-9999

Floor Speech

BREAK IN TRANSCRIPT

Mr. LANKFORD. Mr. President, I want to talk to most Oklahomans about pharmaceuticals, about the cost of drugs and going to the pharmacy.

They don't think a lot about supply chain issues--though, I actually have a bill that is working on this, and this is an issue we have got to resolve.

About 10,000 of the active pharmaceutical ingredients come from communist China. We are very exposed there. That is a very big risk. We have got to work to be able to make sure that we can get access to our pharmaceuticals without being dependent on China to do that. That is a risk that people want to solve, but it is one that they don't really talk about the most. Most of the time, we talk about the cost of a drug and its availability at their local pharmacy. Let me talk about both of those.

As ironic as it sounds, they are tied up together and not in the way that people think about most of them. Many people think that drug companies produce drugs, and then they sell it to the pharmacy, and then the pharmacy sells the drug. They think that that is the way it works. It is really not, actually. Those are two elements. There are drug companies that do research, that develop the drugs, and do all of the clinical trials and get it approved, and they are ready to go, but then there is a wholesale network back there that actually handles the distribution.

Then there is this group that almost no one has heard of called the pharmacy benefit manager. The pharmacy benefit manager actually, oftentimes, sets the real price for the drug. The drug company may produce it at one price, and the pharmacy is ready to be able to sell it at a price, but there is this group in between, the pharmacy benefits manager, that actually controls how it works.

Now, if I am at the pharmacy in Atoka, OK, the patients who are coming into that rural, beautiful community just know what they are paying at the counter; but if you go behind the counter and talk to the pharmacist there or in any other number of communities there, they will tell you they are struggling as an independent pharmacy, especially in rural areas, because there is a game happening with the pharmacy benefit manager that is to the benefit of what is called a PBM and to the detriment of the local pharmacy and of the patient. It is an issue that has got to be resolved.

About 80 percent of all of the drugs that move across the country right now are managed by three different pharmacy benefit managers. Now, I am not opposed to competition, but here is what they have actually done over the last several years: The insurer has purchased the insurance company, the pharmacy benefit manager, the group that actually does the purchasing of the drugs, then, often, the retail pharmacy as well for some of those big chain retail pharmacies. So they, literally, own the entire network there, and they can make money through the whole network.

Again, I am a free market capitalist, and I don't have an issue with people doing that, but here is what is actually happening: The leverage, then, of the big pharmacies owning all of the rest of the chain there is that if you are not in their group, you are facing some real consequences and a real squeeze because they now set the price and tell you how it works.

Let me give you a couple of examples of things that I believe we need to address and that I have been working on for years. Finally, the Finance Committee of the U.S. Senate is actually taking on this issue.

One of them is another little code thing that most people don't know exists, called DIR fees. This direct and indirect remuneration fee is how the whole process works behind the scenes at an independent pharmacy. Let me give you an illustration, and try to take this off the top shelf.

So let's say you are a company and you manufacture a product or that you are in retail and you sell a product that is out there. So you sell a product, whatever it may be--I don't care if it is a shirt or a couch, whatever it may be--and you are going to ship it out. You do the shipping, and you anticipate, once the shipping is done, you will be reimbursed for the shipping. Your job is to be able to retail sell it, ship it out, and then you get the reimbursement for that.

But what would happen in your business if you sold it, shipped it, and then after you shipped it and paid for the shipping, someone came back to you and said: ``Actually, that may have cost you $50 to ship that. I am only going to give you $20 for the shipping because I didn't like the way you did the shipping. I didn't like who you did the shipping with. I don't like the box that you put it in. I preferred a different box. So you lose $30 in the shipping because you didn't put it in the right kind of box''?

So here is what you do: The next month, when you are shipping, you make sure you put it in the box that whoever this is who is reimbursing you likes that certain kind of box. You put it in that box, you ship it out, and then you wait for the reimbursement. Instead, the company comes back and says: ``Oh, no. We have changed our mind. Now we would like a different color of box. So, yes, you put it in the right kind of box, but we would like it in a different color box, so we are going to reimburse you $10, even though it cost you $50.'' This may sound absurd, but welcome to the world of the DIR fees for pharmacies.

Here is what happens: They purchase the drug and get the drug, and they are ready to sell it. They sell it to the consumer. The consumer at the counter pays them for it. They have got their money from the consumer. It goes out the door. Then a month or a quarter or sometimes even a year later, the pharmacy benefit manager sends a notification to the pharmacy and says: ``Oh, we didn't like the way that you did that.'' It wasn't a quality thing. It was just how they did it.

Sometimes they will say: ``Well, you really should have prescribed two drugs to this person, and you just did one.'' Now, the pharmacist doesn't choose what drugs are going out to the patient who is there; the doctor does. The pharmacist just fills the script. But the pharmacy benefit manager may say: ``Oh, you needed to have sold him more drugs than what you did, so we are going to reimburse you less for this.'' And they literally change the rules after the sale is done. So they will reimburse them, but sometimes they will reimburse them less than the actual drug costs to the pharmacist; so the pharmacist actually loses money on filling a prescription for this person, but they don't know that until months later.

That is what is happening right now in small pharmacies across America because the pharmacy benefit managers are focused on how they can make more money, even if it closes down rural, independent pharmacies.

What is interesting is that several of my rural pharmacies have told me they will get these change of rules where suddenly now they are selling drugs or sold a long time ago a drug to someone for less than what they are actually being reimbursed now. They will often get that notification and then a week later get a notification from that big pharmacy group saying: Hey, by the way, if you want to join our retail chain and close down your chain, we will buy you out.

It is a great way to put a little pressure squeeze on them to say: We are going to reimburse you less than the cost of your drugs unless you are one of our pharmacies, and then maybe we will do a little bit better.

Listen, this is the United States of America. We like competition, but we also like fair competition where people are actually reimbursed for the cost of their actual product, they are actually able to survive, and especially in rural areas, that independent pharmacy is able to thrive, because in rural areas across our country, there is not a lot of access to healthcare. So when people have a question about their drugs and about their healthcare, where do they go? The pharmacist in their small town, that is where they go.

DIR fees from these pharmacy benefit managers are directly putting at risk the survival of rural pharmacies across America and across my State, and I am going to do whatever I can to make sure those companies don't drive out of business local, rural pharmacies in my State because my people in my State need that support in their local area.

They may want to do mail-order pharmacy for some things. It is very convenient. It is great. If they choose to do that, it is fine. But if they are taking five drugs, they want to talk to somebody about this and what are going to be the effects. That is not going to happen with mail order; that is going to happen with somebody behind the counter who is going to talk to them and walk them through the process. That is what we need to be able to do.

This is not rocket science, and it is not onerous. It is standard performance metrics that the rules don't change on an independent pharmacy. They know what the rules are, and they don't change, especially after the sale has already been done.

The ability to be able to sell a product and actually at least have some profit, not lose money every time you are able to sell a product, shouldn't be a radical idea. The pharmacist is not getting to pick the price on this product. People think the pharmacist is the one making all the money. The pharmacist is not the one who picks the price on this product; that is set by someone else. And if they literally have to sell it at a price less than what they buy it for, that is not right. They are trying to be able to help their neighbors.

Let me give you another example, another issue I have been working on for years on this. This is a game play between the pharmacy benefit managers and the pharmaceutical companies that actually produce the drugs.

Most drugs, when they come out, are remarkable. The engineering and the science in modern medicine and the technology that it takes to be able to go through the clinical trials and get something approved that shows it is not only safe but effective is remarkable science.

There are some great researchers doing that, and it is incredibly expensive to do. Because that is incredibly expensive in the United States, we protect the patent rights of that new drug. So a drug, when it comes out--it is really expensive when it comes out because we want that company to make enough money to be able to pay for all the research they put into producing it and make a little profit or else they are not going to produce more drugs and more innovation. That is how it works.

But that patent is protected for a season. It is usually around a decade that it is protected for them. After that, then the drug can have drug competition. Those are called generics or biosimilars.

Most folks know, in their pharmacy--if they get a prescription from their doctor and they walk in and say ``Hey, I got this script from my doctor,'' the pharmacist will say ``It is a brand drug,'' many people will say ``Is there a generic of that?'' What they are really asking is ``Is there a cheaper version of that?''

For almost everybody, for your plan from your insurance company, you have one price for the brand drug and a cheaper price for a generic. Do you know why? Because generic drugs are cheaper, that is why, for everybody in the whole value chain.

But here is what is happening. Sometimes people will walk into a pharmacy, and they will say ``Is there a generic version of this,'' and their pharmacist will respond back to them ``There is a generic version, but it is the same price as the brand.''

It makes you pause for a minute and say: Well, that is strange. Why is the generic the same price as the brand?

If that has ever happened to you, here is why that is: because the drug company has worked with the pharmacy benefit manager to say: When competition comes, when the generic comes, if you will list the competition on the higher price what is called branded tier, we will give you a kickback every time our drug is sold in the brand. So you will make additional money if you will list the competition at a higher price.

What does that do? That causes every consumer in America to have to pay more at their pharmacist. It also affects the U.S. budget because, also, Medicare is affected by that as well.

This is a simple fix. Generic drugs should be on the generic tier. Branded drugs should be on the branded tier for sales. This is not rocket science, again; this is straightforward consumer protection.

This is an issue I have pushed on for a long time that I get a lot of pushback from. As you would expect, the pharmacy benefit managers and the drug companies aren't big fans of this. I have nothing in opposition to drug companies. I want them to continue to thrive, produce new drugs, and to be able to make a profit on the production of those new drugs. But when they are doing something to the consumer to drive up the price when they could get a cheaper price, that is bad for them and bad competition. Let's fix that.

Next week, the Finance Committee is going to take up a whole series of bills and options on pharmacy benefit managers. We need an intermediary. The drug companies aren't set up to be able to sell straight to the pharmacy. I don't have a problem with somebody being in between. I am not trying to kill that. But we do need to make sure that it doesn't hurt the consumer, doesn't hurt the Federal budget, and actually works for everybody in the process.

I know this is stuff behind the scenes, and everyone just wants to say: How do we get the price of drugs cheaper?

There are even folks who say: Let's just have the Federal Government take over all this pricing. The Federal Government will just set the price for everything. That will work beautifully.

I always laugh and say: Listen, if you think the Federal Government can solve every problem, try to get your passport right now, because right now, it takes about 18 weeks to get a passport, and it used to take 4 weeks.

The Federal Government is not the solution to everything on this. Protected free markets are a good solution to this. Competition will work if we allow the markets to actually work, but if someone is in the middle controlling all of that, that is something on which we need to intervene and to say: Let's have free and fair markets that are out there to get down the price of drugs, because there are generics, there are biosimilars that are out there that will bring down the price if they are allowed to get to market. So let's make sure they can actually get to market and get down the price.

Let's protect the ability for rural, independent pharmacies to still take care of their patients. Those are their neighbors. They care about them, and they want to make sure they can still be there to be able to care for those folks.

We have work to do. I am glad the Senate is finally taking this up. I have been working on this for years. This is an area we need to address.

BREAK IN TRANSCRIPT

Source