Senators Call Out PBMs, Drugmakers for High Prescription Drug Costs

Drugmakers and pharmacy benefit managers (PBMs) traded the blame over high drug prices during a hearing of the Senate Health, Education, Labor and Pensions Committee on Wednesday.

Each side argued the other was trying to fleece patients and the government, but Sen. Bernie Sanders (I-Vt.), chairman of the committee, argued there was plenty of blame to go around.

“Let’s be clear, while Americans pay outrageously high prices for prescription drugs, the pharmaceutical companies and the PBMs make enormous profits every year,” he said.

In 2021, the 10 major drug companies made $100 billion in profits, and in 2022, the three largest PBMs made over $27 billion, Sanders noted. Moreover, the three pharmaceutical companies that produce insulin — Eli Lilly, Novo Nordisk, and Sanofi — have hiked the price of the drug dozens of times over the last two decades for “the same exact product,” he added.

Meanwhile, 1.3 million Americans have been forced to ration their insulin because of its high cost, and some, including 23-year-old Alec Raeshawn Smith, have died.

“We want to know why there are Americans who are dying or becoming much sicker than they should, because they can’t afford the medicine they need,” Sanders said.

Challenging Pharma to Do Better

Sanders acknowledged that all three drugmakers had recently substantially reduced the price of their insulin products by around 70% to 78%, but when he urged the companies’ CEOs to commit to not increasing the price of any of their insulin products, each one hedged.

David Ricks, CEO and chair of Eli Lilly, agreed to “leave our prices as they are for the insulins on the market today.”

Paul Hudson, CEO of Sanofi, said only that his company had a “responsible pricing policy,” and Lars Fruergaard Jørgensen, president and CEO of Novo Nordisk, said his company is permitted to keep potential list prices to “single digit[s].”

Sanders also pointed out that Eli Lilly’s ramucirumab (Cyramza), a cancer drug, costs $196,000 in the U.S., but $54,000 in Germany, while Novo Nordisk’s semaglutide (Ozempic), a drug for treating type 2 diabetes, costs $12,000 per year in the U.S. but only $2,000 in Denmark, and Sanofi’s vandetanib (Caprelsa), a thyroid cancer drug, costs more than $200,000, while patients in France pay $30,000.

He asked each CEO to reduce the prices in the U.S. to match what other countries charge. Both Ricks and Hudson said the prices will go down when biosimilars enter the market, and Jørgensen said the prices were already declining for semaglutide, though Sanders appeared skeptical, noting, so “the answer is no.”

Where Do Rebates Go?

Hudson said that despite all the focus on list prices, these figures aren’t as meaningful for drug companies. In 2022, 84% of gross insulin sales were returned to the system as rebates and fees. Ricks similarly said 80% of the list price of insulin lispro injection (Humalog) went toward paying “ever-increasing fees and rebates to companies who don’t invent, didn’t develop, nor manufacture the medicines.”

Sen. Susan Collins (R-Maine) illustrated this argument with a line graph, which she presented on a poster, showing the list price versus the net price of insulin from 2012 to 2021. The list price far outpaced the net price, leaving a gap that widened over time.

“So, explain to us who gets that money,” Collins said.

Ricks said he knew only what happened to the net price, and that Collins would have to ask the PBMs how the list price is redistributed.

Hudson also pointed out that Sanofi had tried to bring insulin glargine — priced 60% lower than its brand name version — to market, but “that was not accepted by the system,” meaning it was not listed by the health plans on a formulary.

Eli Lilly also produced an insulin product at a discounted price, which today is only available on about one in three formularies, Ricks said. “I think it’s clear that the lower price is not preferred.”

“Higher list prices allow for higher fees and rebates, which can increase patients’ out-of-pocket costs while benefiting employers, insurance companies, and people who don’t use [these] medicines,” he added.

Several lawmakers argued that PBMs benefit from higher list prices because higher prices mean higher rebates, and PBMs keep a portion of rebates.

David Joyner, executive vice president and president of pharmacy services for CVS Health, argued that “government study after government study has concluded that price increases are not the result of rebates or discounts.”

In their testimony, the PBM witnesses all stated that they pass about 98% of their rebate onto their customers, which include employers, health plans, and unions.

“They use these discounts to help reduce premiums, to provide point-of-sale savings, and to invest in health and wellness programs,” said Heather Cianfrocco, CEO of OptumRx. “Without our negotiations with manufacturers, the cost of drugs would be even higher.”

‘The Fox Guarding the Hen House’

Notably, however, because of vertical integration, the three largest PBMs, CVS Health, Express Scripts, and OptumRx — each of which were represented at the hearing — are all owned by or partnered with health plans. UnitedHealth Group owns OptumRx, Cigna owns Express Scripts, and CVS Health and Aetna merged in 2018.

Sen. Markwayne Mullin (R-Okla.) likened this setup to “the fox guarding the henhouse.” He pointed out that when PBMs say 98% of rebates go to customers, health plans are included among their customers.

“So you’re rebating yourselves. That is just — wow — [a] great business model,” he said.

Sanders, in closing, said the committee would mark-up a “modest set of bills” on Thursday, and will be continuing its work on drug pricing because “profound changes” are needed in the industry.

“And when you go to sleep tonight,” he said to the witnesses, “I hope you … think about the people who died because they couldn’t afford medicine … I, for the life of me, just don’t understand … why we can’t make that product available to all at a price they can afford. That is a moral issue.”