Senate digs into why drug prices are so high

Executives from pharmaceutical companies and pharmacy benefit managers could not agree on the main factors causing rising drug costs as they appeared before the Senate Finance Committee in a series of hearings aimed at investigating the industry and finding possible solutions.

Each set of industry leaders were pointing the finger at each other for the cause. Neither of them was in favor of sharing more information with the American public as a means of decreasing costs, though both were in favor of the other having to do so.

The hearings began on February 26 with seven executives from the top drugmakers in the country. All of the Senators, Republican and Democrat, expressed deep concern for the rising cost of drugs, especially when considering the price difference for the same products in Europe and other countries.

“You’re willing to sit by and hose the American consumer while giving price breaks to consumers overseas,” said Senator Ron Wyden of Oregon, the senior Democrat on the committee.

Drug company executives did not have many answers for this. They said Americans receive drugs earlier than those in other countries and said they feel obligated to sell their products abroad, despite their lower profitability because it would be “immoral to leave the patients behind,” said Kenneth C. Frazier, the chief executive of Merck.

They said the main issue concerning drug pricing is not the high list prices, but that much of the rebates their companies offer never reach patients. They claim they are swallowed by the middlemen in the industry, the pharmacy benefit managers (PBM). They were in favor of more transparency regarding rebates and the Trump administration’s proposal to get rid of rebates.

But Senators were not so convinced this would solve the problem. They wanted firmer, more concrete commitments from the drugmakers that should Congress abolish rebates, drugmakers would lower their list prices.

On Tuesday, Senators had a hearing with executives from the top PBMs in the country. Many Senators were puzzled at their role in the overall drug market other than as “middlemen” taking a cut of profits along the way. Traditionally they are the go-betweens that negotiate with drugmakers on which medicines are covered and by how much on an insurance plan.

PBM executives balked at the suggestion they exist simply to increase costs. They said they are an important part of the system, as experts in pharmaceuticals, aimed at finding for its clients the cheapest, most effective drugs to cover.

They blamed rising prices on a lack of competition in the industry. They said having more generic or biosimilar drugs available would help with negotiations. It’s a solution that would affect their favorite foe, the drug manufacturers the most.

It remains to be seen if these hearings will result in any additional legislation. The Trump administration has proposed plans intended to curb rising costs, but there remains a lot of debate in Congress if the proposed measures would accomplish its goal. Both parties are eager to make progress on this issue, as rising healthcare costs are one of the biggest problems facing most Americans.


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