Kelly Ryan, identified herself as deputy vice president of state policy for the manufacturers’ trade association (testifying in a trade association capacity) and addressed the council on Oct. 27. Ryan described how market consolidation and vertical integration have changed where money flows in the branded‑drug supply chain, said that roughly three PBMs process the majority of claims, and outlined why she and her members view “delinking” PBM compensation from a medicine’s list price as a policy worth considering.

Ryan said the industry has seen a shift away from rebates as PBM compensation toward fees and specialty‑pharmacy profits. She described the mechanics: manufacturers set a public list price and negotiate rebates; the list price can determine patient cost‑sharing (for example, patients on deductibles may be charged the list price at point of sale); PBMs may earn admin fees tied to list price or retain specialty‑pharmacy margin, creating an incentive to prefer higher list prices. Ryan recommended that policymakers consider “compensation reform” to separate PBM pay from list price so incentives do not push toward higher‑priced medicines.

Key points from the testimony:
- Market concentration: Ryan repeated the commonly cited estimate that the largest PBMs process the majority of U.S. claims and that consolidation and vertical integration (insurer ownership of PBMs, PBM ownership of specialty pharmacies) complicate incentives.
- List price vs. net price: Ryan explained the construct of list price (manufacturer set), rebates (negotiated discounts), net price (what the payer effectively pays after rebates) and retail price/cost sharing (what the pharmacy charges or the patient pays). She said that the net price often is materially lower than the list price and that patients on deductibles frequently pay the list price at the pharmacy counter.
- Delinking: Ryan described “delinking” as separating PBM compensation from a drug’s list price (or otherwise reforming compensation to avoid rewarding higher list prices). She characterized it as a newer term (the witness said “delinking didn’t exist until 2024” in policy discussions) and suggested focusing on compensation reform as a clearer term.
- Transparency and state authority: Ryan complimented Louisiana’s recent transparency reporting and suggested state regulators’ new ability to examine affiliates and GPOs is a constructive step.

Questions by council members covered: how rebates, coupons and copay assistance operate at the point of sale; whether manufacturers still use rebates and how member manufacturers vary in approach; how list prices are set and whether they can come down; the role of wholesalers and GPOs; and shifting compensation structures (rebates vs. fees vs. specialty margins).

Ryan told the council she would provide slides and citations and said the trade association would follow up with materials on coupon mechanics and other data the council requested.

Why it matters: Ryan’s testimony outlines industry views on how compensation incentives flow and why a reform like delinking could change prescribing incentives and patient cost exposure. The witness emphasized that policy changes should consider the entire supply chain to avoid unintended consequences.

What the council asked for: Council members requested additional materials and data from the trade association witness, and several members said they want PBM leadership and GPOs to testify in future meetings.