Underspread-pricing arrangements, PBMs charge one amount to health plansfor a drug, then reimburse pharmacies a different, often loweramount–and capture the spread in between. (Photo:Shutterstock)

Two U.S. senators have asked the inspector general of the Healthand Human Services Department to investigate a practice bypharmacy-benefit managers known as spread pricing, as part of a wider inquiry bylawmakers into U.S. drug costs.

Ron Wyden of Oregon, the ranking Democrat on the Senate FinanceCommittee, said that he and Chairman Chuck Grassley of Iowa haverequested the inspector general, which examines the operations ofgovernment health programs, to probe the issue. Underspread-pricing arrangements, PBMs charge one amount to health plansfor a drug, then reimburse pharmacies a different, often loweramount–and capture the spread in between.

“PBMs are paying one set price to pharmacies for a particulardrug, but they're turning around and charging Medicaid and otherhealth-care payers far more for that same prescription,” Wyden saidin his opening remarks at a hearing Tuesday. “If there are changesthat can be made to clamp down on this exploitation of Medicaid, Ihope the committee will consider it. In my view, it's as clear amiddleman ripoff as you're going to find.”

Executives from five PBMs — including CVS Health Corp.,UnitedHealth Group Inc.'s OptumRx unit and Express Scripts parentCigna Corp. — are testifying in front of the Finance Committee aspart of the panel's series of hearings on drug costs. The sessionfollows a February hearing with executives at seven bigpharmaceutical companies, who attempted to put much of the blamefor high drug prices on PBMs.

Despite Congress's scrutiny, both drugmakers and PBMs have gonemore or less unscathed so far, and made the case that otherhealth-care players were at fault.

Investors seemed to take the hearing in stride, and shares ofthe three largest pharmacy-benefit managers trading above theirlowest points of the session. Cigna gained 2 percent to $170.71 at11:37 a.m, while UnitedHealth was up about 0.2 percent to $249.15.CVS shares were down 0.1 percent.

At the hearing, the PBM executives said their companies play acrucial role in holding down drug costs, negotiating millions ofdollars in savings for their clients.

Bloomberg News has previously reported that PBMs have takenlarge markups in Medicaid plans. For many commonly prescribedgeneric medications, state insurance plans are paying millions infees to PBMs, Bloomberg's analysis found. PBMs have said thatspread pricing helps stabilize drug costs, and that their clientsenter into the arrangements freely.

As the hearing began on Tuesday, CareSource, a nonprofit thatruns government-sponsored health plans in five states, said itwould have Express Scripts administer member drug benefitsbeginning in 2020, instead of CVS's Caremark division. The changewill affect prescription coverage for almost two millionpeople.

Several of the states where CareSource operates have scrutinizedspread pricing in Medicaid, where CVS runs many of the drugbenefits for the plans.

“We believe the current PBM model has significant room forimprovement,” said Erhardt Preitauer, chief executive officer ofCareSource. “CareSource saw an opportunity to reinvent the modelwith a focus on transparency.”

CVS didn't immediately respond to requests for comment about thechange.

Read more: 

• Will PBMs be held to account for their role in drugprice hikes?
• Majority of Americans support current efforts tobring down drug prices
• Now comes the hard part for Cigna-Express Scripts:PBM reform

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