Patients at disadvantage with current drug pricing

The current structure of reimbursement for drugs in the U.S. is “regressive” and ultimately hurting patients, a group of drug company executives told a Senate hearing in Washington, DC., February 26.

Kenneth Frazier, CEO of Merck, told members of the Senate Finance Committee during a widely anticipated hearing that the current system — in which pharmacy benefit managers and insurers negotiate with drugmakers that are based on list price — punishes drug companies that set lower list prices.

“Today, the goal is paying into the supply chain the biggest rebate and that actually puts the patient at the disadvantage,” Frazier said. “The list price is actually working against the patient.”

The current system is, Frazier said, “the biggest problem that we have as a country because it is designed so the poorest and the sickest are subsidizing others.”

He was speaking as part of the closely watched hearing in which the drug industry was largely expected to point to other players, such as pharmacy benefit managers and insurers, rather than themselves as drivers of costs in the pharmaceutical market.

Seven executives representing the largest drug companies — including Merck, Pfizer and AstraZeneca — testified at the hearing. A central throughline in the discussion is the role of insurers and PBMs in negotiating price and the role they play in increasing costs. The health insurance industry was not represented at the hearing. \

The executives unanimously said they supported eliminating the rebate system — which has been proposed by the Trump administration through eliminating legal protections for drug rebates — alongside backing greater transparency and a focus on outcomes-based pricing.

Albert Bouria, Ph.D., CEO of Pfizer, said that the end of rebates would lead directly to lower list prices, and lower costs for patients with high cost-sharing in the form of coinsurance or high deductibles.

The Senate Finance Committee hearing marked the first time lawmakers have called the industry’s top executives to account for rising prices, which are a drain on Medicare and Medicaid and a burden to millions of Americans.

The hearing was a sign that Congress and the White House are moving toward legislation this year to curb cost.