Elected officials claim to be putting Big Pharma's feet to the fire as they pursue a multi-pronged campaign to rein in runaway (and highly unpredictable) prescription drug prices.

But some of those observing these investigations wonder: Are both the executives summoned to testify and the politicians merely warming themselves against a chilly wind of public outrage?

If intentions are cloudy, the focus of government regulation is not. At the state and federal level, politicians are targeting:

Rebates provided by pharmacy benefit managers
Price fluctuations for the same drug
Patent lengths
An overall lack of transparency about how prices are set and where the money goes

The pols and Big Pharma find themselves in a tough spot as public pressure forces deeper digging into drug pricing policies. For years, Big Pharma has been dumping millions into the campaign chests of Democrats, Republicans and Independents, at the state and federal level. But the Obama Administration, with its health care reform act, effectively released from its bottle the genie of prescription drug gouging. Now a much better informed voting public wants action from its legislators. And what better way to respond that lengthy Congressional and state legislative hearings?

One can easily see that the public is far wiser today about the lack of guidelines (and scruples?) for setting prices. Surveys now show members of the general public can respond thoughtfully to questions about the pharmaceutical industry. A Kaiser Family Foundation survey found that eight in 10 respondents believe the prices they pay for drugs are “unreasonable.” Three in 10 said they stopped taking their meds due to cost. More than half the respondents to a Maine survey said they were very or somewhat concerned about drug prices. Other survey questions revealed a deep understanding of drug companies practices that lead to higher prices. And considerable research underscores the public's expectation that their elected officials do something about it.

Recent hearings in Washington, D. C., and Augusta, Maine, offer insights into where legislators think they can affect the drug pricing policies and practices of the major pharmaceutical players.

Drugmakers under federal scrutiny

In the nation's capital, U.S. Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Oregon) are about to host their third hearing this year on drug pricing. They have been examining drug development costs, the effects of rebates on prices, the lack of transparency the industry exhibits when discussing and disclosing pricing matters, and other pieces of the prescription drug chain that are shrouded in secrecy, rife with inconsistencies, and are difficult for consumers to comprehend.

In February, they took testimony from a group of pharmaceutical company executives, probing them (respectfully) on how prices are set, what the effects of rebates have on prices, and why prices can fluctuate for the same drugs. The execs tended to throw the pharmacy benefit managers (PBMs) under the bus, claiming at one point they were to blame for unnecessary increases and fluctuations.

Up next: the PBMs themselves, called to testify before the committee April 3. In their summoning letter to representatives of Cigna Corporation, CVS Caremark and CVS Health Corporation, Humana Inc., OptumRx and Prime Therapeutics LLC, Grassley and Wyden said: “Middlemen in the health care industry owe patients and taxpayers an explanation of their role. There's far too much bureaucracy and too little transparency getting in the way of affordable, quality health care. … Witnesses from these companies should come prepared to provide real information and discuss real solutions.”

And with that, the letter required seven pages to list the questions to be asked and the information about price setting to be produced by those testifying. The topic will be a narrow one: insulin pricing. The drug has been one of the most susceptible to wild price swings, and the senators want to know why.

The Maine event

In Augusta, the Maine legislature has been among the busiest when it comes to churning out bills designed to address drug prices. In mid-March, Maine Democrats in the state Senate unveiled a package of bills to address price hikes and inconsistencies. The major outcome appears to be the Dems' proposal to create a Prescription Drug Affordability Board that would establish payment rates that “would apply to purchasers throughout the health care system” and require Big Pharma to justify “excessively expensive” prescription drug prices. The board would set the definition of “excessively.”

Other states have taken steps in similar directions. Vermont's elected officials were the first to ratify a law permitting the importation of drugs from foreign countries. (The state law needs a federal waiver to become effective.) Maine passed a prescription drug transparency law last year, and the California legislature is considering a similar bill. These require manufacturers to produce lists of drugs and their current prices; California's would require a 60-day notice prior to a price increase.

Action at the state level is likely to produce speedier results than at the federal level, says Ann Woloson, executive director of Consumers for Affordable Health Care, Augusta, Maine.

“States, Maine in particular, have a long history as serving as catalysts for change, particularly in the area of health care,” Woloson says. “Maine, for example, created a health plan in 2005 which became a model for Massachusetts which now has one of the lowest, if not the lowest uninsured rates in the nation.” When states create a model in this way, other states can adopt and revise it rather than starting from scratch.

Woloson acknowledges crafting such laws at the federal level is more difficult, given the politics of the situation. But, she says, if Congress picks its battle thoughtfully, it can begin to chip away at the current pricing system.

“There are policy makers who are sincere in their quest to do so, and one easy place they could start would be to allow the prices the U.S. pays for drugs purchased under Medicare Part D to be negotiated,” she says.

She also believes public outrage over drug pricing won't recede.

“The pressure is mounting and policy makers are talking more about doing something, as are the drug companies,” she says. “The problem is they are just nibbling around the edges or not taking the real steps necessary to change the situation.”

But many in the broker community are skeptical that Congress will ever move beyond the “nibbling around” phase. Zach Jones, senior sales executive at ScriptSource, speaks for many when he says, “The way the politicians work to appease the people is to bring in the Big Pharma people [to public hearings] and have them talk about things they could do to control prices. And that's all they do, is talk about it.”

Add Gary Becker, founder and CEO at ScriptSource: “You have Big Pharma … putting in office the people who make these decisions. The government is walking a fine line: 'Do we support the people who put us in office, or our constituents, who want us to try new things?' How do they respond to the demand and calm people down without interfering with Big Pharma's process?”

Read more:

Instant Insights /

Drug pricing hearings: How far will the politicians go?

More From HR Executive

Related Stories

Recommended For You