PRESCRIPTION DRUG AND MEDICARE IMPROVEMENT ACT OF 2003RESUMED
AMENDMENT NO. 942, AS MODIFIED
Ms. CANTWELL. Madam President, I rise today to offer the Cantwell-Lincoln Prescription drug transparency amendment to S. 1, the medicare prescription drug bill. I thank my cosponsor, Senator Lincoln, for working with me on this important amendment that will help protect consumers against high prescription drug prices.
This amendment does three things.
First, it requires any PBM contracting with Medicare to disclose to the Department of Justice how much of the rebates and discounts negotiated for Medicare are being passed back.
Second, the disclosure of these financial arrangements to the Department of Justice provides an incentive for PBMs to return as much of that savings as possible to Medicare, which will in turn, help reduce the high cost of prescription drugs.
Finally, it prohibits a pharmaceutical company from owning a pharmacy benefit manager, an inherent conflict of interest.
By requiring transparency, the Cantwell-Lincoln amendment works to prevent collusion on pricing and helps ensure seniors are not paying unnecessarily high prices for their medications.
PBMs have been the target of numerous lawsuits filed in recent years by health plans, employers and governments. The allegations in these lawsuits are always the same: overinflated drug prices, price collusion between PBMs and manufacturers, failure of PBMs to share discounts and rebates, and switching patients to more expensive drugs without the consent of the patient or the doctor.
The PBMs have denied wrongdoing and have settled in many cases.
Last year, Merck agreed to pay $42.5 million to settle lawsuits over allegations that Medco improperly promoted higher priced Merck drugs when less expensive options from other pharmaceutical companies were available.
In 1998, Merck signed a settlement agreement with the Federal Trade Commission stating that, "Medco has given favorable treatment to Merck drugs."
This admission is proof that pharmaceutical companies and PBMs have engaged in collusion on drug pricing in the past, extracting excessive profits from people who rely on these drug services. The Cantwell-Lincoln amendment is needed to help prevent price gouging in the future.
Other governments have struggled to keep a close watch on PBM practices.
In 2000, one of the big four PBMs, Advance PCS, was hired by the state of Arkansas to provide coverage for the state's 135,000 employees. A recent audit found that the PBM was over charging the state for numerous drugs. During one 4-month period, the PBM overcharged the state $479,000 on generic drugs alone.
PBM executives say that my amendment makes turning a profit impossible. It is true that PBMs are not charities but private companies with a duty to their shareholders to earn a profit.
Let's not forget, however, that these are also private companies charged with providing a Government-funded benefit in the best interests of 40 million senior citizens. These private companies also are duty bound to get the most for the Government's $400 billion investment.
Traveling in my home State of Washington, I hear regularly from senior citizens about the high cost of prescription drugs. While seniors in my State, like elsewhere in the country, want a Medicare prescription drug benefit, they also desperately want some relief from high prescription drug prices. They say, "Stop the price gouging. Do something to make sure that prescription drugs are reasonably affordable for everyone."
PBMs have come to dominate the prescription drug benefit market. Nearly 210 million Americans are served by one of the four largest PBMs.
According to the Centers for Medicaid and Medicare Services, national prescription drug spending increased by 15.7 percent in 2001. Despite promises from pharmacy benefit managers to lower costs, prescription drugs continue to be the fastest growing sector of health care spending in this country.
Soaring in tandem with prescription drugs prices are PBM profits. St. Louis-based Express Scriptsone of the four largest PBMsprovides coverage to 40 million people. The company reported that its net income grew 63 percent last year to $202.8 million.
Another one of the big four, Advance PCS, which covers 75 million people, was ranked by Fortune Magazine as the ninth fastest growing company in the nation based on its profits over the past 5 years.
Unfortunately, it has been near impossible to find out whether PBMs are fairly sharing rebates and other savings with patients or simply using it to boost the bottom line.
Even the General Accounting Office has been unable to find out how rebates are being divided between PBMs and the Federal Employees Health Benefits Plan. A GAO requested by Senator DORGAN last year failed to discover if the PBMs were passing along the savings because none of the PBMs financial documents were available for review.
Several private companies and employee groups that contract with PBMs have resorted to lawsuits to get access to this information.
The Cantwell-Lincoln amendment requires the PBM to disclose to the Department of Justice the financial arrangements that dictate what percentage of rebates and other savings are being passed back to the client.
This disclosure creates a major incentive for PBMs to return as much as possible of the rebates and spread back to the Medicare program. This incentive also will help reduce prescription drug prices.
The PBMs have argued that reporting this financial information would kill their ability to continue to negotiate low drug prices. I am a businesswoman, and I understand the need to keep financial agreements confidential. That is why my amendment mandates the information be handed over to the Department of Justice, where it remains confidential.
Department of Justice oversight also allows for regular review of these financial arrangements to weed out any potential collusion on pricing. This added protection also will help lower drug costs for seniors.
The Cantwell-Lincoln amendment also prohibits PBMs from being owned by pharmaceutical manufacturers. This cross-ownership is problematic because it could allow for pharmaceutical companies to collude with PBMs to favor the manufacturers more expensive drugs over less expensive alternatives.
A report on PBMs by the National Health Policy Forum points out the concerns raised by close relationships between PBMs and drug manufacturers. Close ties between the two could lead to a lack of drug choice for consumers, with one manufacturer's drugs getting preferential treatment by the PBM.
Actions taken this week by the U.S. attorney in Philadelphia reinforce the need for greater PBM oversight as outlined in the Cantwell-Lincoln amendment.
Madam President, I ask unanimous consent that articles from the Washington Post and Wall Street Journal be printed in the RECORD.
Ms. CANTWELL. Madam President, it was reported this week that U.S. Attorney Patrick Meehan plans to join a pair of lawsuits filed by three former Medco Health employees. The employeestwo pharmacists and a doctorallege that Medco provided misleading information to the Government related to a contract to provide drug coverage for Federal employees. The lawsuits accuse Medco of switching patients to more expensive drugs and fabricating records to make it look as if the prescription changes were made by doctors and not by Medco.
These are serious allegations resulting from an investigation that began in 1999. This is the first such action taken by a U.S. attorney against a PBM and is a strong signal that all is not right with this industry.
U.S. Attorney Patrick Meehan told the Newark Star Ledger:
The kind of conduct alleged in the complaints threatens not only the integrity of the system as a whole, but also the well being of the very patients it is designed to benefit. These allegations suggest that, somewhere along the line, the focus became the profit instead of the patient.
The possibility of profitability trumping patient care has promoted a number of consumer groups to favor the accountability system outlined in my amendment. Consumers Union, Public Citizen, Families USA, AFSCME, the National Community Pharmacy Association and the Washington State Pharmacy Association all support my amendment.
Mr. President, I ask unanimous consent that letters of support be printed in the RECORD.
Ms. CANTWELL. Madam President, these groups and others have been trying to call attention to problematic PBM practices. These groups rightly point out that strong consumer protections are needed in any Medicare drug benefit.
The American Association of State, County and Municipal Employees agrees that these protections provide "a critical means of controlling costs."
A national coalition of workers representing more than 20 states also are supportive of efforts to monitor PBMs. Many in this coalition currently use PBMs to provide benefits and many of them are wondering why drug costs continue to rise.
There is a balance to be had here, and the Cantwell-Lincoln amendment makes sure the scale is not tipped too far one way. It is a good amendment that will lower prescription drug prices, provide much needed consumer protections and ensure strong government oversight. I urge my colleagues to support it.