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NACDS clarifies 'misleading' statements by PBM execs
December 15th, 2011
ALEXANDRIA, Va. – The National Association of Chain Drug Stores said the chief executive officers of Express Scripts and Medco Health Solutions made "misleading statements" in testimony at a Senate Judiciary subcommittee hearing on the two pharmacy benefit managers' merger deal.
NACDS said Thursday that it has sent a letter to Sen. Herb Kohl (D., Wis.), to clarify statements made by Express Scripts CEO George Paz and Medco CEO David Snow at the Dec. 6 hearing held by the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights. Kohl chairs the subcommittee.
Mike Bettiga, chief operating officer of Shopko Stores Operating Co., testified at the hearing on behalf of NACDS. But in the followup comments submitted to Kohl this week, the association explained that the PBM executives downplayed the potential harmful impact of the proposed Express Scripts-Medco merger, which is being reviewed by the Federal Trade Commission.
"We agree with your opening comment that employers do have considerable concerns
about this merger but are reluctant to voice their concerns publicly due to fear of
retaliation by the [PBM] entities seeking to merge. This reluctance and fear illustrates clearly many of our concerns about the proposed merger and the impact it would have on health plans and employers. The large PBMs wield similar power over pharmacies, as was
discussed during the hearing," NACDS said in the Dec. 13 letter to Kohl.
"We felt compelled to write to you and correct statements made during the hearing by Mr.
Paz and Mr. Snow. We believe that these witnesses obfuscated facts in an effort to
portray their companies in a better light, downplaying many of their companies'
objectionable activities that would certainly worsen if the two companies were allowed to
For example, NACDS questioned Snow's testimony that every state board of pharmacy and every state insurance commission regulates Medco, and the association urged Kohl to explore that assertion. "PBMs have generally been successful in opposing efforts at state regulation. Only a couple of states directly regulate the activities of a PBM through a board of pharmacy, and the regulation in those states is weak, at best," NACDS stated. "As such, boards of pharmacy are limited in their oversight of PBMs."
According to NACDS, Snow and Paz also claimed that PBMs don't make any decisions in the design of prescription drug benefits but only follow the orders of the health plans and providers.
"We believe that these assertions are misleading. PBMs design the benefit plans and determine the costs. Because of that, it is our view PBMs steer the health plans and employers toward the items they most want to sell," NACDS told Kohl in the letter. "They set prices in a way that pushes orders for products and services (mail order, brands with big rebates, etc.) that the PBMs want customers to order, and creates disincentives for services (e.g. retail) and items (e.g. drugs from manufacturers that don't pay kickbacks) that the PBMs don't want their customers to order."
NACDS also raised questions on the level of savings that PBMs actually achieve and transparency regarding rebates and discounts from pharmaceutical manufacturers. The association noted that this point "has taken on tremendous significance amid the controversy surrounding the merger," as consumer groups and elected officials have voiced concern that the merged PBM would pass along any purported savings to consumers, employers and health plans.
Snow and Paz, meanwhile, have said the economies of scale achieved by the merged company would lower the cost of prescription drugs for Americans.
The chief concern made by opponents of the merger is that it would simply create a PBM that's too big, giving it the market power to force consumers to use its mail order prescription service and curtail patient access to drug stores.
"If this merger is allowed to proceed," NACDS said in its comments to Kohl, "patients will be faced with reduced access to retail pharmacies and pharmacy services, as the combined entity shifts patients to mail order and dominates specialty pharmacy. We believe that you should consider the testimony of Mr. Paz and Mr. Snow as illustrative of how their respective companies presently conduct themselves, which would only be exacerbated by a merger."