5 takeaways from POLITICO’s ‘Corrective Action: How to address prescription drug costs’ event

SACRAMENTO, California — Key California health care players are divided over whether the state should impose new regulations on pharmaceutical middlemen to bring down spiraling drug prices in the largest market in the nation.

Those middlemen, the pharmacy benefit managers, came under the microscope Tuesday at “Corrective Action: How to address prescription drug costs,” a POLITICO Live event.

It was somewhat hostile territory for the industry, featuring its chief antagonist in Sacramento: State Sen. Scott Wiener.

Wiener has authored legislation, Senate Bill 966, that would impose new rules on PBMs, represented on the panel by industry advocate Caitlin Berry.

Anthony Wright, executive director of Health Access California, a consumer advocacy organization, supported the goal of the legislation though not its specifics while a third panelist, UC Law San Francisco professor Robin Feldman argued that California can in fact act more boldly to bring down drug prices in the state.

Here are five takeaways from the event:

A chief antagonist of pharmacy benefit managers does not want to eliminate them.

Wiener did not go as far as others nationally who seek to abolish the middlemen who negotiate with manufacturers over drug prices.

“I'm not here to say we need to eliminate PBMs, but shouldn't we be actually regulating those practices as a matter of reducing costs to the system and supporting patients?” said Wiener.

He’s carrying legislation that would, among other things, require PBMs to be licensed with the California State Board of Pharmacy and to pass down drug rebates to consumers. The proposal is expected to dominate health care regulation discussions in Sacramento this legislative year.

Caitlin Berry, a senior principal with Prime Therapeutics, opposes the bill and argued her industry bolsters competition through negotiations and actually helps limit prices.

“We build networks that stoke competition in between pharmacies to capture business from the insurance members in order to lower costs for the payer,” she said.

States have been limited in their ability to regulate the drug industry. That could be changing.

PBMs are a frequent target of states trying to regulate drug prices because only the federal government has set rules for other parts of the pharmaceutical supply chain in the past.

But Feldman argued a 2023 Supreme Court ruling allowing California to set rules for pork ranchers has reframed the Constitution’s Commerce Clause in a way that would allow states to regulate pharmaceuticals, too.

“That opened the door for states to have much more power to do things such as regulate pharmaceutical industry behavior,” said Feldman, “so there are much more opportunities ahead now.”

A group representing consumers didn’t back one proposed regulation of PBMs.

Wiener’s SB 966 does not yet have the approval of Health Access California. Wright said “we agree that there should be regulation of the industry,” but did not sound sure of which entity should license PBMs.

“There are some specifics that we're going to talk to him about with regard to whether the right place is at the heart of pharmacy or Department of Managed Health Care,” Wright said of Wiener’s bill.

Wright did agree with the senator that the chief negotiators of drug prices should not be abolished.

“We also don't want to necessarily blow up the model of a PBM in absence of other mechanisms to keep prices low,” said Wright.

Drug pricing remains the elephant in the room.

Pharmaceutical prices have risen faster than inflation, prompting finger-pointing between industry players and skeptics in government over who’s to blame.

Yet the precise causes for high prices are the subject of fierce debate in Washington and Sacramento — in part because companies’ financial dealings are private.

Several panelists urged greater transparency into industry profits. Berry countered that some proposals raise antitrust issues, harming PBMs in drug price negotiations.

“There are also, I think, some antitrust concerns with an industry being regulated by an agency that is staffed by folks who are participating in another industry that stands to benefit from anything that they might do,” Berry said of the state pharmacy board regulating both PBMs and pharmacists.

Feldman, though, said “much of the strategic behavior by many players in the industry, pharmaceutical companies, also PBMs, can be characterized as anti-competitive.”

Artificial intelligence could bring down drug costs.

Wiener pointed to an antibiotic developed by artificial intelligence as evidence that the technology presents major promise for drug development. And using AI to help design treatment could help bring down the costs of doing so, including speeding the designing of generics, said Feldman.

“The question of where those savings will go is another one, but it has huge potential,” said Feldman.

Technological innovation is already improving patient experiences by helping arm doctors with more information, said Berry.

“There is a keen interest in taking forth any products that would help expand information to prescribers when they need it to help influence the prescribing and also to influence adherence and positive outcomes for patients,” Berry said.