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PhRMA witness tells insurance committee 340B program and PBMs can raise costs for patients and employers
Summary
Leslie Wood of the Pharmaceutical Research and Manufacturers of America told the House Insurance Committee that pharmacy benefit managers, 340B program growth and hospital markups have driven higher costs for patients, employers and state governments and urged policy changes to ensure rebates and discounts reach patients.
Leslie Wood, regional vice president of state policy at the Pharmaceutical Research and Manufacturers of America (PhRMA), told the House Insurance Committee that prescription drug spending has remained a stable share of health-care spending over the past two decades but that parts of the supply chain are driving higher costs for patients and employers.
"Spending on medicines really has been a stable share of healthcare spending over the last 20 years," Wood said. She said net spending on medicines increased about 2.3% in 2023 and that nearly 90% of prescriptions are filled with a generic medicine.
Wood described how pharmacy benefit managers, or PBMs, and other intermediaries capture a substantial share of spending on branded medicines. "More than half of every dollar spent on branded medicines goes to entities other than the manufacturer," she said, and she characterized PBMs as vertically integrated with insurers, specialty pharmacies and other parts of the supply chain.
She also testified that the federal 340B Drug Pricing Program has grown rapidly and that hospitals and contracted pharmacies are marking up medicines purchased through 340B. "The average markup at a hospital for a medicine is 500% for the 20 most common medicines for patients within commercial insurance," Wood said. She pointed to research and federal inquiries showing that 340B discounts do not by statute require hospitals or contract pharmacies to share savings with patients; she referenced a federal investigation led by U.S. Senator Bill Cassidy and cited statements from Cleveland Clinic and Bon Secours explaining that 340B does not require sharing savings with patients.
Wood said the structure of 340B can cause insurers and employers to lose rebate protections because a drug filled under 340B cannot also generate a duplicate Medicaid or PBM rebate. "On a 340B drug, you cannot receive rebates," she said, and she provided national estimates that, in her presentation, attributed billions in additional costs to employers and state and local governments because of 340B-related rebate forfeiture.
When Vice Chair Carter asked, "How can we make sure that the patients are the main and true beneficiaries of the program?" Wood said, "It is a federal program and so changes really do have to happen at the federal level," but she added that states can improve program integrity by requiring claim modifiers, auditing contract-pharmacy arrangements and studying state-level cost impacts. She said some states have passed laws banning claim modifiers that obscure 340B billing but suggested that transparent claims data would help determine whether savings reach eligible patients.
Wood closed by outlining policy preferences supported by PhRMA: ensuring manufacturer rebates and discounts flow to patients at the pharmacy counter, protecting patient-assistance programs, banning manufacturer coupon designs that do not count toward out-of-pocket maxima, limiting PBM compensation to flat fees rather than percentage-based fees, prohibiting spread pricing, and preventing PBMs from steering patients exclusively to pharmacies the PBM owns.
Her remarks drew no formal committee action in the transcript; the record shows a brief question from Vice Chair Carter and no motion or vote tied to the testimony.
