CAPD: Statement for the Record – U.S. Senate Committee on Health, Education, Labor and Pensions

The Coalition for Affordable Prescription Drugs (CAPD) appreciates the opportunity to submit the following statement for the record.

The Coalition for Affordable Prescription Drugs (CAPD) represents a diverse group of large employers, labor unions, health plans, public sector employees and retirees, and other stakeholders who partner with pharmacy benefit managers (PBMs) to help manage costs so that they can continue to offer affordable, accessible health and drug benefit coverage to their employees and members.

In the face of rising drug prices, PBM partnerships have proven to be one of the most powerful and measureable ways to control prescription drug costs and improve health outcomes for 266 million Americans.1 A recent study from Quintiles IMS Institute underscores the value that PBMs deliver. In 2016, list prices for brand name drugs grew by 9.2 percent, yet net prices, after PBM-negotiated discounts and price concessions, grew by just 3.5 percent.2

As Congress looks for solutions to ease the burden of rising drug prices on American families, it is important to not lose sight of the root cause of the problem. Drug manufacturers are raising list prices at an unsustainable pace. In 2015, drug costs climbed at twice the rate of medical expenses in other areas, such as hospital and nursing home care. And it is projected that, in 2017, prescription drug prices will rise at three times the rate of an average American’s wages.3

This means that employers, retirement plans, and others who provide health care coverage to millions of Americans are being forced to shoulder the increasingly heavy burden that higher drug costs bring. For businesses, this means more pressure on their bottom line. In 2016 alone, health care spending by private companies rose nearly six percent.4

One in two Americans rely on an employer for health benefits.5 This relationship has been a bedrock of the U.S. health care delivery system for decades, which is why as drug prices have continued to rise, an increasing number of employers and other organizations are choosing to partner with PBMs to help keep costs in check.

Employers, as well as unions, public sector employees and retirees, and government programs have found PBM partnerships to be the most effective way to manage costs and improve health outcomes for their workforce, members and plan participants. According to a survey of more than 250 organizations, in 2009 only 47 percent of employers chose to use a PBM. As drug list prices continued to increase, by 2013 that number had grown to 61 percent.6

First, PBMs deliver value by managing prescription drug spending. Harnessing their scale and purchasing volume, PBMs engage in data-driven negotiations with drug companies to achieve deep discounts on the list price of prescription drugs set by the drug manufacturers.

Second, PBMs negotiate with pharmacies to lower prices further at the point-of-sale, which reduces the costs of providing a pharmacy benefit.

Third, PBMs deploy their clinical expertise to review drugs for safety and efficacy to create formularies that deliver effective clinical outcomes and affordability. As an example, PBMs identify when a patient could achieve the same health outcomes through the use of clinically equivalent, lower cost generic drugs. In 2016, generic drugs accounted for 89 percent of prescriptions written, but only 26 percent of drug costs. That translated to $253 billion in savings across the U.S. health care system, in 2016 alone.7

In addition to “front-end” savings, achieved through direct negotiations with drug manufacturers and encouraging the use of lower-cost generics, organizations rely on PBMs to develop clinically driven, patient focused programs and offer one-on-one counseling to help their employees and members better manage chronic conditions such as diabetes and heart disease. This leads to long-term savings and a healthier, more productive work force. Research has also demonstrated that one in two Americans does not take their medicines as prescribed, leading to billions of dollars in avoidable medical costs. PBMs work with employers and unions to develop engagement tools to drive medication adherence, such as refill reminders to help patients get and take the medicines they need as they are prescribed.

Also, PBMs manage specialty medicine programs, which are only 2 percent of prescriptions but account for 40 percent of total drug spending.8 PBMs identify specialty trends and develop clinical program to engage members, increase medication adherence and reduce costs.

The proof of the PBM model’s effectiveness lies in the numbers. PBM negotiations in Medicare Part D, for example, have kept growth in average per capita prices per prescription at 2 percent from 2010 to 2014.9

Finally, PBM partners demand full visibility, not only into total cost savings promised and whether they are being delivered, but also into the details of how these savings are realized. PBM clients are active participants in the process, and maintain the right to audit their PBMs at any time to ensure that the plan sponsor and its members are receiving the full benefit and value of the contract.

PBM partnerships are the right model to drive cost savings today and in years to come, as the research bears out. The Quintiles IMS Institute forecasts that list prices for protected brands will grow by seven to ten percent annually through 2021, while growth of PBM-negotiated net prices is expected to be significantly lower, just two to five percent for the same period.10

As Congress, policymakers, industry and consumers look for new approaches to managing rising prescription drug prices, finding innovative ways to harness the proven benefits of PBM partnerships is the clearest and most promising solution. CAPD stands ready to engage in the dialogue and help advance the conversation around ways to build on the working, private sector solutions that exist in the marketplace today. In particular, we urge Congress to focus on ensuring and increasing competition to further strengthen PBMs’ ability to negotiate for lower prices.

With prescription costs rising at an unsustainable rate and health care reform once again in the headlines, this is a critical time for all those involved in operating and overseeing the U.S. health care system to work together to find new and better ways to bring down drug costs. CAPD is grateful for the opportunity to submit this testimony and eager to work with stakeholders to find new ideas and build on existing strategies to help drive progress for employers, employees, retirees, taxpayers – and for America’s future.

 

1 “The Return on Investment (ROI) on PBM Services,” Visante, Nov. 2016

2 “Medicines Use and Spending in the U.S.,” Quintiles IMS Institute, May 2017

3 “Prognosis for Rx in 2017: more painful drug-price hikes,” CBS News, Dec. 30, 2016

4 National Health Spending: Faster Growth in 2015 as coverage expands and utilization increases, Health Affairs

5 “Health Insurance Coverage of the Total Population,” 2015, Henry Kaiser Family Foundation website

6 “Employers Act to Control Prescription Drug Spending,” Society for Human Resource Management, June 7, 2013

7 2016 Generic Drugs Savings and Access in the United States

8 “Medicines Use and Spending in the U.S.” Quintiles IMS, April 2016

9 MedPAC Report to Congress, March 2017

10 “Medicines Use and Spending in the U.S.,” Quintiles IMS Institute, May 2017