Pharmaceutical middlemen accused of driving the costs of prescription drugs have been moving parts of their operations overseas, a new House investigation concludes, allegedly to avoid increasing government scrutiny and regulation.
A Republican report from the House Oversight Committee published Tuesday alleged that pharmacy benefit managers, or PBMs, have been establishing key portions of their businesses in countries known for lacking financial transparency, including the Cayman Islands, Switzerland , and Ireland .
“Instead of prioritizing the health of Americans across the country, evidence obtained by the House Oversight Committee shows how the three largest pharmacy benefit managers colluded to line their own pockets,” Chairman James Comer (R-KY) said in a press statement along with the report. “These self-benefitting pricing tactics pushed by PBMs have done nothing but jeopardize patient care, undermine local pharmacies, and raise prescription drug prices.”
The report outlines that PBMs, which negotiate prescription prices between insurance companies and pharmaceutical manufacturers, use formularies of preferred medicines that push patients toward higher-priced drugs rather than lower-priced alternatives.
“In total, the Committee identified more than 1000 examples of medications that, according to Medicare Part D data, would have been less expensive had the excluded medication been given preference or simply able to compete on a level playing field,” the Oversight Committee wrote in its report.
The middlemen have come under increasing bipartisan scrutiny this Congress.
But moving operations overseas to avoid government regulations is a new charge.
The Republican report notes that, within the past five years, the three largest PBMs, CVS Caremark, Optum Rx, and Express Scripts, have each created their own group purchasing organization, or GPOs, based in foreign countries.
Express Scripts created GPO Ascent Health Services, based in Switzerland, in 2019. Both CVS Caremark and Optum Rx created their own GPOs in Ireland in 2021.
CVS Caremark, Optum Rx, and Express Scripts control 80% of the market, serving 270 million people in the United States. But smaller PBMs are also accused of engaging in similar practices.
Cigna, for example, also created subsidiary group Quallent Pharmaceuticals, based in the Cayman Islands, in 2021.
“The location of these subsidiaries raise significant questions about the purpose of their creation, in particular whether their foreign domicile is intended to prevent transparency and enable PBMs to retain hidden rebates and keep patient costs high,” the Republican report said.
Part of the problem, as both Republicans and Democrats have noted, is that patients are largely unaware of the fact that when they choose a health insurance plan, they are also committing to working within a set PBM network, limiting their options for purchasing prescriptions.
“People don’t choose their PBMs,” ranking member Jamie Raskin (D-MD) said in a hearing on Tuesday with the CEOs of the three largest PBMs.
When questioning the CEOs, Comer said the PBM industry has a “credibility” and “transparency” problem, adding that the committee believes they “have anticompetitive practices.”
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The Federal Trade Commission , which has concurrently been investigating the practices of PBMs, is slated to sue the largest firms over negotiating tactics, mostly due to insulin prices.
Republican and Democratic lawmakers in the House passed PBM reform legislation last year, and a version of the bill passed out of a Senate committee. The legislation, however, failed to pass the full Senate as a part of a spending deal this spring.
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