At today's Senate Judiciary Committee hearing, Sen. John Kennedy (R-LA) spoke to witnesses and Sen. Chuck Grassley (R-IA) about prescription drug processes.
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00:00Thank you Senator Cohen. Senator Kennedy. Professor Sood, as I understand it 80% of the
00:10PBM market is controlled by three companies, three PBMs, that are vertically integrated.
00:17Is that right? That is correct. Does your research show
00:23that the prices that consumers pay are higher than they would be if those companies were not
00:33vertically integrated? So my research on Medicare Part D. Give me an answer. Partially.
00:43What do you mean partially? They're either higher or they're lower. So that's saying it's a partial
00:49price. What I find is that Medicare Part D premiums
00:53are higher as a result of vertical integration. Okay. Well then why don't we, I'm all for transparency
01:04Mr. Chairman. I want to say that. But why don't we skip the foreplay and go right to the sex
01:10and get rid, outlaw vertical integration for Part D. Would you accept an amendment to your bill like
01:21that? I don't want to answer that question right now because I want to study that.
01:29Would you support that Mr. Scott? Let me just guess what your answer is.
01:34No sir. And I can explain why. No. You speak Sanskrit. I mean, I'm sorry.
01:42You know, you're good at it. And I know your job is to protect the PBMs.
01:47And I might tell us I don't think PBMs are the only ones at fault.
01:50But you don't have unclean hands.
01:56Professor Sood, you say PBMs ought to be fiduciaries. To whom?
02:02To both the plan and their members.
02:08Well, what if the plan and the members' interests diverge? Who are they fiduciaries to?
02:15Ultimately, in principle, they should be fiduciaries to the members.
02:18Okay.
02:19So, for example, ERISA makes...
02:21I get it.
02:22Okay.
02:22I get it.
02:25Mr. Chairman, again, why don't we skip the foreplay and go right to the sex?
02:30Why don't we just amend your bill to require that PBMs have a fiduciary obligation to plan members?
02:41Well, I think that's been suggested.
02:44And I think there's part of that in our legislation, but probably not fully enough to satisfy you.
02:50Well...
02:51So let me look at what you want to add to it.
02:54Okay.
02:54I mean, I'm not criticizing your bill.
02:57I don't want my office to end up in Bethesda.
03:01So I'm not criticizing your bill.
03:03I like transparency.
03:05But we're just nibbling around the edges here.
03:08And with respect, Mr. Scott, your definition of a fiduciary is wrong.
03:15A fiduciary isn't somebody that controls the decision.
03:18You know that, and I know that.
03:19A fiduciary is somebody who has a legal obligation to give his client the best advice and to do what's best for his client.
03:29It doesn't replace agent with principal or vice versa.
03:35You know that, and I know that.
03:38Well, you need to talk to your lawyers.
03:40I may be wrong, but I doubt it.
03:45Let me go back to Professor Sood.
03:47Tell me two things you would do tomorrow to fix PBMs and result in lower prices for consumers.
04:03So I think the two things I would do is...
04:05Very specific.
04:06Yes.
04:07I would implement price transparency so that everyone knows what they're paying and...
04:14Okay, price transparency just tells us who's screwing them.
04:18Yeah.
04:18Okay.
04:18And then the fiduciary responsibility says, if you're getting screwed, I can take you to court.
04:24So I would do those two things.
04:26And those are, I think, better than banning particular practices because otherwise it's whack-a-mole.
04:33You ban spread pricing and something else will show up a year from now.
04:37Okay, I got 29 seconds.
04:39Do you have any other suggestions?
04:40I appreciate your straight talk.
04:42The other thing we can do is what I recommended is pass-through of rebates to patients.
04:49So suppose a drug...
04:50Say that again.
04:51So pass-through of rebates to patients.
04:53So for example, the list price of a drug is $50,000, but the rebate on the drug is $40,000.
05:00So when a patient is paying cost-sharing, suppose 10%, they should be paying on the post-rebate price.
05:08So which is the $50,000 less the $40,000 rebate.
05:12Right now what's happening is patients are paying cost-sharing on the $50,000.
05:16So this would immediately lower patient out-of-pocket costs.
05:22So as Dr. Kocher said, for the cancer patients...
05:26So you're saying that the PBMs are jacking up, are encouraging manufacturers to jack up the list price so they can jack up their rebates.
05:35And that...
05:35Is that right?
05:36Yes.
05:36That's illegal.
05:37And the jacked up...
05:38That's illegal.
05:39Yes.
05:40I don't know about that, but...
05:42I do.
05:42It's illegal as hell.
05:44Yeah.
05:45Before I call on Senator Arano, I want to remind my members we got a vote and they're enforcing the 30-minute rule.
05:52So I'm going to...