RE CREATING
A HOLE AT THE BOTTOM OF THE
BUCKET. AND WE'RE POURING MORE
WATER IN WITH NEW WITH NEW BRAND
DRUGS, BUT WE RELY ON THE WATER
COMING OUT OF THE BOTTOM IN
ORDER TO WORK IF PBMS HAVE THE
ABILITY TO KIND OF TIGHTEN THAT,
RIGHT, IT'S NOT JUST A PATENT
THICKET THAT CAN GIVE A
MANUFACTURER MORE MARKET SHARE
BEYOND THE TIME THEY'RE SUPPOSED
TO HAVE IT LAUGHS. THE
MANUFACTURER CAN ENGAGE IN
REBATE PRACTICES AND KICKBACKS
BACK TO PBMS THAT ALSO KIND OF
PROLONGED THAT LIFE. SO I DO
THINK THAT PERHAPS A BETTER
APPROACH TO PATENTS IS NECESSARY
WITHOUT QUESTION, BUT I THINK
IT'S REALLY IMPORTANT TO
UNDERSTAND THAT THE SAVINGS THAT
THE COMPETITIVE MARKETPLACE IS
GENERATING DON'T WORK AS IT'S
SUPPOSED TO, EITHER. SO THE
THICKETS AREN'T ESSENTIALLY THE
ONLY THING STANDING IN THE WAY
OF MORE AFFORDABLE MEDICINES. I
MEAN, I THINK I THINK THAT THAT
WAS A NICE COMPREHENSIVE ANSWER.
SO YES, THANK YOU. THANK YOU, DR
WEBBER, MISS WALDRON. THANK YOU.
SO IN THE ESSENCE OF TIME YOU
EAT TEST ONE OF THE QUESTIONS I
WAS GOING TO ASK SO I DON'T HAVE
TO REPEAT THOSE. UM BUT
REGARDING SOME OF THE THINGS
THAT WE COULD DO AS A
LEGISLATURE, UM, I WAS JUST
LOOKING AT MY NOTES AND THE
CALIFORNIA HEALTH BENEFITS
REVIEW PROGRAM. NOTED THAT IN
2020 2021 7 STATES HAD
INTRODUCED LEGISLATION RELATED
TO THIS TOPIC. UM, PROPOSALS
VARY FROM DIVERTING 51% OF 200%
OF THE REBATE DOLLARS TO THE
ENROLLEE OR TO THE PLAN SPONSOR
WITH CALCULATIONS OCCURRING AT
THE POINT OF SALE. UM THEY GO ON
TO TALK ABOUT WEST VIRGINIA,
WHICH WAS AN ACTED REQUIRING AND
ROLLING COST SHARING TO BE
CALCULATED POINT OF SALE BASED
ON A PRICE REDUCED BY AT LEAST
100. UM OF THE REBATES. UH, WE
DON'T KNOW HOW THAT'S WORKING,
AND I GUESS BECAUSE IT'S PRETTY
RECENT, BUT UM, ANY REBATE
EXCEEDING THIS SUPPOSED TO BE
PASSED ON TO THE HEALTH PLAN TO
REDUCE PREMIUMS. AND IT GOES ON
AND ON ABOUT OKLAHOMA DOING
SIMILAR THING AND OTHER STATES.
GEORGIA. WE SEE THESE BILLS
PRETTY MUCH ON A REGULAR BASIS
NOW HAVE AN UNHEALTHY COMMITTEE.
A FEW YEARS WE HAD SB 873 LAST
YEAR, SENATOR BRADFORD AND THE
GOAL WAS AS FAR AS THE AUTHORITY
OVERSEEING TRYING TO GET THE
DEPARTMENT OF MANAGED HEALTH
CARE AS WELL AS THE CALIFORNIA
DEPARTMENT OF INSURANCE TO, UH,
LOOK AT AND SUBMIT A REPORT UH,
TO THE LEGISLATURE ON AH! THE UM
ALL OF THESE TOPICS IF THIS BILL
WOULD WORK REQUIRING AN
ENROLLEES ARE INSURED, DEFINED
COSTS SHARING FOR EACH
PRESCRIPTION DRUG TO BE
CALCULATED THE POINT OF CELL
BASED ON A PRICE REDUCED BY AN
AMOUNT EQUAL TO AT LEAST 90% OF
ALL REBATES RECEIVED. THAT'S
WHAT WE HAD TRIED TO DO HERE.
AND THEN REQUIRES THE HEALTH
PLAN TO PASS THROUGH TO EACH
ENROLLEE OR INSURED AT THE POINT
OF SALE, A GOOD FAITH ESTIMATE
OF THE ENROLLEE OR INSURANCE
DECREASED COST SHARING REQUIRED
PURSUANT TO THIS BILL. UM HOW AS
FAR AS. AND THE QUESTION THAT
WAS ASKED ABOUT IS THERE STILL A
PLACE FOR PBMS? OR HOW CAN HOW
CAN THIS BE? AH FIXED. WHAT
WOULD YOU RECOMMEND TO US? BASED
ON YOU KNOW WHAT WE'VE SEEN
ACROSS THE COUNTRY. YOU KNOW
YOUR KNOWLEDGE OF THIS THIS
ASPECT OF OUR HEALTH SYSTEM AND
PHARMACEUTICAL DISTRIBUTION
SYSTEM. HOW CAN WE MAKE THIS
MORE EFFICIENT? MORE EFFECTIVE?
YOU KNOW FOR THE PATIENT. AH!
SAVING DOLLARS IF IT'S EVEN
POSSIBLE. MOST HEALTHCARE UH,
ENVIRONMENT WE'RE IN. BASED ON
YOU KNOW WHAT WE'VE TRIED TO DO
WITH OTHER STATES HAVE TRIED TO
DO. WHAT SHOULD WE BE LOOKING
AT? AS FAR AS YOU KNOW WHAT WE
CAN DO? I MEAN, I THINK I THINK
THERE'S SOME YOU KNOW KEY
PRINCIPLES THAT REALLY ONE IS
MAKING, ENSURING THAT PATIENTS
ARE BENEFITING FROM THESE
DISCOUNTS OR REBATES. WHAT IN
TERMS OF THE COST SHARING THAT
THEY FACE RIGHT? THERE'S NOTHING
ACTUALLY LIKE PBMS ARE ARE AN
IMPORTANT PART OF NEGOTIATING
WITH DRUG MANUFACTURERS OVER
PRICES THAT THAT'S NOT, YOU
KNOW, IN PRINCIPLE THAT
DISSIMILAR FROM WHAT INSURERS DO
WHEN THEY NEGOTIATE AND CREATE
NETWORKS OF PROVIDERS OF
PHYSICIANS AND HOSPITALS, RIGHT
WE DO SEE THAT THE PRICES THAT
THOSE IN NETWORK PHYSICIANS AND
HOSPITALS AGREE TO OUR BIG
DISCOUNTS OFF OF THEIR BUILD
CHARGES. TYPICALLY THE BIG
DIFFERENCE HERE IS THAT YOUR
DEDUCTIBLE OR CO INSURANCE AS A
PATIENT AT THE HOSPITAL IS BASED
OFF THAT DISCOUNTED PRICE, AND
THAT IS GENERALLY NOT THE CASE.
IF YOU'RE PAYING COINSURANCE OR
IN A DEDUCTIBLE PHASE ON THESE
DRUG PRICES WHERE THESE
DISCOUNTS HAPPENED AFTER THE
FACT AND SO THAT ENDS UP
CREATING A VERY, UM PERVERSE OR
KIND OF HARMFUL SET OF
CONDITIONS FOR THE PATIENT WHOSE
INSTEAD NOW PAYING AN INFLATED
PRICE AT THE PHARMACY COUNTER.
IT'S ALSO ONE OF THE MOST COMMON
INTERACTIONS WITH THE HEALTH
CARE SYSTEM. IS YOUR PATIENT
GOING AND PICKING UP OR FILLING
YOUR PRESCRIPTION DRUG? AND SO
YOU'RE REMINDED OVER AND OVER
AGAIN ABOUT THIS AFFORDABILITY
CHALLENGE THAT'S CREATED BY THE
FACT THAT YOU'RE NOT SHARING IN
THESE DISCOUNTS AT THAT
TRANSACTION. I THINK YOU KNOW,
JUST AT A HIGH LEVEL, WE'VE
TALKED A LOT ABOUT THE
COMPLEXITY AND IN ANY TYPE OF
POLICY MOVING TOWARD INCREASED
TRANSPARENCY, I THINK IS
IMPORTANT. ANOTHER IMPORTANT
PRINCIPLE HERE, YOU KNOW, WE'VE
SEEN UM EVEN IN, FOR EXAMPLE,
THE COMMERCIAL MARKET AND THE
EMPLOYERS BASE RIGHT THAT
THERE'S A PHARMACY BENEFITS
CONSULTANTS WHO ARE SUPPOSED TO
BE KIND OF HELPING OR PROVIDING
CONSULTING SERVICES FOR
EMPLOYERS AS THEY'RE PICKING UP
PBM OR PICKING BETWEEN COMPETING
PBMS. YOU'RE STARTING TO NOW GET
CONCERNS ABOUT TO WHAT EXTENT
ARE THEY BEING COMPENSATED BY
THE PBMS AS WELL AND JUST KIND
OF THESE INCREASING LAYERS
THERE, AND SO I THINK THAT'S
JUST ANOTHER EXAMPLE. WHERE IN
ORDER TO MAKE THIS MARKET
FUNCTION BETTER? WE NEED MORE
TRANSPARENCY TO UNDERSTAND
WHAT'S ACTUALLY GOING ON. YEAH
JUST TO PIGGYBACK OFF THAT, YOU
KNOW. A LOT OF THE PROBLEMS GO
BACK TO THE 19 NINETIES, WHERE
YOU KNOW. IN 1987 PRESIDENT
RONALD REAGAN SIGNED THE FEDERAL
ANTI KICKBACK LAWS, ALL
MARKETPLACES, THE NINETIES,
DRUGMAKERS AND PBMS AND OTHER
INTERMEDIARIES GOT EXEMPTIONS TO
THOSE FEDERAL ANTI KICKBACK LAWS
THAT ALLOWS THEM TO ENGAGE IN
THIS PAY TO PLAY. UM IN
TRADITIONAL MARKETPLACES. IF YOU
OR I WERE TO WALK INTO AN
APPLIANCE STORE TO BUY A WASHING
MACHINE OR A DISHWASHER. THERE'S
A PRICE AND THEN THERE MIGHT BE
A REBATE. WE WALK UP TO THE
CASHIER. WE PAY THE INFLATED
PRICE. THEN WE DO THE NECESSARY,
YOU KNOW, FILL OUT THE FORM AND
GET THE REBATE THAT COMES BACK
TO US AS CONSUMERS THAT DOESN'T
HAPPEN IN THE PRESCRIPTION DRUG
SUPPLY CHAIN. IT IS VERY UNIQUE
IN THAT. A WE HAVE A SYSTEM THAT
INCENTIVIZES HIGHER PRICES IN
THE FACE OF COMPETITION. AND
THEN WE HAVE PATIENTS WHO ARE
SADDLED WITH THE OVERPAID WITH
THE OVERPRICED MEDICINES AT THE
PHARMACY COUNTER GENERATING
REBATES THAT WILL GO BACK TO
PBMS HEALTH INSURANCE COMPANIES
AND PLANT SPONSORS THAT LOWER
PREMIUMS IN MANY INSTANCES, NOT
ALL ENTIRELY FOR OTHER HEALTHIER
YOU KNOW INDIVIDUALS WHO AREN'T
SICK AND NEEDING MEDICINE. SO I
DO THINK THAT IT IS IMMORAL AND
UNETHICAL TO TAKE SICK PATIENTS
AND REQUIRE THEM TO OVER PAY FOR
MEDICINES. TO GENERATE REBATES
TO GO TO OTHER PEOPLE WHO AREN'T
SICK. UM SO I THINK THAT THERE
IS THERE IS WORK THAT CAN BE
DONE TO ERODE PATIENT COST
SHARING THEIR THE OTHER THING
THAT OTHER OUT THAT WILL ADD TO
IT. IS THAT LOOK AS SOMEBODY WHO
IS AUDITED PBS INVESTIGATED PBMS
. OKAY I HAVE LEARNED THAT
TRANSPARENCY IS THE BEST IN
DISINFECTED. I HAVE CAUGHT A LOT
OF METAPHORICAL COCKROACHES WITH
MY FLASHLIGHT. LOOKING AT DRUG
PRICING IS EXCEL SHEETS. WHEN
PBMS ARE REQUIRED TO PROVIDE AN
ITEMIZED ACCOUNTING OF THE
SUPPOSED DEAL THAT THEY'RE
PROVIDING THE PATIENTS AND PLAN
SPONSORS. THEY ARE IN A MUCH
BETTER POSITION TO BE HELD
ACCOUNTABLE AS PUBLICLY TRADED
COMPANIES WHOSE PRODUCE VERY
OBLIGATION IS TO SHAREHOLDERS
AND NOT THE END CLIENT. SO ANY
SORT OF POLICY WHETHER IT BE
CONTRACTUALLY IN A PLAN SPONSOR
CONTRACT OR MANDATED BY THE
STATE LEGISLATURE OR FEDERAL
GOVERNMENT THAT REQUIRES AN
UNCOMFORTABLE AMOUNT OF
TRANSPARENCY IS THE BEST WAY TO
NOT ONLY RIGHT SIZED
PRESCRIPTION DRUG COSTS BUT TO
BETTER ISOLATE WHERE PERVERSE
INCENTIVES MIGHT BE WORKING
AGAINST THE INTEREST OF THE PLAN
SPONSOR I THINK JUST AS A FOLLOW
UP TO THAT, BECAUSE PART OF WHAT
WAS ATTEMPTED IN SB 873 WAS
REQUIRING SOME OF THOSE
REPORTINGS UM WHERE IS IT? THAT
AND THAT IT WOULD BE SHOWN AN
END OF CALENDAR YEAR
RECONCILIATION FOR ANY COST
SHARING REDUCTIONS. ODE TO THE
ENROLLEE OR INSURED PURSUANT TO,
UH, THE REGULATIONS. THAT. WE'RE
NOT PASSED ON TO THE ENROLLEE OR
INSURED AND THAT IT WOULD DO
SOME OF THAT ACCOUNTABILITY. UM
AND IT'S ALMOST GOES BACK TO THE
QUESTION THAT I WAS GOING TO ASK
THAT WAS ASKED ABOUT THE
AUTHORITY OVERSEES PBMS. IN
ORDER TO HAVE THIS TRANSPARENCY.
WE NEED TO HAVE SOME ENTITY THAT
IS LIKE WE HAVE THE DEPARTMENT
OF INSURANCE OF A IF A PERSON IS
HAVING A PROBLEM WITH THE
INSURANCE COMPANY, THEY CAN, UH,
FILE A COMPLAINT WITH THE
DEPARTMENT OF INSURANCE AND IT
CAN BE RESOLVED AND I KNOW
BECAUSE I'VE DONE THAT, SO I
KNOW IT'S AVAILABLE, BUT IS
THERE A WAY THAT. CREATING AN
OVERSIGHT OR SOME KIND OF
ENTITY. COULD HELP. WITH THE
TRANSPARENCY ISSUE. THAT'S RIGHT
NOW. IT SEEMS LIKE THEY KIND OF
JUST DOING WHAT THEY DO IN EACH
EACH DRUG HAS ITS OWN. ISSUE.
WITHOUT UNDERSTANDING WHAT THE
WHAT? THE ARCHITECTURE OF AN
INTENDED SORT OF, YOU KNOW,
OVERSIGHT WOULD BE FROM A
GOVERNMENT PERSPECTIVE. I CAN
ONLY SPEAK PHILOSOPHICALLY AND
SAY, LOOK, A LOT OF STATES HAVE
ALLOWED PBMS. COMPLETE COMPLETE
ABILITY TO DO AS THEY PLEASE.
THEY DON'T ANSWER TO ANYBODY. SO
STATES LIKE OHIO HAVE REQUIRED
LICENSURE WITHIN THE STATE
DEPARTMENT OF INSURANCE AND THEN
WHEN THEY WHEN THEY PASS
POLICIES. ULTIMATELY YOU HAVE
SOMEBODY TO ACT AS AN ENFORCER.
I'M NOT HERE TO SAY THAT'S
PERFECT OR THE RIGHT OR THE OR
THE RIGHT WAY TO GO. I'M HERE TO
SAY THAT LOOK, IF YOU DON'T HAVE
YOU KNOW ANY SORT OF ENFORCEMENT
AUTHORITY OVER PBMS. GOOD LUCK
ACTUALLY GETTING WHAT YOU INTEND
THROUGH POLICY. ENFORCEMENT
AUTHORITY. OKAY BECAUSE I WAS
WHEN YOU MENTIONED THE ANTI
KICKBACK STATUTES, THE OFFICE OF
INSPECTOR GENERAL, I THINK IT
WAS LIKE FIVE YEARS AGO, HAD
TRIED TO PROPOSE SAFE HARBOR
CHANGE. UH SAFE. HARVARD CHANGES
TO THAT STATUTE THAT THEY WOULD
DECIDE WHICH WE BAIT
ARRANGEMENTS WERE HARMFUL AND
WHICH ONES WERE NOT AND KIND OF
WENT BY THE WAYSIDE BECAUSE
THERE WAS SO MUCH DEBATE OVER
IT, AND I MEAN IT WOULD LOOKING
AT THAT AGAIN AT THE FEDERAL
LEVEL, BE SOMETHING THAT WOULD
BE HELPFUL OR NOT, OR WAS THAT A
LITTLE BIT FEDERAL TRADE
COMMISSION IS DOING THAT AS PART
OF THEIR INVESTIGATION. UM I
THINK IN GENERAL, THE SPIRIT OF
WHAT YOU'RE ASKING IS SOMETHING
THAT'S NECESSARY. IS THAT LOOK,
EVERYBODY'S EVERY PBM THAT YOU
IF YOU IF YOU ASK ANY PBM AFTER
THIS HEARING, YOU KNOW. ARE YOU
TRANSPARENT, THEY'LL SAY
ABSOLUTELY. TRANSPARENCY IS NOT
BLACK AND WHITE. IT IS A IT IS A
IT IS A SPECTRUM OF EXPERIENCE.
IN MY EXPERIENCE, THERE IS NO
SUCH THING AS A FULLY ALIGNED,
TRANSPARENT PBM. UM IT IS JUST
DEGREES OF TRANSPARENCY AND SO
TO ME, ENSURING THAT THE PEOPLE
THAT END UP PAYING THE BILL AT
THE END HAVE THE MOST ACTIONABLE
INFORMATION POSSIBLE TO ASSESS
WHETHER OR NOT THEY'RE GETTING A
GOOD DEAL AND WHETHER THEY'RE
PBM IS ADEQUATELY INCENTIVIZED
TO DO SO. TO ME, THAT IS, THAT
IS VERY IMPORTANT, REGARDLESS OF
HOW YOU ENFORCE THAT THAT
OUTCOME. THANK YOU. THANK YOU
WERE AT THIS TIME GOING TO MOVE
TO PUBLIC COMMENT. WE OBVIOUSLY
HAVE PROBABLY A LOT OF QUESTIONS
THAT WE HEARD OTHER COMMITTEES
THAT WOULD BE INTERESTED IN
COVERING THIS CONVERSATION AS
WELL. BUT I DIDN'T WANT TO TAKE
AWAY FROM THOSE THAT HAVE BEEN
ABLE TO JOIN US HERE TODAY. TO
PROVIDE ADDITIONAL PERSPECTIVE.
I'M GONNA ASK PUBLIC COMMENTERS
TO BE ROUGHLY AROUND TWO MINUTES
APIECE. THAT'S ENOUGH TO BE ABLE
TO GET SOME MATERIAL ON THE
RECORD FOR OUR CONSIDERATION,
AND I'M GONNA GIVE THE GAVEL
OVER TO DR WEBBER. SO I CAN TAKE
A QUICK LITTLE MEETING BUT BACK
TO JOIN YOU FOR CLOSING COMMENTS
AS WELL. THANK YOU. WHOEVER
WANTS TO BEGIN. SORRY UH, BILL
HEAD WITH PCM, A WITH A NATIONAL
PBM TRADE ASSOCIATION. AND JUST
WANT TO MAKE A COUPLE OF
COMMENTS. ONE IS, UM EVERY
SINGLE STATE EMPLOYEE PROGRAM
HIRES UH, PBM. INCLUDING
CALIPERS. VIRTUALLY EVERY STATE
MEDICAID PROGRAM HIRES THE PBM,
INCLUDING MEDICAL MEDICAL CARVED
OUT A COUPLE YEARS AGO AS YOU
MAY RECALL, AND THEY HIRED A
PBM. MAN SO WE MUST BE DOING
SOMETHING RIGHT? UM I DO WANT TO
DO TAKE ISSUES WITH A FEW OF THE
THINGS THAT HAVE BEEN SAID, AND
I HOPE AT SOME FUTURE DATE
BECAUSE OUR TIME IS LIMITED,
OBVIOUSLY, IS THAT WE CAN
ACTUALLY HAVE A PBM 101 BY PBMS
AND GIVE MORE DETAILED
BACKGROUND ABOUT HOW WE OPERATE
AND HOW WE INTERACT WITH THE
SYSTEM. UH DR TRISH, I THINK
WOULD EVEN ACKNOWLEDGE THERE ARE
COLLEAGUES AT THE SCHAEFFER
SCHOOL WHO HAVE A DIFFERENT
DIFFERENCE OF OPINION IN TERMS
OF THE IMPACT OF THE SYSTEM AND
SUCH, HAVE YOU? I DO. I DO.
WANNA A COUPLE OF CORRECTIONS IS
PBMS DO NOT UM, DECIDE WHAT GOES
ON A FORMULA. THEY WORK WITH THE
PLAN TO HELP PLAN THE HEALTH
PLAN IS TO HEALTH PLAN'S
FORMULARY. I'M CERTAINLY ASSIST.
UH AND, UM, CREATING THAT
FORMULA AND WORKS FOR THE PLAN.
AT THE END OF THE DAY, THE PBM
IS CONTRACTED TO PROVIDE THE
LOWEST NET COST TO THE PAYER.
THAT IS WHAT IT IS. CONTRACT IT
TO DO. AND THE NOTION THAT PBMS
ARE SELF SERVING THAT THEY'RE
PAYING THEMSELVES MORE.
JUSTIFIES ECONOMIC LOGIC.
BECAUSE OF A PBM IS RESPONDING
TO AN RFP AND TELLS CALPERS
WE'RE GOING TO ACTUALLY PAY OUR
OWN AFFILIATED PHARMACIES A
LITTLE BIT MORE. UM THEY
WOULDN'T GET THE CONTRACT JUST
DEFIES ECONOMIC SENSE. IN
RESPECT TO TRANSPARENCY. I WOULD
URGE YOU TO LOOK AT MAYBE 315
THAT WAS PASSED A FEW YEARS AGO.
IT REQUIRES PBMS TO BE LICENSED
IN THE STATE TO DO BUSINESS. IT
ALSO REQUIRES PBMS TO BE VERY
TRANSPARENT TO THE CLIENT. SO
THAT INCLUDES REBATES,
REIMBURSEMENTS PAYMENTS ALL
THESE OTHER THINGS. SO THERE IS
THIS AUDITING AND IT HAS TO BE
QUARTERLY AND YOU CAN'T CONTRACT
IT AWAY. YOU CAN'T DENY IT TO
THE CLIENT. IT IS CURRENT LAW
AND IT IS ENFORCED THROUGH THE
PLAN BY TO THE MHC. SO THERE IS
ENFORCEMENT AND THERE AND THERE
IS TRANSPARENCY. SO AGAIN, I
WOULD JUST, UM I RESPECTFULLY
REQUEST THAT WE BEGIN THE
OPPORTUNITY TO SORT OF HAVE
EQUAL TIME IT HAS. I THINK IT'S
MR CHAKA SAID. IT IS A VERY
COMPLEX ISSUE. UM AND HAS HE
MENTIONED TO EVERYBODY IN THE
SUPPLY CHANGES PROFIT, DIFFERENT
DRIVEN AND I WOULD ENCOURAGE YOU
TO LOOK AT INDEPENDENT SOURCES
OF WHERE THE DOLLAR ACTUALLY
GOES. PBMS PROFIT MARGINS ARE IN
THE 2 TO 4% RANGE. UM SO WE'RE
NOT. WE'RE NOT THE ONES RAKING
IN THE MONEY. THERE'S JUST A LOT
OF MONEY IN THE GRAND SCHEME OF
THINGS AND BIG PICTURE WISE. BUT
IT CASCADES FROM THE
MANUFACTURER DOWN. WE DON'T BUY
OR SELL DRUGS, AND WE REIMBURSE.
SO UH, THANK YOU VERY MUCH FOR
YOUR TIME AND LOOK FORWARD TO
ENGAGING MORE. THANK YOU. THANK
YOU SO MUCH. SUSAN BONIOR, CEO
OF THE CALIFORNIA PHARMACIST
ASSOCIATION, WE HAVE OVER 50,000
LICENSED PHARMACISTS IN THE
STATE OF CALIFORNIA AND OVER
60,000 PHARMACY TECHNICIANS
ABOUT 4000 COMMUNITY PHARMACIES
IN THE STATE 2000 CHAIN 2000
INDEPENDENT, SO IT'S A REALLY
INTEGRAL PART OF OUR HEALTH CARE
SYSTEM. UH AND IT'S UNDER THREAT
RIGHT NOW. I'M SURE YOU'VE SEEN
IT. I'M SURE YOU'VE HEARD ABOUT
IT. WHAT IS HAPPENING WITH ALL
THIS INFORMATION WE'VE HEARD FOR
YOUR CONSTITUENTS. THE PATIENTS
AT THE COUNTER IN THE PHARMACY
IN FRONT OF THEIR MOST
ACCESSIBLE HEALTHCARE PROVIDER,
THE PHARMACIST AND WHAT'S
HAPPENING THERE AND YOU'VE SEEN
IT IS REALLY A BREWING CRISIS.
UH AND THAT IS MEANING THAT WE
HAVE OUR PATIENTS, OUR
CONSTITUENTS WHO ARE NOT ABLE TO
GET THE MEDICATIONS IN A TIMELY
MATTER OR EVEN THE MEDICATIONS
AT THEIR LOCAL CLOSEST PHARMACY
THAT THEY HAVE BEEN PRESCRIBED.
WHAT'S GOING ON IN THIS SYSTEM
IF YOU CAN IMAGINE AN
INDEPENDENT, SMALL BUSINESS
PHARMACY FAMILY OWNED, TRYING TO
SIGN A CONTRACT WITH ONE OF
THESE THREE LARGE PBMS AND I
WANT TO CLARIFY TO. IT'S THE
PRACTICES THE BAD PRACTICES THAT
WE WANT TRANSPARENCY AROUND. WE
UNDERSTAND THE ROLE OF THE PBM.
WE JUST WANT THERE TO BE
ACCOUNTABILITY AND TRANSPARENCY,
SO THE BAD PRACTICES WILL STOP
SO THAT PATIENTS CAN ACTUALLY
GET THEIR PRESCRIPTIONS AT A
REASONABLE PRICE. AND ALSO ONE
SMALL CORRECTION THERE. PBMS ARE
NOT REQUIRED TO BE LICENSED IN
CALIFORNIA. THEY JUST REGISTER
WITH THE DEPARTMENT OF MANAGED
HEALTH CARE, AND THERE IS VERY,
VERY LIMITED ENFORCEMENT. SO
THAT IS THE REALITY TODAY HERE
IN CALIFORNIA. BUT GOING BACK TO
WHAT IS THE EXPERIENCE FOR YOUR
CONSTITUENTS YOURSELF OR YOUR
FAMILY MEMBER WHEN THEY WALK
INTO THE PHARMACY, AND THEY WANT
TO HAVE THEIR PRESCRIPTION
FILLED CURRENTLY, WHAT'S
HAPPENING IS THAT THE PHARMACY
IS BEING CHARGED ONE PRICE TO
STOCK A MEDICATION. UH AND THEN,
UH, THEY ARE GETTING REIMBURSED
AT A MUCH LOWER PRICE. WHEN THAT
MEDICATION IS SOLD. YOU CAN'T
BELIEVE IT. NO ONE COULD RUN A
BUSINESS THIS WAY. NO ONE COULD
SAY THAT YOU HAVE TO. YOU'RE
GOING TO HAVE TO PAY $10 TO GET
SOMETHING. AND THEN THE ONLY
REIMBURSEMENT YOU'RE GOING TO
GET IS $8. BUT THIS IS HAPPENING
ON A MASSIVE SCALE WITHIN ALL OF
OUR COMMUNITY PHARMACIES RIGHT
NOW WHERE THEY ARE LOSING MONEY
ON EVERY PRESCRIPTION. THEY ARE
SELLING TO A PATIENT THAT IS
COMING THERE. WHAT IS THE RISK
HERE? THE RISK HERE IS TO ACCESS
AND IT'S TO EQUITY. IT MEANS
THAT ARE MOST VULNERABLE
POPULATIONS AS PHARMACIES CLOSE
WILL HAVE RESTRICTED ACCESS TO
THE MOST IMPORTANT POINT OF
HEALTHCARE, WHICH IS EARLY
INTERVENTION AND PREVENTION. IF
WE'RE EVER GOING TO HAVE
AFFORDABLE HEALTH CARE, WE MUST
HAVE A ROBUST PHARMACY
INFRASTRUCTURE IN OUR STATE.
RIGHT NOW. INDEPENDENT PHARMACY
IS THE CANARY. IN THE COAL MINE.
IT'S UNDER THREAT. I'M GLAD YOU
HAVE A FLASHLIGHT, BUT WHAT
CALIFORNIA NEEDS IS A SPOTLIGHT.
WE'VE GOT TO SHINE IT ON THIS
AND WE'VE GOT TO CHANGE IT
BEFORE. IT'S TOO LATE. THANK YOU
SO MUCH. THANK YOU. ALL RIGHT.
GOOD MORNING. RICHARDSON DAVIS,
REPRESENTING THE CALIFORNIA
ACCESS COALITION, DIVERSE
COALITION IS COMMITTED TO
ENSURING PATIENT ACCESS FOR A
TREATMENT MEDICATION AND
REDUCING BARRIERS AND WE SUPPORT
SUNSHINE AND CLARITY ON THE
PRACTICES OF PBMS AND THE
ENTITIES THAT THEY CONTRACT WITH
CONTINUED SUPPORT TO ENSURE
TRANSPARENCY. THANK YOU. THANK
YOU. CAN YOU HEAR ME? OKAY YES.
GOOD MORNING, LIZ HELMS. THANK
YOU, MR CHAIR IN THE COMMUNITY
FOR HAVING THIS HEARING. IT'S
REALLY IMPORTANT TO HEAR WHAT
EVERYBODY HAS TO SOUND THIS
ISSUE. I'M LIZ HELMS. I'M THE
PRESIDENT AND CEO OF THE
CALIFORNIA CHRONIC CARE
COALITION. WE'VE BEEN WORKING ON
PBM ISSUES FOR LONGER THAN I'D
LIKE TO THINK STARTING WITH
PUTTING A SPIKE LOT SPOTLIGHT ON
HIM SEVERAL YEARS AGO ON GAG
ORDERS AND THINGS THEY WERE
DOING IN CONTRACTS TO HURT
PHARMACISTS AND HURT PATIENTS.
IT'S IMPORTANT TO REMEMBER THAT
BEHIND ALL THESE DISCUSSIONS
THAT WE'RE ALL HUMAN BEINGS.
PEOPLE WHO ARE ILL. AND THE
MEDICATIONS. THEY'RE PAYING THE
PRICE FOR THE GREED OF SOME PBM
SOME PBMS. IT'S BECOMING
INCREASINGLY DIFFICULT FOR
PATIENTS TO GET THEIR
MEDICATIONS. FOR MANY REASONS.
HERE'S A FEW THEIR COMMUNITY
PHARMACISTS ARE CLOSING. THE
COST OF THEIR MEDICATION
CONTINUES TO INCREASE THEIR
PHARMACISTS CAN'T AFFORD TO
STOCK CERTAIN MEDICATIONS
BECAUSE THEY ARE LOSING. IN SOME
CASES HUNDREDS OF DOLLARS EVERY
TIME THEY DISPENSE THEM. THE
CHRONIC CARE COALITION
REPRESENTS PATIENTS WITH CHRONIC
CONDITIONS AND, IN SOME CASES,
SEVERE ILLNESSES. THEY RELY ON
THEIR COMMUNITY PHARMACISTS TO
HELP THEM MANAGE THEIR
MEDICATIONS, SO VITALLY
IMPORTANT. PATIENTS DO DON'T
KNOW THAT THE MOST IMPORTANT
COMPONENTS OF THEIR HEALTHCARE
IS SYSTEMATICALLY BEING
DESTROYED BY FOR PROFIT
UNREGULATED. CORPORATIONS ALL
THEY KNOW IS THAT THEY NEED
THEIR MEDICATIONS AND DON'T
UNDERSTAND WHY THEY'RE HAVING
DIFFICULTY GETTING THEM. OUR
PATIENTS NEED TO HAVE ACCESS TO
THEIR MEDICATIONS THAT THE
PHARMACIES OF THEIR CHOOSING,
AND IT'S TIME FOR THE STATE TO
ACT OR ASKING YOU TO ACT. SO
THANK YOU VERY MUCH FOR YOUR
TIME. THANK YOU. MR CHAIR
MEMBERS. JOHN WINGER ON BEHALF
OF AMERICA'S HEALTH INSURANCE
PLANS, WHERE THE NATIONAL TRADE
ASSOCIATION FOR HEALTH PLANS AND
NOTES ARE A LITTLE OVER THE
PLACE, BUT I'LL TRY TO BE
SUSTAINED. SO UM, WHAT MR HEAD
SAID WAS ACCURATE HEALTH PLANS,
LABOR TRUST PUBLIC EMPLOYEE
BENEFIT PLANS ALL CONTRACT WITH
PBMS FOR THE SOLE PURPOSE OF
LOWERING DRUG PRICES. I DON'T
THINK THESE SOPHISTICATED
PURCHASERS WOULD ENTER INTO
THESE AGREEMENTS. IF IT WASN'T
TO LOWER THE DRUG PRICES. UM I
WOULD SAY 8315 DOES SHINE A
LIGHT DOES PROVIDE TRANSPARENCY
AND THE REASON WHY WE WENT TO
REGISTRATION IN THAT BILL IS
BECAUSE IT WAS DETERMINED THAT
GMHC AND CD ALREADY REGULATE THE
CLIENTS OF PBMS. AND SO IT
WOULD. YOU WOULD NOT NEED THAT.
DUAL REGULATION WHEN IT'S
ALREADY BEING OVERSEAS BECAUSE
THE PBM HAS THE OBLIGATION TO
THE PLAN INTO THEIR CLIENTS, AND
THOSE CLIENTS ARE THE ONES THAT
ARE REGULATED. YOU ALSO HAVE THE
OPPOSITE HEALTH CARE
AFFORDABILITY TO OVERSEE THE
ENTIRE DRUG MARK OR THE ENTIRE
HEALTHCARE MARKET, SO THAT BE
ANOTHER FORM OF OVERSIGHT. I
WOULD SAY ON THE FORMULARY
TEARING THAT IS REALLY THE ONLY
TOOL IN THE TOOLBOX FOR PLANS TO
LOWER DRUG PRICES BECAUSE YOU
CAN'T SAY NO TO A PHARMACEUTICAL
MANUFACTURER. RIGHT YOU HAVE TO
GIVE THE PATIENT THE DRUG AND SO
CREATING THAT COMPETITION IS
REALLY THE ONLY WAY TO DRIVE
DOWN THE PRICE. THE MAJORITY OF
MODELS ARE 100% PASSED THROUGH
MODELS SO THAT REBATES GOING
BACK TO THE PLAN GOING BACK TO
THE UNION TRUST. WHICH IS, AS IT
WAS SAID IT GOES BACK TO THE
OVERALL PREMIUM IMPACT. AND SO I
WOULD. I WOULD CONTEND THAT IT'S
NOT KICK BACK TO THE PBM. AND
THEN JUST FINALLY ON THE U. S
HOUSE OVERSIGHT COMMITTEE REPORT
WHICH WAS ANSWERED, UM I'M
SORRY. I'M FORGETTING YOUR LAST
NAME. BUT I WOULD NOTE THAT THEY
ALSO FOUND THAT PBM SECURED
CONTRACTUAL PROVISIONS THAT
DISINCENTIVIZE DRUG COMPANIES
FROM RAISING LIST PRICES. SO
THAT WAS ONE OF THEIR FINDINGS
AS WELL. SO WE WOULD WE WOULD
CONTEND THAT IT IS STILL TRUE
THAT LIST PRICES CONTINUE TO GO
UP ON REBATED AND UNRELATED
DRUGS. THANK YOU. THANK YOU. SEE
NOBODY ELSE WAS SEEING THE
SECRET PUBLIC COMMENT. THANK YOU
AGAIN FOR PRESENTATIONS AND FOR
EVERYBODY ELSE THAT PROVIDED A
LITTLE BIT OF OVERVIEW TO
HIGHLIGHT SOME OF THE ISSUES
THAT NEED TO BE DISCUSSED AS
WE'RE MANAGING, I THINK IS OTHER
STATES ARE LOOKING AT, UM THIS
SECTOR THIS PART OF THE INDUSTRY
THAT ULTIMATELY YOU KNOW, WHEN
YOU LOOK AT ALL THE PLAYERS ARE
AT RISK OF COLLAPSE, AND
ULTIMATELY, PATIENTS WOULD BE AT
RISK FOR NOT NOT RECEIVING THE
BENEFIT AND THE SUPPORT THAT
THEY NEED FOR THEIR CARE, I
GUESS AS A MATTER OF CLOSING
COMMENTS AND WANTED TO JUST
TURNS DR WEBBER WALDRON AND I'M
HAVE A FEW OF MY OWN AND THANK
YOU AGAIN FOR BEING HERE TODAY.
THANK YOU. CHAIR OF BEFORE I SAY
ME CLOSING COMMENTS. I DID HAVE
ONE FURTHER QUESTION. JUST KIND
OF PIGGYBACKING OFF OF WHAT
ASSEMBLYMEMBER'S. WALDRON WAS
STATING A FEW, UM, OF THE PUBLIC
COMMENTS MENTIONED MAYBE 315.
HOWEVER MY QUESTION TO YOU IS,
UM, WHERE DO YOU SEE? UH, THE
OFFICE OF HEALTH CARE
AFFORDABILITY. THAT WE HAVE
ESTABLISHED HERE IN CALIFORNIA,
PLAYING AN OVERSIGHT ROLE. AND
UM, YOU KNOW, I HAD A BILL A
BILL. EXCUSE ME LAST YEAR, THE
ADULT WITH UM YOU KNOW REBATES
AND I WAS TOLD THAT THE OFFICE
OF HEALTH CARE AFFORDABILITY.
WOULD ESSENTIALLY FIX AND
UNCOVER THE ISSUES IN TERMS OF
PATIENTS, NOT ACTUALLY GETTING
THOSE REBATES THEMSELVES. I'M
JUST WONDERING. WHAT YOUR
THOUGHTS ARE. I MEAN, I THINK
THERE'S A NUMBER ONE OF THE
THINGS THAT WE HAVEN'T REALLY
TALKED ABOUT IN THIS HEARING AND
IS PROBABLY RIGHT FOR A WHOLE
NOTHER HEARING IS THINK. HOW DO
WE MEASURE AND CONCEPTUALIZED
VALUE? AND WHAT DOES THAT MEAN?
AND WHAT SHOULD WHAT ARE THE
TYPES OF PARAMETERS AT THE
OFFICE OF HEALTH CARE
AFFORDABILITY SHOULD BE
CONSIDERING AS THEY MEASURE AND
ASSESS VALUE TO OUR HEALTH CARE
SYSTEM AND VALUE TO SOCIETY OF
DIFFERENT INTERVENTIONS,
INCLUDING PRESCRIPTION DRUGS.
AND SO I THINK THERE'S SORT OF A
BIGGER QUESTION OF LIKE, WHAT IS
THE APPROPRIATE APPROACH TO BE
TARGETING VALUE VERSUS
AFFORDABILITY VERSUS BUDGET
CONSTRAINTS AND THOSE TYPES OF
THINGS? UM AND I THINK YOU KNOW,
PART OF THAT IS GOING TO
POTENTIALLY BE UNPACKING WHERE
THOSE DOLLARS GOING, AND IS
THERE A BETTER WAY TO GET MORE
VALUE OUT OF THEM, INCLUDING
ADDRESSING ISSUES OR
INEFFICIENCIES IN THE SUPPLY
CHAIN. YEAH, AND WITHOUT KNOWING
ENOUGH ABOUT THE STATUTORY
CHARGE OF THE AFFORDABILITY
BOARD, I WOULD SAY I ALWAYS KIND
OF LAUGH A LITTLE BIT WHEN I
HEAR THE WORD DRUG AFFORDABILITY
BECAUSE I ALWAYS ASK BEFORE THE
ABILITY FOR WHO YOU KNOW, IN A
SYSTEM THAT INCENTIVIZES HIGHER
PRICES DOESN'T IT DOESN'T HAVE
COMPETITION WORKED ACTUALLY
LOWER THEM AND WE HAVE THIS
NEGOTIATED EXPERIENCE, AS WE'VE
TALKED ABOUT PATIENTS WILL OFTEN
OVER PAY FOR MEDICINE RELATIVE
TO THE NET PRICE GENERATING A
REBATE THAT GOES SOMEWHERE ELSE.
WELL THE PEOPLE WHO ARE
SOMEWHERE ELSE ARE VERY HAPPY
WITH THE SYSTEM OF AFFORDABILITY
BECAUSE IT'S CREATING VALUE FOR
THEM AT THE EXPENSE OF SOMEBODY
ELSE. AS I MENTIONED EARLIER,
MEDICAID GETS THE BEST PRICES,
THE BEST NEGOTIATED PRICES OFF
OF LIST PRICES, SO WE HAVE THIS
SYSTEM WHERE IT IS EXPLICITLY
DESIGNED TO CREATE THIS
DISPARATE NET PRICE EXPERIENCE
FROM PAYER TO PAY HER OFTEN
TIMES IT IS CREATING VALUE THAT
COMES FROM ONE SOMEBODY OVERPAYS
TO GENERATE A VALUE FOR SOMEBODY
ELSE. SO OFTENTIMES WHAT? I KNOW
WE'RE TALKING ABOUT
AFFORDABILITY FOR AN EMPLOYER
AFFORDABILITY FOR A GOVERNMENT
PROGRAM AFFORDABILITY FOR A
PATIENT. YOU KNOW, OFTENTIMES
EVEN THAT FUNDAMENTAL QUESTION
ISN'T DEFINED WITH A LOT OF THE
PRESCRIPTION DRUG AFFORDABILITY
BOARDS I'VE SEEN ACROSS THE
COUNTRY. AND SO WHEN I ASKED
LIKE, HOW DO WE MAKE DRUGS
AFFORD MORE AFFORDABLE, I SAY
WELL, WHO WHO? WHOSE INTERESTS
ARE WE TRYING TO LOOK OUT FOR
HERE? AND WHO DO WE WANT TO MAKE
DRUGS AFFORDABLE, TOO? BECAUSE
THE SECOND YOU ANSWER THAT
QUESTION. IT'S GOING TO BE A
VERY DIFFERENT ANSWER, DEPENDING
ON WHO YOU WANT TO ULTIMATELY
SERVE. THANK YOU FOR THAT. AND
AGAIN, THANK YOU. CHAIR AND OUR
PANELISTS AND MEMBERS OF THE
AUDIENCE WHO WERE HERE. THIS HAS
BEEN, UM, LIKE I SAID PBMS AND
JUST DRUG PRICING AND IT'S VERY,
VERY COMPLICATED. UM AND I LOOK
FORWARD TO CONTINUING
CONVERSATIONS TO NOT ONLY
INCLUDE THE VOICES THAT WE'VE
HEARD TODAY. BUT ALSO IT'S WE AS
WE HEARD SOME OF THE PHARMACIES
IN OUR COMMUNITIES, BOTH THE
LARGE RETAIL CHAINS AND SOME OF
THE SMALLER INDEPENDENT ONES,
ALONG WITH THE VOICES OF THOSE
WHO ACTUALLY REPRESENT THE PBMS
TO GET A MORE WELL ROUNDED
PICTURE OF THE SITUATION THAT WE
AS AS STATE LEGISLATORS GRAPPLE
WITH AND ALSO AS WE INTERACT AND
LOBBY OUR FEDERAL, UM
COUNTERPARTS TO REALLY HELP
CHANGE SOME SOME OF THESE THINGS
ON A NATIONAL LEVEL. UH THIS CAN
REALLY HELP US BETTER UNDERSTAND
WHAT WE'RE DEALING WITH. SO
THANK YOU SO VERY MUCH. THANK
YOU AND AGAIN, I THINK I'LL JUST
ALIGN MY COMMENTS WITH DR WEBBER
VERY MUCH APPRECIATE YOUR
TESTIMONY HERE TODAY AND YOUR
TRAVEL AND THE SELECT COMMITTEE
ON BIOTECHNOLOGY WILL NOW
ADJOURN. WE WILL ANNOUNCE OUR
NEXT HEARING AT A TIME TO BE
DETERMINED IN YOUR FUTURE AND
APPRECIATE EVERYBODY'S TESTIMONY
. OBVIOUSLY THIS IS A
CONVERSATION. THIS IS A SUBJECT
AREA THAT I THINK IS DESSERT IS
GAINING A LOT OF CLOSER
ATTENTION. AND SO I APPRECIATE
THE WORK OF COLLEAGUES,
COMMUNITY MEMBERS AND EVERYBODY
ELSE THAT'S GOING TO HELP US
FIGURE OUT WAYS TO BE ABLE TO
LOOK FOR ANY APPROPRIATE
GOVERNMENTAL RESPONSE. UH AND OF
COURSE, MY MINDFUL THAT WE HAVE
A LOT OF INTERSECTING ISSUES
WITHIN THE HEALTHCARE SYSTEMS
THAT ARE AT PLAY HERE AS WELL.
SO I LOOK FORWARD TO THIS
CONTINUED CONVERSATIONS. THANK
YOU ALL FOR YOUR TIME AND
ATTENTION TODAY. THANK YOU FOR
HAVING US.