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STATE OF COMPETITION IN THE 

PHARMACY BENEFITS MANAGER AND 

PHARMACY MARKETPLACES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

REGULATORY REFORM, 

COMMERCIAL AND ANTITRUST LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

NOVEMBER 17, 2015 

Serial No. 114–52 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

MIMI WALTERS, California 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

TOM MARINO, Pennsylvania, Chairman 

BLAKE FARENTHOLD, Texas, Vice-Chairman 

DARRELL E. ISSA, California 

DOUG COLLINS, Georgia 

MIMI WALTERS, California 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

DANIEL FLORES, Chief Counsel 
(III) 

C O N T E N T S 

NOVEMBER 17, 2015 

Page 

OPENING STATEMENTS 

The Honorable Tom Marino, a Representative in Congress from the State 

of Pennsylvania, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law .................................................................................. 1 

The Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress 

from the State of Georgia, and Ranking Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law ................................................. 3 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 14 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 64 

WITNESSES 

Amy Bricker, R.Ph., Vice President, Retail Contracting and Strategy, Express 

Scripts 

Oral Testimony ..................................................................................................... 16 

Prepared Statement ............................................................................................. 19 

David A. Balto, Esq., Law Offices of David A. Balto, PLLC 

Oral Testimony ..................................................................................................... 22 

Prepared Statement ............................................................................................. 24 

Natalie Pons, Senior Vice President, Assistant General Counsel, Health Care 

Services, CVS Caremark Corportation 

Oral Testimony ..................................................................................................... 46 

Prepared Statement ............................................................................................. 48 

Bradley J. Arthur, R.Ph., Owner, Black Rock Pharmacy 

Oral Testimony ..................................................................................................... 56 

Prepared Statement ............................................................................................. 58 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Henry C. ‘‘Hank’’ Johnson, Jr., a Representative in Congress from the State of Georgia, and Ranking Member, 

Subcommittee on Regulatory Reform, Commercial and Antitrust Law .......... 5 

Material submitted by the Honorable David N. Cicilline, a Representative 

in Congress from the State of Rhode Island, and Member, Subcommittee 

on Regulatory Reform, Commercial and Antitrust Law ................................... 74 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Material submitted by the Honorable Tom Marino, a Representative in Congress from the State of Pennsylvania, and Chairman, Subcommittee on 

Regulatory Reform, Commercial and Antitrust Law ........................................ 90 

Material submitted by the Honorable Doug Collins, a Representative in Congress from the State of Georgia, and Member, Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law ............................................................ 103 

Response to Questions for the Record from Amy Bricker, R.Ph., Vice President, Retail Contracting and Strategy, Express Scripts ................................... 108 
Page

IV 

Response to Questions for the Record from Natalie Pons, Senior Vice President, Assistant General Counsel, Health Care Services, CVS Caremark 

Corportation .......................................................................................................... 115 

Response to Questions for the Record from Bradley J. Arthur, R.Ph., Owner, 

Black Rock Pharmacy .......................................................................................... 122 

OFFICIAL HEARING RECORD 

UNPRINTED MATERIAL SUBMITTED FOR THE HEARING RECORD

Material submitted by the Honorable Tom Marino, a Representative in Congress 

from the State of Pennsylvania, and Chairman, Subcommittee on Regulatory Reform, Commercial and Antitrust Law. These submissions are available at the Subcommittee and can also be accessed at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=104193. 

Material submitted by the Honorable David N. Cicilline, a Representative in Congress from the State of Rhode Island, and Member, Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law. This submission is available at the Subcommittee and can also be accessed at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=104193. 

Material submitted by the Honorable Doug Collins, a Representative in Congress 

from the State of Georgia, and Member, Subcommittee on Regulatory Reform, 

Commercial and Antitrust Law. This submission is available at the Subcommittee 

and can also be accessed at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=104193. 
(1) 

STATE OF COMPETITION IN THE PHARMACY 

BENEFITS MANAGER AND PHARMACY MARKETPLACES 

TUESDAY, NOVEMBER 17, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON REGULATORY REFORM, COMMERCIAL AND ANTITRUST LAW

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 3:33 p.m., in Room 

2124, Rayburn House Office Building, the Honorable Tom Marino 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Marino, Goodlatte, Issa, Collins, Ratcliffe, Bishop, Johnson, Conyers, DelBene, Cicilline, and Peters. 

Staff Present: (Majority) Anthony Grossi, Counsel; Andrea Lindsey, Clerk; (Minority) Slade Bond, Counsel; and James Park, Counsel. 

Mr. MARINO. Good afternoon. The Subcommittee on Regulatory 

Reform, Commercial and Antitrust Law will come to order. Without 

objection, the Chair is authorized to declare recesses of the Committee at any time. I don’t foresee any because that was the last 

vote for the day. 

We welcome everyone to today’s hearing on the State of Competition in the Pharmacy Benefits Manager and Pharmacy Marketplace. And I now recognize myself for my opening statement. 

When a patient visits a doctor who recommends and prescribes 

medication, the patient rarely receives the prescription drug directly from the doctor. Instead, the patient submits his prescription 

to a pharmacy which then dispenses that ordered medicine. While 

this may appear to the patient as a relatively simple exchange, behind the scene exists a complex system. Within this system is a variety of different players who engage in millions of interactions that 

influence the types of drugs that are available and the prices that 

patients pay for them. 

Two of the key players in this process are pharmacy benefit managers and pharmacies. Today’s hearing will examine the state of 

competition in these two important markets. Pharmacy benefit 

managers or known as PBMs, play an important role in the 

healthcare system. PBMs oversee and administer the prescription 

drug benefits for more than 247 million Americans, or approximately 95 percent of Americans who receive drug benefits. 
2 

Through the management of these benefits, PBMs perform a 

number of varied services. They negotiate the prices of prescription 

drugs with manufacturers and wholesalers. PBMs design drug 

formularities that dictate the drugs that will be covered under a 

benefit plan and the cost-sharing portion the patient will bear for 

each drug. PBMs also negotiate with pharmacies to determine 

which pharmacies will participate in their networks, the fees that 

each pharmacy will receive for dispensing drugs, and the amount 

the pharmacy will be reimbursed for each drug. 

By virtue of their central position in the administration of prescription drug benefits, some would argue that PBMs have the ability to place downward pressure on the prices of drugs. PBMs also 

can achieve efficiencies that result in savings both to the ultimate 

patient and the payer of health benefits. Pharmacies also play a 

critical role in the delivery of medicine to Americans. In addition 

to purchasing prescription drugs, they typically are the entities 

that directly engage with the patients. As someone who represents 

a district with many rural communities, I know firsthand how important pharmacies, particularly independent pharmacies, are to 

their customers. Many times these independent pharmacies develop meaningful relationships with their customers and provide 

essential assistance when dispensing the prescription drugs. 

Together with doctors, pharmacies are part of an integral team 

that ensures patients are receiving the proper drugs in the correct 

amounts and administered in the appropriate fashion. I have been 

an ardent supporter of independent pharmacies throughout my 

time in Congress. In both the 112th and the 113th Congress, I introduced legislation that would grant independent pharmacies a 

specific exemption to the antitrust laws when negotiating contract 

terms for provisions of healthcare items or services. This would 

have potentially given the vast network of isolated independent 

pharmacies a stronger competitive footing relative to larger national pharmacies. 

Whether this exemption is needed is another item to consider 

today. Many PBMs also provide pharmacy services, either through 

their own brick-and-mortar locations or through mail-order services. As a result, PBMs may negotiate services with competitors to 

their own pharmacies. Over the years, this has resulted in tensions 

between certain pharmacies and PBMs. The antitrust enforcement 

agencies have periodically reviewed PBM activities, finding in some 

instances that these activities are appropriate and stepping in 

when they are not. 

Today’s hearing with allow us to become better educated about 

the services that PBMs and pharmacies provide. The hearing also 

will allow us to review whether the proper economic incentives are 

in place to ensure that customers are receiving affordable prescription drugs and to explore some of the historic tensions between certain PBMs and pharmacies. 

The public record generated today will also assist the Committee 

with its oversight authority of the antitrust enforcement agencies. 

We have before us Express Scripts and CVS Caremark, two of largest PBMs and pharmacy companies. They will provide an inside 

and first-hand perspective of PBM and pharmacy operations, as 

well as an invaluable viewpoint into the prescription and pharmacy 
3 

industry at large. Additionally, we will hear from a representative 

of independent pharmacies and one of the experts covering both of 

these markets. I look forward to today’s discussion from this excellent panel of witnesses. 

The Chair now recognizes the Ranking Member of the Subcommittee on Regulatory Reform, Commercial and Antitrust Law, 

Mr. Johnson of Georgia, for his opening statement. 

Mr. JOHNSON. Thank you, Mr. Chairman. Today’s hearing is a 

welcome opportunity to continue this Subcommittee’s examination 

of competition in the healthcare marketplace. The topic of today’s 

hearing, competition in the pharmacy marketplace, will explore the 

role of pharmacy benefit managers, or PBMs, in ensuring competitive and affordable drug prices for American consumers. In the 

pharmacy marketplace, PBMs serve as the intermediary between 

the manufacturers and wholesalers of prescription drugs and the 

payers of health insurance benefits. In their role as the intermediary in this market, PBMs administer prescription drug benefits to approximately 95 percent of Americans who receive prescription drug benefits. Furthermore, through their contracts with 

health payers such as health insurance companies, PBMs are responsible for negotiating the cost and availability of prescription 

drugs with manufacturers and wholesalers. 

In short, PBMs are a critical gatekeeper in the prescription drug 

benefit system. It is, therefore, imperative that we fully understand 

the functioning of this market from both a competition and regulatory perspective to determine whether consumers are receiving 

the most affordable prices for prescription drugs. From a competition perspective, some have suggested that there is significant horizontal consolidation in the PBM market. 

And, furthermore, that this horizontal consolidation is compounded by the vertical integration of certain PBMs into the mail 

order and retail pharmacy market. While the Federal Trade Commission has studied this issue on several occasions and reached the 

conclusion that the PBM market is adequately competitive, as 

Commissioner Julie Brill has noted, the FTC has not conducted a 

further study of the PBM industry since 2005, other than to review 

the ESI Medco merger in 2012, which did not examine issues surrounding PBM, plan designs such as PBM fee and compensation 

transparency. 

It is therefore incumbent upon this Subcommittee to conduct a 

thorough inquiry on this matter which I hope that today’s hearing 

provides. From a regulatory perspective, it has also been suggested 

that PBMs pricing techniques, rebate schemes and formulary designs have resulted in higher costs to consumers. I hope that today’s hearing also serves as a fruitful discussion of this topic particularly with regard to the Department of Labor’s inquiry into this 

matter last year. 

As Consumers Union has noted, effective regulation and effective 

competition work hand in hand. And the less we can rely on effective competition, the more important it is that regulation ensures 

effective transparency to reduce the potential for abuse. I strongly 

agree. While the PBM marketplace is undoubtedly convoluted, today’s hearing will serve as an important basis for determining 

whether consumers are receiving the best prices for prescription 
4 

drugs or whether we should do more to ensure affordable and 

transparent markets for prescription drugs. 

I thank the Chair for continuing this series. And before closing 

I ask unanimous consent that the written statement of Lynn Quincy and George Slover of Consumer’s Union be made a part of the 

record. 

Mr. MARINO. Without objection, so ordered. 

[The information referred to follows:] 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 

Mr. JOHNSON. I yield back. 

Mr. MARINO. The Chair now recognizes the full Judiciary Committee Ranking Member, Mr. Conyers of Michigan for his opening 

statement. 

Mr. CONYERS. Thank you, Mr. Chairman. I join you in welcoming 

the witnesses and look forward to a very frank and analytical discussion of the subject matter. 

Once when I was Chairman of the House Judiciary Committee, 

the Committee reported legislation that would have granted a limited antitrust exemption for independent pharmacies to allow them 

to collectively bargain as to the terms and conditions of reimbursements from pharmacy benefit managers. This legislation arose 

from the recognition that small independent pharmacies struggle to 

compete against large pharmacy chains, particularly with respect 

to their ability to negotiate reimbursements from pharmacy benefit 

managers. 

Pharmacy benefit managers administer the prescription drug 

benefit portion of health insurance plans for private companies, 

unions, and governments. They’re responsible for processing and 

paying prescription drug claims, contracting with pharmacies, and 

negotiating discounts and rebates with drug manufacturers, all for 

the ostensible purpose of keeping drug prices low for health plans. 

The hearing today gives us an opportunity to delve more deeply 

into the state of competition in the marketplace for pharmacy benefit managers and to consider its possible effects on consumers. To 

that end, we should keep the following in mind. 

As an initial matter, we should assess whether the market for 

pharmacy benefit managers is too concentrated and structurally 

problematic to maximize consumer benefits. Although estimates 

vary, most studies indicate that just three companies may control 

up to almost 80 percent of the pharmacy benefit manager market. 

Such concentration in any industry necessarily raises questions 

about whether the dominant firms can use their power to the detriment of their competitors and consumers. 

The largest pharmacy benefit managers also own retail pharmacy businesses which can be in the form of a large national retail 

chain, specialty pharmacy business, or online mail-order pharmacies. According to some experts, these ownership arrangements 

create an inherent conflict of interest because a large pharmacy 

benefit manager can leverage its market power to benefit its retail 

pharmacy business by using exclusivity arrangements, providing 

more generous reimbursements to the detriment of small independent retail pharmacy competitors. Moreover, such concerns may 

be further exacerbated when the industry is relatively unregulated, 

as may be the case with pharmacy benefit managers. 

In addition, we should consider whether a lack of transparency 

with respect to operations of pharmacy benefit managers helps or 

hurts competition. Some critics of pharmacy benefit managers assert that the lack of transparency makes it difficult to assess 

whether they are fully passing on whatever savings they may have 

obtain from drug manufacturers. These critics contend that the 

substantial rise in profits for pharmacy benefit managers in recent 

years suggest that such savings are not in fact being passed on to 

consumers. 
15 

*Note: The material submitted by Mr. Marino is not printed in this hearing record but is on 

file with the Committee. See also ‘‘For the Record Submission—Rep. Marino’’ at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=104193. 

Critics further assert that it is hard to know whether pharmacy 

benefit managers are providing fair reimbursements for generic 

drugs to small independent retail pharmacies given the lack of publicly available information about how pharmacy benefit managers 

determine such reimbursements. If these allegations are true, the 

lack of transparency may well make it difficult for health insurance 

plans to secure the lowest costs or the best quality service for consumers. 

Now, while some criticize what they see as lax antitrust enforcement in the pharmacy benefit manager marketplace, there is a 

broader question of whether more direct regulatory measures are 

needed beyond stronger antitrust enforcement. And that’s what 

makes what the witnesses have to say here today very important 

as we on this Committee decide what direction we should pursue. 

And I thank the Chairman for the time. 

Mr. MARINO. Without objection, other Members’ opening statements will be made part of the record and I ask unanimous consent 

to enter in some statements and documents for the record. Representative Carter, Republican from Georgia; Representative Blum, 

Republican from Iowa; America’s Health Insurance Plans; American Pharmacist Association; and Pharmaceutical Care Management Association.* 

Hearing no objection, so ordered. 

I will begin by swearing in our witnesses before introducing 

them. So would you please stand and raise your right hand. 

Do you swear that the testimony you are about to give before 

this Committee is the truth, the whole truth and nothing but the 

truth, so help you God? 

Let the record reflect that all of the witness have responded in 

the positive. 

Please take your seat. 

We have four distinguished witnesses today. And starting at my 

left is Ms. Bricker. She is the Vice President of retail channel management, contracting and strategy at Express Scripts, Incorporated. 

Prior to joining Express Scripts, Ms. Bricker was the Regional Vice 

President of account management at Walgreen’s Health Services as 

well as the Director of community retail pharmacy at BJC 

Healthcare. Ms. Bricker is a graduate of St. Louis College of Pharmacy, and is a registered pharmacist in Missouri. Welcome. 

Mr. Balto, who has been with us before on other occasions is an 

antitrust attorney with over 15 years of government antitrust experience. Mr. Balto worked as a trial attorney in the antitrust division of the Department of Justice and in several senior level positions at the Federal Trade Commission during the Clinton administration. He received his B.A. From the University of Minnesota and 

his J.D. From the Northeastern University School of Law. Welcome, sir. 

Ms. Pons is the Senior Vice President and assistant general 

counsel at CVS Health. Prior to joining CVS in 2011, Ms. Pons was 

the chief compliance officer at AdvancedPCS and a senior legal 

counsel at PCS Health Systems. Ms. Pons earned her bachelor’s de-
16 

gree in business administration from the University of Iowa College of Business, and her J.D. From the University of Iowa College 

of Law. Welcome. 

Mr. Arthur is the president of the National Community Pharmacist Association and the owner of two independent pharmacies 

in Buffalo, New York, which have been serving their community 

since 1957. Mr. Arthur is active in the pharmacist community and 

has served on various business and pharmacy boards during his career. Mr. Arthur earned his bachelor’s of science degree from the 

University of Florida College of Pharmacy, and his micro MBA certificate from the State University of New York at Buffalo. 

Each of the witnesses’ written statements will be entered into 

the record in its entirety. I ask that each witness summarize his 

or her testimony in 5 minutes or less. And to help you stay within 

the time, there is a light in front of you. Now, as I’m intent on 

making my statements—I’m not looking at any lights and I’m not 

looking at any clocks. I have people up here that nudge me. What 

I will politely and diplomatically do when we’re getting close, when 

you hit that 5-minute mark, I will again diplomatically raise the 

gavel and try to get your attention and ask you by doing that to 

wrap up your statement if you would do that, please. 

Ms. Bricker, would you like to make your statement, please. 

Turn on the microphone, please. Thank you. 

TESTIMONY OF AMY BRICKER, R.Ph., VICE PRESIDENT, 

RETAIL CONTRACTING AND STRATEGY, EXPRESS SCRIPTS 

Ms. BRICKER. Chairman Marino, Ranking Member Johnson, and 

other Members of the Subcommittee, my name is Amy Bricker. I’m 

a licensed pharmacist and serve as vice president retail contracting 

and strategy for Express Scripts. Thank you for the opportunity to 

be here today and share our perspective on competition in the 

pharmacy benefits manager and pharmacy marketplaces. 

Express Scripts is the Nation’s largest pharmacy benefit manager or PBM. We provide pharmacy services to roughly 86 million 

Americans covered by our clients which are large employers, health 

insurers, labor unions, TRICARE, Medicare, Medicaid, and marketplace plans. Express Scripts employs more than 25,000 hard working dedicated employees nationally. We have more than 2,000 employees in Pennsylvania, and more than 700 in the State of Georgia. Our number one goal is to make prescription drugs safe and 

more affordable for our patients and clients. Everything we do at 

the company is aimed at that goal. In a changing system, the demand for pharmacy services and prescription drugs has never been 

stronger. When used properly, prescription drugs keep patients 

healthy and costs lower for everyone. As the Subcommittee examines PBM and pharmacy competition, we want to emphasize three 

takeaways. 

First, the PBM marketplace is extremely competitive. Dozens of 

national and regional PBMs offer payers competing services and 

products. PBMs compete on price, data analytics, customer service, 

pharmacy access, clinical support services, and many other factors. 

Payers have a wide choice of PBMs and use that power to demand 

favorable pricing and contract terms. Express Scripts is an independently operated PBM. Some PBMs are owned by chain drug 
17 

stores while others are owned by health insurers. We believe our 

independent business model provides our clients with a clear choice 

when choosing a PBM. By operating separately from both the supply chain and the distribution channels, we stand alongside our clients as an independent counterweight in the marketplace. 

Second, scale matters. Express Scripts scale allows it to negotiate 

discounts from drug manufacturers and pharmacies that lower 

costs for our clients and patients. Express Scripts creates competition by forcing drug makers to compete against one another for 

placement on planned formularies and to gain market share. In a 

similar way, Express Scripts creates competition among more than 

68,000 retail pharmacies nationwide. We contract either individually with retail pharmacies or through group purchasing organizations called PSAOs which represent networks of pharmacies. Like 

large chain pharmacies, PSAOs combine the bargaining power of 

thousands of independent pharmacies when negotiating with 

PBMs. In fact, the largest PSAOs are as sizable as chain pharmacies. 

Under Medicare part D, the TRICARE program and some private 

plans, we must ensure patients have access to a minimum number 

of pharmacies within a region. In rural areas, independent pharmacies know that Express Scripts needs them in our network to 

meet Medicare access rules and thus command a premium. In a 

changing system, our scale helps drive savings. Brand drug makers 

may have short term pricing power when bringing a breakthrough 

drug to market. However, our scale helps level the playing field 

when a brand or generic competitor merges. Scale also allows us 

to drive a hard bargain and lower costs for patients, clients, and 

taxpayers. 

In 2014, prescription drug spending grew more than recent 

years. Much of this grown was driven by an increase in the unit 

cost of prescriptions, the prices manufacturers charge. But across 

our clients, closely managed plans spent nearly one-third less per 

member on traditional medications when compared to unmanaged 

plans. The tools we use help lower costs for clients and patients. 

Any effort to undermine our tools will mean higher costs for patients and payers. 

The third takeaway relates to independent pharmacies. In a 

changing system, independent pharmacies are more than holding 

their own. This is great news. The National Community Pharmacist Association recently published its annual digest, and it contains important data. One, the number of independent pharmacies 

has held steady over the past 4 years, even with the increasing 

rate of acquisition of independents by retail chains. Two, over the 

past decade gross profits have held steady at around 23 percent. 

And, third, over the past decade, annual sales per store have hovered between $3.6 and $4 million per year. 

In conclusion, Express Scripts values our relationships with our 

pharmacy partners, including independent pharmacies. Without 

independent pharmacies we could not offer clients and patients a 

high quality pharmacy benefit. The key lesson of the past 5 years 

is that effecting change requires stakeholders to work together. 

Rather than pit one part of the pharmacy against another, we can 
18 

and must work together to lower costs for payers and improve patient outcomes. 

Thank you again for the opportunity to be here today. Chairman 

Marino and Ranking Member Johnson and other Members of the 

Subcommittee, I am happy to answer any questions that you might 

have. 

Mr. MARINO. Thank you. 

[The prepared statement of Ms. Bricker follows:] 
19 
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Mr. MARINO. Mr. Balto. 

TESTIMONY OF DAVID A. BALTO, ESQ., 

LAW OFFICES OF DAVID A. BALTO, PLLC 

Mr. BALTO. Thank you, Mr. Chairman, Ranking Member, for inviting me to testify today. This is a very important subject. My testimony today is based on my years as a government enforcer and 

in representing consumers, public interests groups, PBMs, payors, 

and pharmacies, and PBM matters. And I’ve testified on several occasions for consumer groups. I have a simple message. By any 

measure the PBM market is severely broken. 

If you look at my testimony on pages 7 and 8 you see that profits 

are increasing rapidly. Margins are increasing rapidly. By any 

measure this market is not behaving competitively. Why is that? 

Normally for a market to function effectively, you need threes 

things: choice, transparency, and a lack of conflicts of interest. On 

all three of these measures, the PBM market receives a failing 

grade. Think about just the issue of—my testimony documents how 

as drug prices are increasing PBMs are increasing their profits too. 

They’re profiting from increased prices through increased rebates. 

You don’t have to guess about this. If you look at page 7 of the 

Consumer Union testimony, they document instances where there 

have been government enforcement actions where PBMs have 

forced consumers to higher priced, less efficacious drugs in order 

the maximize their rebates. Now, normally a payor faced with this 

situation would go and ask for information on rebates. But the 

PBMs won’t provide that. They won’t provide that kind of transparency. 

Now, in the Department of Labor proceeding that the Ranking 

Member mentioned, the Department of Labor is considering careful 

regulation to require transparency. And on one side of the table, 

you have Fortune 50 corporations, Consumers Union, and the AFLCIO all saying: We want that greater transparency. And who pops 

into the room but the FTC. And the FTC says: No. Transparency 

regulation would be a bad idea. We know what marketplace realties are, but economic theory teaches us that transparency would 

be bad. 

I don’t know what counts as regulatory chutzpah to this Committee, but to me that’s really regulatory chutzpah. Obviously the 

Department of Labor and other entities should go and regulate and 

require the kind of transparency that these PBMs fight tooth and 

nail to try to avoid. 

Why do these problems occur? Because the FTC has effectively 

made this a regulatory free zone. They have stopped investigating 

mergers. The last two big PBM mergers they didn’t even require 

a document or conduct a deposition. Including CVS’ acquisition of 

Omnicare which major consumer groups cried out do an investigation, but the FTC says, no. 

What does this mean for consumers? First it means these folks 

can go and merge at will. If these two companies wanted to merge 

tomorrow, if they wanted to go to the FTC’s marriage chuppah, and 

ask it be merged, we don’t know what would keep the FTC from 

saying no by the standards they are applying today. But there are 

worse effects. When you wonder about why Walgreens would ac-
23 

quire Rite Aid, it is so that they can battle against the dominance 

of these PBMs so they can have a fair seat at the table. Now that 

may or may not be a good merger, but the need for that merger 

is on the FTC’s doorstep. 

But, when you create an enforcement free zone, everybody listens. It is not just the PBMs who will engage in increasingly abusive conduct, increasingly abusive conduct. It’s everybody else. So 

a pharmaceutical manufacturer who says what keeps me from increasing prices 6,000 percent? The FTC is asleep at the switch, let 

me do that. 

What does this Committee need to do? First, pass legislation to 

provide for a fair MAC transparency. The consumers care about 

whether or not community pharmacists know what they are buying 

a drug for, because that pharmacist is the consumer’s agent. And 

when they are forced to dispense drugs below cost, everybody suffers except PBMs which are increasing their profit. 

Second, go and investigate in restricted networks, restricted part 

D networks but especially restricted networks for vulnerable consumers who have critical disabilities and specialty drugs. Specialty 

drug spending is increasing dramatically. That’s the major mover 

to drug spending. And having a market where the PBMs increasingly force consumers into their own specialty pharmacies is sort 

of like putting the fox in charge of the hen house. 

Third, the PBMs have a new—there’s a new approach in going 

and attacking patient assistance programs. Patient assistance programs are programs by pharmaceutical manufacturers to enable 

patients to afford drugs they might otherwise not be able to afford. 

Those also should be investigated. 

The most important thing I say in my testimony, and I really 

urge the Committee to spend time looking at this is what I say on 

page 6, it is really heartfelt and it is based on years of representing 

consumers. Who represents the consumer when in getting drugs 

it’s the pharmacist who represents the consumer. The pharmacist, 

as the Chairman has indicated, will go to battle with the PBMs to 

make sure the consumer receives the right drug at the right price 

and they need to be protected. I welcome any questions you have. 

Mr. MARINO. Thank you, sir. 

[The prepared statement of Mr. Balto follows:] 
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Mr. MARINO. Ms. Pons. 

TESTIMONY OF NATALIE PONS, SENIOR VICE PRESIDENT, ASSISTANT GENERAL COUNSEL, HEALTH CARE SERVICES, CVS 

CAREMARK CORPORTATION 

Ms. PONS. Thank you. Good morning, Chairman Marino, Ranking Member Johnson and Members of the Subcommittee. My name 

is Natalie Pons and I’m senior vice president and assistant general 

counsel with CVS Health. We appreciate the opportunity to testify 

on the critical role that pharmacists and pharmacies play in local 

community all across America in providing convenient access to affordable high quality prescription drugs within the vibrant marketplace in which we compete. 

From our company’s earliest days CVS Health has been singularly focused on helping people on their path to better health. 

Our values are the same as those of our consumers, businesses and 

communities we serve. We want to make health care more accessible and help improve health outcomes in more affordable effective 

ways. 

Our goal is to work with health plans, employer plans and government plans who contract with us to ensure that their enrollees 

have access to a well coordinated, safe and affordable prescription 

drug benefit. 

Our patient centered model is organized around how consumers 

access and use medication. It provides multiple points of care and 

extends across all of our business units. Our pharmacy benefit 

management program, our retail mail specialty and long-term care 

pharmacies, our Medicare part D plan and our MinuteClinics. 

In addition to our active medication adherence and care coordination for chronically ill patients, we also provide access to key preventative care such as vaccinations, smoking cessation and weight 

loss programs. 

Our overriding commitment to improving American’s health is 

the main reason we decided to end tobacco sales last year and forego $2 billion in annual revenue. CVS Health is proud of its commitment to and success in constraining prescription drug costs through 

the discounts in savings we share with our consumers business, 

labor, health plan and government partners while helping to improve outcomes. 

Using our clinical tools we’re able to help keep premiums low 

and save tens of billions of dollars for patients, employers and taxpayers. Our success is driven by on how effectively we help our 

partners and patients achieve the best return on their health care 

dollars. We manage prescription drug benefits on behalf of a diverse set of purchasing partners that include health plans, as well 

as employer and government plans including Medicare part D and 

State managed Medicaid programs. 

Health care purchasers rely on pharmacy benefit managers to 

negotiate the lowest possible prices from drug manufacturers, put 

together networks that provide convenient access to pharmacists 

and pharmacy services and provide a portfolio of clinical programs 

and services that help ensure positive outcomes and secure overall 

value for both the patients and clients alike. 
47 

To help us achieve this outcome, we encourage the use of cost effective generics over more expensive branded products which helps 

consumers and plans save money on prescription drugs, without 

compromising clinical efficacy. To be clear though, our role in the 

design of these plans is advisory, the plans always have the final 

say when creating their drug benefit and how it is implemented. 

Competition in the PBM industry has aptly described as vigorous 

by the Federal Trade Commission. In fact there are 30 different 

large and mid sized PBMs that offer businesses, Labor, consumers 

and government a variety of choices when considering options for 

best managing of pharmacy benefit. 

In addition, the pharmacy marketplace is a very competitive one, 

with over 60,000 pharmacies in the United States, consumers in all 

parts of the country have many outlets to fill their prescriptions. 

To ensure broad based access our PBM contracts with every category of pharmacy, including drugstore chains, grocery stores and 

over 20,000 independent pharmacies. We welcome competition indeed our success is predicated on it. Healthy competition drives innovation and allows us to effectively help the consumer business 

labor health plan and government partners that we serve achieve 

the best returns on their health care investments. 

We look forward to working with the Members of this Committee 

and others to continue promoting a competitive health care landscape. Thank you for this opportunity to testify and I’ll be happy 

to take your questions. 

[The prepared statement of Ms. Pons follows:] 
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Mr. MARINO. Thank you. Mr. Arthur. 

TESTIMONY OF BRADLEY J. ARTHUR, R.Ph., 

OWNER, BLACK ROCK PHARMACY 

Mr. ARTHUR. Thank you, Chairman Marino, Ranking Member 

Johnson and Members of the Subcommittee. Thank you for conducting this hearing today and providing me the opportunity to 

share my views and personal experiences regarding the state of 

competition in the pharmacy benefit manager and pharmacy marketplace. 

My name is Brad Arthur and I’m a pharmacist owner of the two 

independent pharmacies in the Black Rock community of Buffalo, 

New York, a very historic, ethnically diverse and predominantly 

blue color community. My pharmacies have been serving these 

communities since 1957 when my dad opened his first pharmacy. 

I’m also the President of the National Community Pharmacists Association which represents the pharmacists owners, managers and 

employees of nearly 23,000 independent community pharmacies 

across the United States. 

I’m here today as a healthcare provider, a small-business owner 

and hopefully to present some of my experiences and those of my 

fellow independent pharmacists in dealing with the PBM industry. 

Community pharmacies represent the most accessible point in 

patient centered health care, where typically consumers do not 

need an appointment to talk with a pharmacist about prescription 

medications, over-the-counter products or really any health related 

concern. 

In this way community pharmacies also serve as the safety net 

health care provider on the front lines. Not only in natural disasters which occur often in Buffalo, tornados, hurricanes, flooding, 

whatever it may be, everyday when patients need help, their independent pharmacies are there to assist. 

According to the Pharmaceutical Care Management Association, 

PBM has managed pharmacy benefits for over 253 million Americans. Three large companies lead the PBM market. Express 

Scripts, CVS Health, and OptumRx. In total the cover more than 

180 million lives in the United States or roughly 78 percent of 

Americans whose pharmacy benefits are managed by a PBM. In 

addition, the annual revenues for these three entities are staggering. In 2014, annual revenues for Express Scripts were approximately $100.9 billion. Annual revenues for CVS Health were 139.4 

billion, and for OptumRx $31.97 billion. In 2015, OptumRx acquired Catamaran and other PBM which reported annual revenues 

to combine into that number of $21.67 billion. 

Why should the Federal Government be concerned about this dynamic for large plans? Including the Federal Medicare part D program which was mentioned today, TRICARE the FEHBP. There 

are only three PBMs to choose from. Because although there are 

other PBMs, none of them in spite of what we’ve heard are large 

enough to administer the prescription drug benefits for these programs. The big three PBMs control almost 80 percent of the entire 

market and these PBMs have the upper hand, both in negotiating 

the contract of the payer, as well as strongly influencing the actual 

plan design itself. The PBM industry typically states that they can 
57 

use their economic power to harness enhance market efficiencies, 

but for whom? However, the staggering annual revenue that continue to grow each year of the big three suggest that these efficiencies are going directly to their corporation’s bottom lines. 

Small community pharmacies like mine are faced on a daily by 

basis with the impact of the PBM’s disproportionate market power. 

Community pharmacies routinely must agree to take it or leave it 

contracts from the PBMs just to continue to serve our long-standing patients. 

As if that weren’t, enough, the PBMs also directly set the reimbursement rates for pharmacies, the very same pharmacies that 

stand in direct competition of some of these PBM owned mail order 

and specialty pharmacies. Therefore it comes as no surprise when 

the PBMs present employer and government payers with carefully 

tailored suggested plan designs that steer beneficiaries to these 

PBM owned entities. 

As the owner of two pharmacies, I have limited ability to negotiate network participation or reimbursement terms with these entities. However, from a business standpoint, community pharmacies can’t just walk away from these contracts. If we did, I 

would lose a significant amount of the prescription revenue given 

the large share of these covered lives that these PBMs represent. 

Although many independent community pharmacies rely on 

pharmacy services organizations to contract on their behalf, these 

PSAOs are no match for the PBMs. In 2013, the GAO conducted 

a study on the role and the ownership of the PSAOs and stated 

that over half we spoke with reported having little success in modifying certain contract terms as a result of the negotiations. This 

may be due to the PBMs use of standard contract terms in the 

dominant market share of the largest PBMs. Many PBM contracts 

contain standard terms and conditions that are largely nonnegotiable. 

Mr. Chairman, that’s the conclusion of my testimony. I welcome 

any questions. 

Mr. MARINO. Thank you. 

[The prepared statement of Mr. Arthur follows:] 
58 

Prepared Statement of Bradley J. Arthur, R.Ph., Owner, 

Black Rock Pharmacy 
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Mr. MARINO. The Chair now recognizes the Chairman of the full 

Judiciary Committee, Mr. Bob Goodlatte of Virginia for his opening 

statement. 

Mr. GOODLATTE. Thank you, Mr. Chairman. In late July, Chairman Marino, Ranking Member Conyers, Ranking Member Johnson, 

and I announced a series of Committee hearings focused on competition in the health care marketplace. Today’s hearing is the 

third in this series and will examine the competitive dynamics 

within the pharmacy benefit manager or PBM and pharmacy markets. PBMs oversee the administration and management of prescription drug benefits. In that capacity PBMs interact with nearly 

every step of the prescription drug supply chain. Consequently, 

they have the ability to extract lower prices for prescription drugs 

and have had some success in doing so. 

However, notwithstanding pressure from PBMs drug prices continue to rise. A recent Wall Street Journal investigation found that 

increases in drug prices routinely outpaced inflation and often by 

a significant amount. These increases were found despite reduced 

demand drug studied and even in the face of new competing drugs. 

If true, this represents a troubling trend as Americans face a 

progressively aging population and an ever growing amount of taxpayer money used to fund the purchase of prescription drugs. 

Through today’s examination of competition within the PBM and 

pharmacy markets, we should explore whether the proper economic 

incentives exist for PBMs and pharmacies to place a genuine check 

on rising drug prices. 

Another challenge facing the country and my constituents is affordable and accessible health care in rural communities. Independent pharmacies play a critical role in the delivery of personal 

prescription drug care, especially in rural areas. 

During my tenure in Congress, I’ve seen many community pharmacies in my district shudder their doors. While we should allow 

the free market to operate, we should also ensure that there is a 

level playing field for both large and small pharmacies. Today’s discussion will help shed some light on the nature of the competitive 

playing field in the pharmacy market. 

Since the enactment of the Affordable Care Act, I consistently 

have expressed concern that the law would compel consolidation 

across a number of health care industries. My fears appear to be 

coming true. Both the PBM and the pharmacy markets have experienced consolidation in recent years. Indeed Walgreens and Rite 

Aid recently announced their intent to merge and CVS’s purchase 

of Target’s retail pharmacies is currently under review at the Federal Trade Commission. 

This Committee has held hearings on past PBM consolidation, 

including the merger between Express Scripts and Medco. While 

this hearing is not intended to review the details of any particular 

transaction, we should examine how these trends have impacted 

competition in both the PBM and pharmacy markets. Specifically, 

it will be helpful to learn what affects these transactions have had 

on prices paid by Americans for prescription drugs. Most importantly, we should explore whether market courses compel these 

transactions or the Affordable Care Act and its regulatory progeny 

are prompting increased consolidation. 
65 

We have an excellent panel of witnesses before us today who can 

provide us with firsthand perspectives on the competitive issues 

facing the PBMs and pharmacies and I look forward to hearing 

their testimony. 

Thank you, Mr. Chairman. 

Mr. MARINO. We are going to go into our 5 minutes of questioning. And as is once in a while customary, I’m going to wait and 

ask my questions last today because I really want to hear what the 

panel has to say. And so I’m going to recognize the Chairman of 

the full Committee, Mr. Goodlatte for his 5 minutes of questioning. 

Mr. GOODLATTE. Thank you, Mr. Chairman and I thank all the 

witnesses for their testimony today. 

I want to direct this question to both Ms. Bricker and Ms. Pons. 

We’ve all heard about the dramatic spikes in the price of certain 

prescription drugs, that were previously in the market for a significant period of time at stable prices. In fact, I was speaking about 

this particular issue just yesterday with pharmacists in my district. 

On a number of these drugs pharmacies end up taking a loss if 

they dispense them. I understand that you’re not the drug manufacturer. However, you do have a role to play in negotiating the 

price and reimbursement of these drugs. Can you comment on this 

current situation? 

I’m familiar with one Ritalin generic drug that has gone from 

about $125 for a 30-day supply to about $600 for a 30-day supply 

just this year. I’m familiar with a tube of a medical cream that’s 

gone from about $100 for the tube to $2,000 for one small tube. 

This very much concerns me and I would like to know what your 

perspective is on how this pricing is taking place and what you as 

the insurer are doing to try to hold down these prices and hold 

these companies accountable. 

Ms. BRICKER. Thank you, Congressman, for the question. High 

drug prices are not a new phenomenon. We have seen this in, you 

know, over decades of managing prescription benefits. At Express 

Scripts, we encourage competition, we believe that competition results in a decrease in drug pricing. Oftentimes when drug prices 

increase, it’s due to a shortage or it’s due to a number of manufacturers coming out of the market. And so with competition you see 

a decrease in price. 

We’re advocates for biosimilars in technology and in negotiating 

inflation protection from our brand manufacturers to pass on to our 

clients, as well as their members. So with that, I understand the 

need we hear from our plan sponsors regularly about the concerns 

that they have around increased drug prices and through our tools 

from a clinical perspective it is our hope to continue to manage 

that drug benefit in partnership with our plan sponsors. 

Mr. GOODLATTE. Ms. Pons—— 

Ms. PONS. Thank you—— 

Mr. GOODLATTE. Do you put pressure on these manufacturers to 

offer more reasonable prices since you’re a large purchaser or you 

are a large insurer of—and CVS in your case a large purchaser of 

them as well. 

Ms. PONS. Yes, yes. Every day our company gets up and what we 

do is try to get the best prices on behalf of our clients to help keep 
66 

their premiums down for their members and help keep costs affordable. 

And, you know, we’ll agree, there have been some very egregious 

examples in the marketplace that I think we all find shocking. Beyond that, as Ms. Bricker testified, we do think that a combination 

of the clinical tools that we have available as well as our ability 

to negotiate with pharmaceutical manufacturers, together with 

some of the important policies that she talked about in terms of 

getting more competitive products into the marketplace, whether 

that’s, more generics, more biologics, lower cost of site of care, 

those things in combination can go a long way to helping curb 

these issues. 

Mr. GOODLATTE. Let me ask Mr. Arthur if he’d like to respond. 

Mr. ARTHUR. Yes. Thank you, Mr. Chairman. I would like to add 

that while prescription drug prices have historically gone up at a 

rate greater than the normal cost of inflation, throughout most of 

my career, the trend was just the opposite on the generic side. As 

more generic manufacturers enter the marketplace, the trend has 

been for the price to come down as the market responds. 

What’s interesting to note is that these extremely large business 

entities have the sophistication and the examples that you alluded 

to mete this out, they have the sophistication to respond to these 

market fluctuations very quickly. The pharmacists that you heard 

from are expressing frustrations because when the price of the 

drugs goes down, the PBMs have no problem implementing those 

as the basis for reimbursement sometimes overnight. But there is 

a significant lag that is seriously to the detriment of the independent community pharmacist, because they are often times saddled with dispensing these much needed medications at a loss. 

Mr. GOODLATTE. Let me ask both Ms. Bricker and Ms. Pons, another question as well. Both Express Scripts and CVS operate 

PBMs as well as pharmacies. Some have raised concerns that 

PBMs in your position have a conflict of interest due to the fact 

that your PBMs negotiate contracts with pharmacies that directly 

compete with pharmacies owned by your corporate parent. What is 

the risk of your leveraging your role as a PBM to gain a competitive advantage against of pharmacies that are outside your corporate family? 

And let me give you an example too as well. Pharmacist yesterday showed me a drug, I can’t remember what it was, but the reimbursement rate from the PBM was 300 and some dollars less than 

the prescription of the prescription drug. Now they cannot because 

of their contract with the PBM, they can’t turn around and tell the 

purchaser, well, I’m sorry I can’t sell you that drug for that price. 

They can’t turn around sell it to you, but you’ll have to make up 

the difference. If they want to sell that prescription drug to that 

regular customer, they have to eat that 300 and some dollar cost. 

How is it that the insurance company can justify that, knowing the 

cost and knowing that you’re in a competitive environment, but 

with a bigger company and therefore able to manage these costs in 

ways that a small pharmacy can’t? 

How can that policy be justified of having to say, sorry, this is 

all we’re going to pay you and you can’t do anything but eat the 
67 

rest of that cost. How can a small pharmacy stay in business in 

that environment? 

Ms. PONS. That’s an excellent question. And a fair question to 

ask. You know, we put together our MAC list so that we can encourage pharmacies to try to buy generic products at the lowest 

possible cost. Having said that—— 

Mr. GOODLATTE. Some of these were generic products, as Mr. Arthur noted. In fact, the Ritalin was a generic product that had 

quadrupled in price over a very short period of time. 

Ms. PONS. Yeah. And so we want them to buy at lowest possible 

cost, but we also want them to get a fair margin. In order for us 

as a PBM to meet our commitments to our clients, we need to have 

our network have a very high dispensing of generic rates within 

the network. If we are paying pharmacies prices that are lower 

than their acquisition costs, pharmacies aren’t going to go do that. 

So we try very, very hard to make sure that they get a fair margin. 

Are there going to be times when a particular drug they dispersed are under water? Absolutely. But what we do look at the 

pharmacies overall reimbursement across all of their generic claims 

to try to ensure that they are getting a fair margin so that they 

are incented to dispense as many generic as possible. 

Mr. GOODLATTE. They showed me their records for a particular 

day. On that day they sold—their two stores in their operation, 

they sold $15,000 worth of drugs and the total across that entire 

was a net loss of a few hundred dollars. Again, I understand some 

are going to be high and you can’t always get it right—but if the 

average is a net loss on a daily basis, how do pharmacies stay in 

business? 

Ms. PONS. Yeah. The other thing I would say and I think it is 

typical for other companies in the industry, there is an appeals 

process so if that’s happening, you know, we’re making certain assumptions because we don’t know what every pharmacy in the network is buying their product at. We are trying to do our best to 

estimate what their cost is. 

And if there are situations where they are losing more than they 

are winning on, there is an appeals process where we can address 

that. Again, it is not in our interest to have pharmacies not want 

to dispense generics because it is going to cost our clients more 

money. 

Mr. GOODLATTE. Thank you, Mr. Chairman. My time is long expired. 

Mr. MARINO. The Chair now recognizes the Ranking Member, 

Mr. Johnson. 

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Balto, please explain how a lack of transparency in the PBM marketplace may be 

undermining competition and consumer choice, and limit your answer to 1 minute, please. 

Mr. BALTO. Oh, it is very simple, I mean, when you look at the 

problem of escalating drug prices one thing people would want to 

know is what’s happening to the rebates. And since the merger of 

Express Scripts and Medco occurred it is even harder for plans, 

plans I represented to get that kind of rebate information. If they 

got the rebate information, they could make sure the right deci-
68 

sions are being made and they could get more of the rebates and 

that would result in lower costs to consumers. 

Mr. JOHNSON. Thank you. Mr. Arthur, some of your fellow witnesses contend that PBMs benefit consumers because their scale 

allows them to negotiate effectively with drug companies to keep 

patient premiums and cost sharing manageable. What’s your response to that? 

Mr. ARTHUR. Well, that’s a noble go. I don’t believe that to be the 

case. I think the scale that is employed is often for the betterment 

of the parent corporation. We see numerous examples with the implementation of Medicare part D and the doughnut hole. It wasn’t 

uncommon for us to see patients due to the pricing methodologies 

at the large PBMs to be thrown in the doughnut hole prematurely. 

So we have all discussed about the need to use scale to drive 

down costs to consumers the reality in the marketplace. We haven’t 

necessarily seen that to be the case. 

Mr. JOHNSON. All right. Thank you. Mr. Balto, why do you believe the Federal Trade Commission has not been vigorous enough 

in it’s enforcement efforts with respect to PBMs, give me this in 30 

seconds? 

Mr. BALTO. I think they allowed economic theory to replace marketplace realities and they are failing to see the real harm to consumers and plans and the limitation of their choices. 

Mr. JOHNSON. Thank you. Ms. Bricker. Mr. Balto suggestions 

that rapidly rising profits in recent years suggest that PBMs are 

not fully passing on savings from drug manufacturer rebates and 

discounts on to health plans and consumers. What’s your response 

to that? 

Ms. BRICKER. Our clients demand transparency. I can’t speak to, 

you know, clients that Mr. Balto represents, but the clients that 

Express Scripts represents, you know, demand transparency. We 

feel that the additional transparency that is being suggested could 

be harmful actually to competition, resulting in price fixing and potentially collusion. 

Mr. JOHNSON. Your response, Mr. Balto, in 30 seconds? 

Mr. BALTO. In a competitive market, profit per script would not 

be increasing by 75 percent in 3 year period. That is a clear sign 

that the Express Script, Medco merger has been anti competitive 

and consumers are being harmed. 

Mr. JOHNSON. Okay. Ms. Pons, CVS recently completed the acquisition of Omnicare, a very large provider of long-term pharmacy 

services. From a consumer and patients perspective this could be 

concerning as now your company is both a retail pharmacy, PBM 

and LTC provider with a sizable market share. Although the acquisition is very new and you are still working on the integration, 

what assurances can you provide today that this will not negatively 

impact the level of service and care to some of the Nation’s most 

vulnerable and fragile patients residing in nursing homes? 

Ms. PONS. Thank you for that question, Ranking Member Johnson. It is a new acquisition, we are I think already 4 months into 

this after, you know, spending an extensive process with the FTC 

going through this. This is a completely new line of business for 

CVS Health, but one that we thought was very important to continue our various touch points that we have with patients. And as 
69 

you point out, a very vulnerable patient set. And we think that 

with our other assets that we have, for those patients that leave 

those facilities, that we can better integrate them and coordinate 

their care better. 

So we feel like it’s a great addition to what we do best, which 

is trying to coordinate care at the lowest possible cost and improve 

outcomes and we are anxious to move forward with it. 

Mr. JOHNSON. All right. Thank you. Last, Mr. Arthur, some of 

you fellow witnesses—Well I see I’m out of time so I will—Okay. 

All right. 

In response to concerns about unfair terms between independent 

pharmacies and PBMs, some have argued that pharmacies could 

simply refuse to accept the PBMs proposed terms and conditions or 

come together to negotiate more acceptable contract terms. Why is 

this not a sufficient answer in your view? 

Mr. ARTHUR. Sir to answer the first part of your question, 98 percent of my business’ is revenue comes from third party agreements, 

be they private from the private side, the commercial side, or from 

the government payer side in the form of Medicare—or Medicaid, 

excuse me. Turning away from that business is not a realistic option that I have. I would have no recourse but to close my doors. 

So we are in an extremely anticompetitive position from that point 

of view. 

The second part of your question we have turned to these entities 

as an attempt to negotiate, but they have also faced some of the 

same barriers that we have to truly negotiate contracts. When 

given the opportunity I as a small independent business have tried 

to strike certain terms from agreements only to have them push 

back a take it or leave it answer. So we haven’t been successful in 

negotiating these either independently. We certainly cannot get together as a bunch of independents, that would be collusion. We 

have tried to circumvent that—not circumvent it—we have tried to 

meet that challenge by using the contracted entities, but they have 

also shared with us that they are a have you small fish in a big 

pond and successful at truly negotiating terms. 

Mr. JOHNSON. All right. Thank you Mr. Arthur. And thank you, 

Mr. Chairman. 

Mr. MARINO. The Chair recognizes Mr. Ratcliffe from Texas. 

Mr. RATCLIFFE. Thank you Chairman Marino. Of all the issues 

that we examine here in Congress perhaps none is more personal 

than that of health care. Americans literally trust our health care 

professionals with our lives. And pharmacists are an essential part 

of that health care, particularly in the communities in northern 

and east Texas that I represent. Because in many of those towns 

there are big chain drugstores, but most of the towns in the district 

that I represent depend on local community pharmacies that have 

been there for decades. And as the health care landscape evolves 

and becomes frankly increasingly complicated I want to make sure 

that we protect the pillars of the community in those types of 

towns in my district. 

So Ms. Bricker, let me ask you a question. It is my understanding that your company may not update their reimbursement 

rate often enough to keep up with fluctuations in the marketplace. 

That concerns me because if a certain generic drug price drops rap-
70 

idly and if that drop isn’t updated quickly it would seem to me that 

Medicare could be paying more for a generic drug than it should. 

Is that a legitimate concern? 

Ms. BRICKER. Thank you for the question, Mr. Congressman, in 

Express Scripts we have teams of people dedicated to this very subject ensuring that we are responsive to the marketplace, surveying 

the marketplace to ensure that our pricing is appropriate for our 

community and all retail pharmacies. We are updating no less frequently than every 7 days. There are laws on the books and over 

20 States across the country that also enforce this very thing. And 

so Express Scripts is compliant and takes seriously those laws. 

Mr. RATCLIFFE. Well, I get that it is compliant. And every 7 days 

is good but is it a legitimate concern in the 7 day period that that 

type of price fluctuation can occur so that Medicare is paying more 

for a drug than it should? 

Ms. BRICKER. So the least frequently that it would occur is every 

7 days. We’re reviewing it daily. And if there is a dramatic price 

change that occurs within, you know, prior to that 7 day change, 

we’ll make the change earlier as well. 

Mr. RATCLIFFE. Okay. So I understand the cost of generic drugs 

has really skyrocketed in the last couple of years now. How often 

do you update your MAC list, those reimbursement lists? 

Ms. BRICKER. No less frequently than every 7 days—— 

Mr. RATCLIFFE. Seven days okay. 

Ms. BRICKER. But we are looking at it every single day. And so 

if there is change that needs to be made the following day we will 

do that. 

Mr. RATCLIFFE. Okay. So, are pharmacists able to see in realtime what they are disbursing on a generic drug is, or are there 

fees being charged to pharmacies after the point of sale? 

Ms. BRICKER. Directly at the point of sale? As you’re standing at 

the counter the pharmacist is processing the prescription, submitting vital information to the PBM and in exchange roughly 3, 5, 

seconds they are receiving a response on what copay to collect if 

any, and what reimbursement they will receive. 

Mr. RATCLIFFE. Okay thank you. Ms. Pons, the same question 

about the MAC list, how often are you updating them? 

Ms. PONS. We have a team of people that are constantly monitoring various market sources, to see what’s happening with drug 

acquisition costs and are compliant with State laws that if there 

are market forces that suggest we need to make updates sooner 

than that, we do. 

Mr. RATCLIFFE. Okay. Thank you. So Mr. Arthur, we are frequently told that PBM contracting terms are unfavorable to many 

of the independent pharmacy owners out there, however the PBM 

industry claims that those issues really shouldn’t be resolved by 

legislative bodies, but instead should be left to the contracting parties. I guess my question to you is if the terms contained in PBM 

contracts are egregious, why don’t pharmacies simply refuse to accept the proposed terms and conditions or come together to negotiate more acceptable contract terms? 

Mr. ARTHUR. I don’t think it is really practical for us as small 

business owners to just refuse those contracts because as we 

learned earlier today, it impacts a significant portion of our busi-
71 

ness, that to walk away from those contracts would be a death note 

to our businesses. And I think it is very telling to your question 

that the reason that there is timely update to MAC in 20 States 

is because the independent community marketplace push for that. 

That didn’t come voluntarily. So we had to push for that timely— 

in 20 States, and we continued to push for that across the entire 

country. 

So that has been our approach to try to create fairness some in 

the marketplace. We continue to try everyday to negotiate some of 

the egregious terms so that we can be more competitive. But the 

fact remains today that we’re at such a disadvantage because a significant portion of our customer base, our patient base is impacted. 

Mr. RATCLIFFE. Thank you. 

I see my time has expired. I yield back. 

Mr. MARINO. Thank you. The Chair now recognizes the Congressman from Rhode Island, Mr. Cicilline. 

Mr. CICILLINE. Thank you, Mr. Chairman. And thank you to our 

witnesses. I want to welcome you, and certainly thank you for your 

testimony and I particularly want to acknowledge the extraordinary corporate citizenship of CVS, a company that I have admired for a long time, particularly when it made its very courageous and impactful decision to forego selling tobacco products at 

the loss of $2 billion in revenue. But I think you have really set 

an example for health care companies and I just want to publicly 

applaud you for that. 

I want to go first in response to you, Mr. Balto has said in his 

testimony, well it was in his written testimony here today that 

plan sponsors need more transparency in order to make sure they 

are receiving the full benefits of PBM bargaining power and to 

make sure that PBMs effectively rein in drug costs. It sounds like 

a reasonable proposition would you respond to that claim? 

Ms. PONS. Yeah, no. We are fully supportive of transparency with 

our clients. What we are not supportive of is transparency of our 

proprietary information with our competitors and in fact I think 

the FTC has said on a number of occasions that that transparency 

can actually have the opposite affect in terms of reducing cost. 

And so our clients have very extensive audit rights which they 

exercise regularly, and to ensure they are getting the benefit of the 

bargain that they struck with us, so we are completely supportive 

of transparency with our clients. And if we did not make that available to them, they would look for another vendor that did. 

Mr. CICILLINE. And so is it fair to conclude that your assessment 

is that the transparency related to your relationship with the pharmaceutical company, that it could produce higher costs for the consumer? 

Ms. PONS. We believe that if our competitive pricing that we 

have with our clients was made more publicly available and our 

competitors were aware of that, whether that’s rebates or network 

rates or other proprietary terms, we believe that, that could actually result in higher prices, because there isn’t an incentive to 

make your prices lower. Because then everybody’s cannibalizing 

the market. 

Mr. CICILLINE. And Mr. Balto also argued that PBMs exclusivity 

arrangements with some drug manufacturers can keep drug prices 
72 

**Note: The material submitted by Mr. Cicilline is not printed in this hearing record but is 

on file with the Committee. See also ‘‘For the Record Submission—Rep. Cicilline’’ at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=104193. 

artificially high by keeping lower-price drugs off the market and by 

incentivizing PBMs through manufacturer rebates to switch patients from prescribed drugs to more expensive alternatives. Would 

you respond to that argument. 

Ms. PONS. Yeah. I guess I would just say that’s a little foreign 

to my experience in working with the PBM day in, day out. We 

make formularies available to clients. Typically generics are on the 

first tier, preferred brands, and then nonpreferred brands, and the 

client can either elect to have that formulary or choose one for 

themselves—or make one up for themselves, and that’s what is the 

foundation of their plan benefit. 

You know, my experience is clients are very smart. They’re very 

demanding. They’re sophisticated. If they don’t have that sophistication themselves, they’ll higher consultants that do. And they’re 

going to look for the best possible deal for themselves as well as 

offering an attractive benefit to their plan members. 

Mr. CICILLINE. So some consumer groups have argued that PBMs 

keep the proceeds of rebates and discounts and keep a disproportionate share of that for themselves, and so that one could conclude 

from the rise in profits of PBMs that they’re not fully passing on 

savings to health and to consumers. 

But despite that, there is a report from the FTC, August 2005, 

that shows that PBM-administered prescription drug coverage pay 

between 15 and 50 percent less for drugs than non-insured consumers by an exact same drug. And so I first ask unanimous consent, Mr. Chairman, that this be made part of the record.** 

Mr. CICILLINE. And I’d ask Ms. Pons if you could respond to that 

claim and the findings, because my interest is what will get my 

constituents the lowest cost. And we talk a lot about another effort 

to permit the Federal Government to negotiate discounted prices 

directly with pharmaceutical companies to the Medicare program, 

which they’re prohibited from doing. It seems like PBMs are at 

least achieving that through their scale. It seems as if that’s what 

the report concludes, and I would just like you to respond to that. 

Ms. PONS. Yeah, and I think there have been a couple of different reports. The one I think you’re referring to is the one in 

2005 where they investigated whether there was, in fact, a conflict 

of interest between PBMs and owning mail service pharmacies. 

And the findings of that report was that they did not believe there 

was; and that, they saw that there were more savings with the 

PBM-owned mail versus a non-PBM-owned mail pharmacy as well 

as over retail pharmacies; and that mail service pharmacies were 

very good at generic dispensing and were very closely aligned with 

client incentives. 

Mr. CICILLINE. And, Mr. Chairman, if I may just ask one final 

question. Mr. Balto argues in his written testimony that there is 

an ‘‘increasing disregard of the antitrust laws in the pharmaceutical area’’ and argues as a result that ‘‘consumers suffer from 

a lack of choice in the marketplace.’’ 

And in 2009, your company was actually investigated by the FTC 

based on allegations of anticompetitive behavior. I’d wonder if you 
73 

would just briefly state what the conclusions of that were, and I 

would ask unanimous consent that a letter from the Federal Trade 

Commission dated January 3, 2012, be introduced into the record. 

Mr. MARINO. Without objection, so ordered. 

[The information referred to follows:] 
74 
75 

Ms. PONS. Yes, we did go through an investigation after the CVS 

Caremark merger that started in 2009 and I believe ended in 2012 

that looked at a number of activities but primarily trying to assess 

whether or not there was anything that was anticompetitive. And 

they looked at our firewall and a number of our programs. 

And at the end of the review, they determined that there were 

no anticompetitive findings, and that’s in the closing letter. There 

was, however, a legacy issue around one of—a company that we 

had acquired and some information that they had inaccurately 

placed on Plan Finder, and so we had a consent order around that. 

But there was nothing related to any anticompetitive activity. 

Mr. CICILLINE. And finally, Ms. Pons, are you familiar with a 

2011 Visante study that found PBMs will save plan sponsors and 

consumers almost $2 trillion or nearly 35 percent between 2012 

and 2021 when compared with the prescription drug expenditures 

made without pharmacy benefit management? Can you speak a little bit about that. 

Ms. PONS. Yeah. And I’ve seen that study as well, and, you know, 

I would even say more practically day in, day out, you know, with 

the thousands of clients that we negotiate with, they’ve got very 

specific targets for us in terms of what we’re going to do for savings 

for them in terms of, you know, generics and preferred brands. And 

so we have to live up to those commitments every day. 

Mr. CICILLINE. Thank you. 

And I Thank you, Mr. Chairman, for the indulgence. 

I would just finally say that, you know, one issue, which is obviously not before this Committee, is the power and, you know, ability of pharmaceutical companies to really skew the marketplace 

with very little controls on their ability to increase drug prices. 

And, you know, that’s an issue which I think is very much part of 

this conversation and hard to disaggregate, but it seems to me that 

the ability to at least have some bargaining power against these 

pharmaceutical companies in the marketplace is something that we 

should attempt to preserve as much as we can. 

And with that, I yield back. 

Mr. MARINO. Agreed. 

Chair recognizes Mr. Collins from Georgia. 

Mr. COLLINS. Thank you, Mr. Chairman. 

You know, sometimes I think when I fly in here—I fly—and I’ve 

made this statement to my district before that we fly into a wonderland of where reality doesn’t matter anymore. Case in point, 

many of the things that I’ve heard this afternoon give me cause to 

believe, yes, we’re there again. And this is an issue with community and independent pharmacists that, you know, play a critical 

role in my district, in rural northeast Georgia. 

Mr. Chairman, with the unanimous consent to enter into the 

record a report from the association representing senior care pharmacies on MAC pricing data, a letter from BlueCross BlueShield on 

compounding pharmacies, and several statements and examples of 

PBM interactions from community pharmacies. 

Mr. MARINO. Without objection, so ordered. 

Mr. COLLINS. Look, I appreciate our witnesses being here. I appreciate the chance to have a discussion, but to be truthful, I’m 

very discouraged about what I see in the pharmacy landscape. 
76 

***Note: The material submitted by Mr. Collins is not printed in this hearing record but is 

on file with the Committee. See also ‘‘For the Record Submission—Rep. Collins’’ at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=104193. 

Ms. Bricker, you state in your testimony PBM marketplace is extremely competitive. That’s an interesting statement since three 

companies Express Scripts, CVS Health, and OptumRx control 

about 80 percent of the PBM market, which translates into 180 

million lives. Not a great deal of competitiveness there. 

Mr. Arthur knows too well community pharmacies routinely incur losses of approximately $100 or more on many prescriptions, 

because PBMs or insurance middlemen reimburse pharmacies well 

below their cost to acquire and dispense, generic prescription drugs 

that have skyrocketed in price. This is one of the most pressing 

areas that I believe demands congressional action. 

PBMs can wait weeks and months to update reimbursement 

benchmarks they use to compensate pharmacies while drug prices 

increase virtually overnight. That’s why I introduced H.R. 244 dealing with this issue of transparency and would encourage folks to 

be a part of that. 

Now, one of the things that has been interesting to me today is 

discussing mail order. Since PBMs own their own mail order pharmacies, I’ve seen information leading me to believe that a real incentive exists for them to steer patients toward mail order delivery. 

In fact, I’ve seen firsthand that a fax received by a community 

pharmacist from OptumRx indicating that he could not mail patients their prescriptions. Less than a month later, a patient gave 

that pharmacist a letter mailed to them from OptumRx touting 

savings they could see if they got their prescriptions mailed from 

the PBM mail order pharmacy. 

While the letter states the patient is free to continue using a retail pharmacy house elite, it requires notification to an insurance 

company, and it is likely that many patients won’t have time or 

knowledge to know that the mail order is not mandatory. This is 

extremely concerning from an anticompetitive standpoint and a patient care perspective. 

Mr. Chairman, I ask unanimous consent that both of these documents be made part of the record. Mr. Chairman, unanimous consent to make these part of the record.*** 

Mr. MARINO. They’re admitted. 

Mr. COLLINS. All right. And given that CMS has also recently finalized Medicare Pard D requirement that allows PBMs to automatically auto ship new prescriptions without express beneficiary 

consent, this is of particular concern, and especially to one certain 

gentleman that happens to be very close to me, and that is my father. 

Mr. Arthur, can you share your experiences regarding PBMs urging mail order delivery of medications over filling them in the 

store. Has this affected your pharmacies and other pharmacies? 

And regardless of your views about PBM and their prices, why 

should we be concerned? And if you could narrow that down. 

Mr. ARTHUR. I’ll take your last question first, if I may. And I 

think Chairman Conyers mentioned it was back in the early 2000’s, 

Campbell-Conyers, which attempted to provide limited antitrust 

exemption for independent community pharmacy. I can assure you 
77 

that circumstances in the marketplace have deteriorated dramatically since that time. 

So this is a very pressing issue, and I think, you know, it’s interesting we spend a lot of time this morning—this afternoon talking 

about one of the primary goals being to drive generic utilization. 

It’s interesting to note that the generic utilization rate and independent community pharmacy far exceeds that in mail order or any 

other sector. 

Mr. COLLINS. Thank you, Mr. Arthur. I appreciate that. 

Mr. ARTHUR. Thank you, sir. 

Mr. COLLINS. I want to turn to Ms. Bricker. And you have talked 

about—and Ms. Pons as well, you have talked about teams of people that looked a your MAC list, your transparency list, teams of 

people that do this. I want to give you a couple of examples of how 

you actually look at this and you said within your 7 days. 

This is a recent example released from Avera. It says, if a pharmacy filled a prescription of a Omeprazole, a common 

antipsychotic, on April 16, 2014, Express Scripts reimbursed that 

pharmacy $1.20. If the pharmacy filled the same prescription the 

next day, the 17th, it reimbursed only $0.20. On the 18th, you paid 

another amount, this time $0.80. Another one was potassium chloride, $0.45 on the 22nd of April; 26th of April, $0.33; and on April 

28, $0.52. 

One, I just have a direct question. Ms. Bricker, do you all have 

two sets of MAC lists? Is there two sets of lists out there? Do you 

have two lists for MAC pricing? 

Ms. BRICKER. We have multiple MAC lists, yes. 

Mr. COLLINS. Okay. What about you, Ms. Pons? 

Ms. PONS. Yes. 

Mr. COLLINS. Okay. Is that just to keep the ball from being hidden from community pharmacies? 

Ms. PONS. No, we have multiple clients. We have thousands of 

clients, so—— 

Mr. COLLINS. You have multiple clients. So you prefer one’s over 

the others? 

Ms. PONS. We make—— 

Mr. COLLINS. Never mind. 

Ms. PONS [continuing]. Our client list match what our—— 

Mr. COLLINS. The issue that I have—and I appreciate that. And 

the question is answered. 

I hear from pharmacies in my community that reimbursement or 

MAC appears to be arbitrary and has little connection to actual 

price. These examples seem to indicate that. Can you please explain the disparities in MAC pricing you pay to these long-term 

care pharmacies? Ms. Bricker. 

Ms. BRICKER. So I don’t actually know the acquisition cost of any 

given pharmacy. Our policy is to survey the market based on a 

number of price points that are available, both confidentially to Express Scripts as well as publicly, and in an attempt to respond in 

kind to the market. And so it is—we make every effort to ensure 

that we are reimbursing a fair amount for prescription drugs from 

a generic perspective. 

We have an appeals process, that if we get it wrong a, pharmacy 

can file an appeal and provide us additional evidence. 
78 

Mr. COLLINS. Ms. Bricker, have you ever told a pharmacy that 

if they appeal any more that they would be cut off from their plan? 

Ms. BRICKER. No, I have not. 

Mr. COLLINS. Not you personally, your company. 

Ms. BRICKER. I am not aware of ever making that statement, no. 

Mr. COLLINS. Ms. Pons. 

Ms. PONS. I’m not aware either. 

Mr. COLLINS. Will you answer the question long term, that I 

asked Ms. Bricker as well on MAC pricing disparities? 

Ms. PONS. Yeah. I actually have a very similar answer to hers 

in the sense that we do our best to try to estimate what we think 

people are buying at and put a reasonable margin on that because 

we want them to dispense generics. 

Mr. COLLINS. Okay. So if I told you that I know pharmacies who 

have been told if you appeal and—if you appeal, we will deal with 

it in your contract, you cannot appeal this, would you all both find 

that egregiously appalling? 

Ms. BRICKER. I am not aware of Express Scripts ever making a 

statement like that. 

Mr. COLLINS. That’s not what I asked. I said, but if they were 

told that a pharmacy was told that, would you find that appalling 

that your companies would say that? 

Ms. BRICKER. Yes, I actually would agree with you. You know, 

the appeals process is there to ensure that we are responsive to the 

market. 

Mr. COLLINS. Well, I think there’s a concern because there’s a 

disconnect because this is what’s being told. 

I think the concern that I have here is all in all, in this playing 

field, there needs to be a level playing field. There needs to be a 

playing field for community pharmacies and independent pharmacies as well asker companies involved in this market. Right now 

there’s not. 

And you can talk about it all you want. We can go into different 

pricing. We’ve already talked about multiple lists, and we talked 

about the appeals process. And we also know from pharmacists 

who have been told, if you appeal more, we will cut you off. 

What is even more appalling to me is when my local pharmacists 

across this country try to speak out about this, they received letters 

and discussions from PBM saying, if you make too much noise 

about this, your contract could be in jeopardy. That is not right. I 

will continue to fight this, and if you don’t believe that it’s true, 

it is true. 

And when we understand this—here’s my concern. That in the 

coming future, because I hear from my pharmacists all across this 

country and in northeast Georgia, if it continues the way it is, they 

will be closing. And all those wonderful savings that are being donated from PBMs are going to be lost and close businesses and 

close lives. 

And I just have a question, who will my folks in the Ninth District of Georgia call when they need someone at night and their 

local pharmacist is the one they trust? Ms. Bricker, they’re not 

going to call you. They’re not going to find you in St. Louis. They’re 

not going to find you, Ms. Pons. They’re going to try and find their 
79 

local pharmacist who is being closed because of the anticompetitive 

nature of this field. This needs to be addressed. 

With that, Mr. Chairman, I yield back. 

Mr. MARINO. The Chair recognizes the gentleman from California, Mr. Issa. 

Mr. ISSA. Okay. Well, I’m going to start off, Mr. Balto, in your 

statement, it’s already been read a couple times, but I’ll grab a couple of the key words you used. This is the PBMs are the least regulated sector of healthcare. I guess without the FDA they might be. 

Essential elements of competition are not there. The following are 

transparency, choice, and lack of conflict of interest. Right? 

Mr. BALTO. Correct. 

Mr. ISSA. And by the way, I’m not trying to make anybody a good 

guy or a bad guy. I just like to put this portion of the market in 

perspective. And I think, sort of as the witness against the PBM 

sitting between these two fine women from the industry, you’re the 

one to ask. 

If I told you that from the 2010 case published, for the two public 

companies on each side of you, that, for example, Express—and of 

course they’ve got mergers. There’s other factors. But they’re annual reports. Express Scripts went from about $42 billion in 2010 

to $100 billion in gross revenues. Their profit, gross profit went 

from $2 billion to $3 billion during that period. After tax revenue 

went from $1.2 billion to $2 billion during that period of time. 

On the other side, CVS, a bigger company, getting bigger, and in 

the retail space, so it’s a little more complex to follow them, went 

from $97 billion to $139 billion. They went from $6 billion in profit 

to $9 billion in profit. And they both went up slightly in their per 

share. 

Let me ask you a question. If somebody sells, for example, $100 billion worth of product and makes $2 billion after expenses and 

taxes, just one question: Where do you think those excess profits 

are that you say are there? 

Mr. BALTO. Well, first of all, Congressman, what we’re looking at 

are entities that are moving information and are moving—— 

Mr. ISSA. No, no. But I’m asking a question to you that is narrow, and I want to make sure that I don’t get a—I don’t know. You 

had an opening statement, so please stick to the question because 

I’m going to ask the others questions. 

Mr. BALTO. I wanted to explain it—— 

Mr. ISSA. If a company makes—if you’re qualified to answer on 

the financial part, if you sell $100 billion and you make $2 billion— 

and I checked, and they have had this same chairman for a long 

time and he gets decent compensation, but it’s in the millions not 

the billions. So from a material standpoint, they don’t have but 2 

percent of gross sales in profit. 

Now, unless there’s money hidden under a mattress, my question 

for you—and I’ll use Express Scripts. I could use either but Express 

Scripts is a much simpler company—they’re basically a wholesaler 

middleman. They drive down their cost of distribution, particularly 

their mail order process; they negotiate the lowest prices they can; 

they squeeze, if you will, the retailer on one end as much as they 

can, Pfizer and the other pharmaceuticals on the other, and they 

end up with, you know, a buck and-a-half a share for their stock-
80 

holders or about $2 billion, and it hasn’t gone up or down in a 

major percentage. 

So my question to you is, is it the lack of, as you said, the lack 

of transparency in competition, is that really at any of these pharmaceutical companies—and I realize there’s a difference in, if Ms. 

Bricker’s company makes $2 billion, it might drive Mr. Arthur’s 

company out of business because of their ability to buy and so on. 

There’s no question—we could have a discussion between retail 

and wholesale and their tactics, and of course, with CVS, an integrated company that has both. And I’d like to give you a chance 

to answer that if you’d like to throughout the hearing. 

But the real question is, where are these excess profits that 

you’re alleging? If I go to Pfizer or any other number of large successful pharmaceutical companies, I will find after-tax revenues in 

as much as double digit of their gross sales. 

So my question to you is, where is the evidence of that? Quickly. 

And then I’d like to others to answer. Because I’d like to understand that part, which I think for this Committee, looking at competition, and whether they need to be regulated, this is a big question. 

Mr. BALTO. Sure. And I’d like to respond to you in writing because it’s a complicated question. 

Mr. ISSA. Okay. 

Mr. BALTO. But in my testimony, looking at just their margins, 

their margins have increased substantially. But let me answer you 

more carefully in writing about what the answer is. 

Mr. ISSA. Okay. And for the two wholesale pharmacies, and I’d 

like to also include the retail quickly, if there were more transparency and a more level pricing for what a particular pill or two 

cost, and instead of a complex set of rebates and negotiations, if we 

look to these monopolies, particularly, people who have an exclusive and said, look, we don’t care what you sell it for and how 

much, but you can’t be all over the place on prices such that these 

MACs are so different. Would that really affect your business 

model in an adverse way? 

I know, quickly, for Mr. Arthur, he would love to see a price 

where the price is the price to a certain extent, and only discounts 

are truly based on volume, you know, the truck delivery versus the 

UPS delivery. Because that certainly would change these disparities that are driving retail out. 

Quickly, I apologize, Mr. Chairman, if they could answer. 

Ms. BRICKER. So scale matters. And, you know, in a free market 

where you’re able to buy in a larger quantity, we’ve seen this not 

just in pharmacy but in other aspects in other industries. And, so 

yes, it would be absolutely detrimental to our plan sponsors to have 

fixed pricing, if you will. But with that said—— 

Mr. ISSA. Actually, it was cost bases from a monopoly, more like 

a public utility. You can buy your electricity cheaper from an exclusive source that has to sell it to you if you’re a volume user, but 

the difference is based on actual earned discounts. But go ahead, 

please. 

Ms. BRICKER. But our MAC is responsive to that very thing. I 

understand, you know, when I’m establishing MAC that I’m not 

going to establish MAC for an independent pharmacy the same as 
81 

that of a large retailer that can purchase the product at, you know, 

a much more deeply discounted rate. And so it’s our attempt to do 

that. 

Our plan sponsors, you know, count on us to keep costs down, 

and we have guarantees in our contracts. We are obligated to ensure that we’re lowering costs year over year for our plan sponsors. 

Mr. ISSA. Right. In your case, your MAC price is always higher 

than your cost, I assume? 

Ms. BRICKER. I’m sorry? 

Mr. ISSA. The pricing you’re willing to pay the retailer is always 

higher than your actual cost? 

Ms. BRICKER. Well, I couldn’t say that with 100 percent certainty. That’s definitely my intent. My intent is to—— 

Mr. ISSA. Well, you know your cost, don’t you? 

Ms. BRICKER. You’re saying my cost at mail? 

Mr. ISSA. Well, you buy. You’re a large buyer. He’s a small buyer. 

Ms. BRICKER. Yes, sir. 

Mr. ISSA. You set his price based on an assumption of what he 

paid for the product. I just want to understand, can you say here 

today under oath, both of you, that you always provide the retailer 

a ‘‘price’’ that is at least above what the two largest people in the 

pond pay? 

Ms. BRICKER. Absolutely, 100 percent. 

Mr. ISSA. Okay. So you can certify that. You can too? 

Ms. PONS. Yes, that we make every effort to do that, yes. 

Mr. ISSA. Well, every effort. You’ve got great computers. 

Ms. PONS. No—— 

Mr. ISSA. Would you say with the certainty of somebody gets 

fired, if that’s not the case, if you actually expect the small retailer 

to take less than, in fact, you’re already paying? 

Ms. PONS. Yeah. What I can tell you is that our independent 

pharmacy community gets paid a higher rate of reimbursement on 

generic products than our own pharmacies do. 

And the other thing I would just add to the mix as well, because 

we haven’t talked about this, is the fact that there are a number 

of very large what are called PSAOs, pharmacy service administrative organizations, that independents belong to. I believe over 80 

percent of the independent pharmacies joined one of these big, 

three Fortune 50 companies, and there’s some large independent 

PSAOs as well. Those are the actual entities that we’re negotiating 

with. 

We’re not negotiating with, you know, typically, you know, a 

small, single, independent pharmacy. And so there is a lot of back 

and forth. And to the extent that we can’t make changes sometimes, it’s because we’ve got a contract that’s 100 pages long with 

our client that says everything under the sun that they want in 

their network. So we’re not truly trying to make people’s lives difficult for the sake of—— 

Mr. ISSA. No, I know you’re not. 

Mr. Chairman, I know that I’m actually stealing from your time 

every minute that this goes on, but I would ask that Mr. Arthur 

give his opinion on this. Because I do think that—and I said this 

to two of the witnesses when I met with them in advance. You 

know, the hotel industry and the airplane industry used to suffer 
82 

from the fact that two people on an airplane sitting next to each 

other, one could pay four times more than the one next to them, 

and it was always very hard to understand. 

At least now, if you go to an online Web site, you can at least 

get some transparency on what the best deal is. And I think for the 

retail industry, this is part of what’s not existing in healthcare. 

And I’d just like Mr. Arthur to give his insight on not knowing 

what something gets bought for by anybody except what you get 

told on reimbursement. 

Mr. MARINO. Go ahead, Mr. Arthur—— 

Mr. ISSA. I will owe you, Mr. Chairman. 

Mr. ARTHUR. Very briefly, Mr. Congressman. One important distinction. You mentioned the role of the PBMs as a wholesale. The 

PBM stocks no product in inventory. It doesn’t handle any product 

in inventory—— 

Mr. ISSA. I apologize. I called him a middleman, but you’re right, 

except for their own mail order, they’re working with you based on 

your inventory. 

Mr. ARTHUR. Yes, sir. And the reason I mention that is when you 

give the numbers, the genesis of the PBM industry was due to 

their technical expertise in moving from a paper environment to an 

electronic environment for the processing of claims. We could have 

a discussion today, a very vibrant discussion about the other services that they do provide in that space. But essentially, they are 

negotiating those prices for purely an administrative function, in 

my view. 

Mr. ISSA. Thank you very much, Mr. Chairman. And I will owe 

you that large poker chip. 

Mr. MARINO. Thank you. I have about 30, 40 minutes of questions, but I know I’m limited to several minutes. 

Mr. Balto, aren’t we talking about—and I liked Mr. Issa’s line of 

questioning concerning excess profits, but I’m a capitalist—are we 

really talking about excess profits or market shares? 

Mr. BALTO. Well, look, I think the PBMs—there is a service that 

the PBMs perform, and the question is, is the market acting competitively? Is their ability to lower prices being fully translated in 

lower prices to consumers? 

And we see these trends which the Ranking Member identified, 

which the Consumers Union statement identified that shows that 

with higher drug prices that their profits seem—their profits are 

going up. 

Mr. MARINO. Okay. Let’s set aside antitrust issues for a moment 

though. But isn’t it just customary usually those that have a larger 

share in the market generate more profits? 

Mr. BALTO. If the market is behaving competitively, you would 

expect price to be competed down to marginal costs. You wouldn’t 

expect to see their profits per script increasing in this fashion or 

their profits increasing overall in this fashion. 

Mr. MARINO. Okay. Let’s move to—and I know what Mr. Arthur’s 

answer is going to be on this. So I would like Mr. Athur to answer 

it, and then I ask Ms. Bricker and Ms. Pons to give me their opinion of this. 

What is the downside of independents coming together and buying prescription drugs in bulk? What’s the downside of that? You 
83 

know, if there is an exemption to the antitrust law for pharmaceuticals, what is the downside of independents getting together 

and purchasing drugs? 

Mr. BALTO. There’s no downside. And somehow, in 19 pages of 

testimony, I did not deal with the collective negotiation point. I 

apologize. 

Mr. MARINO. Well, no, let’s not talk about the antitrust part of 

it. That’s another hurdle. 

Mr. BALTO. There is clearly a significant advantage to pharmacies coming together. There is antitrust uncertainty, and antitrust exemption would be appropriate. My colleagues on the panel 

tell you about PSAOs. Those PSAOs are ineffective. In fact, PSAOs 

are often prohibited by the PBMs of even turning over the contracts to individual pharmacies. 

There needs to be greater ability of people like Mr. Arthur to collectively negotiate to protect their interests. 

Mr. MARINO. Ms. Bricker. 

Ms. BRICKER. A couple of things come to mind. So pharmacies 

absolutely can join group purchasing organizations and collectively 

buy drugs, or they can also join PSAOs to have them represent 

them in negotiations with PBMs. In our contracts at Express 

Scripts, it’s explicitly written, you know, to Mr. Balto’s statement, 

that we prohibit member pharmacy from seeing contract. It’s required that the PSAO pass the contract that they have executed on 

behalf of a member pharmacy to that pharmacy. 

So it’s important to us to have independent pharmacies in network. We have 25,000 independent pharmacies in network. Just to 

give context, less than 5 percent of independent pharmacies service 

a rural area in the United States. These are still very vital. It’s 

very important that those pharmacies stay in business, but they 

command a premium, as they should, because they’re serving a 

population that no one else is. 

Mr. MARINO. Ms. Pons, would you care—— 

Ms. PONS. Yeah. My comments will be similar to Amy’s in the 

sense that we welcome pharmacies to join PSAOs. It helps us, obviously, to negotiate with, you know, five PSAOs as opposed to 

20,000 individual pharmacies, and those PSAOs are able to negotiate very effectively on behalf of their clients. And similarly, we 

require that the PSAOs share that contract back with the pharmacy, and the pharmacy actually has to tell us in writing that 

they’ve designated a PSAO to be their agent for the negotiations. 

Mr. MARINO. Why the disparity then in pricing? Because of volume? Is there a disparity in pricing with independents with some 

entity representing them, negotiating prices with pharmaceuticals 

compared to your companies? 

Ms. PONS. We don’t know, you know, the price that others pay. 

I would just say that—— 

Mr. MARINO. Well, we do know that independents pay significantly more across the board than examples of your companies. 

Why? 

Ms. PONS. I was going to say, they’re, you know, taking their volume through their PSAO to try to get the best deal that they can 

that is not going to be the same as a Walgreens who has a much 

greater footprint. 
84 

But, you know, as stated earlier in the testimony, we do factor 

that into the reimbursement that we provide to our independents, 

and, you know, again, they receive a richer reimbursement for 

their generics to take that into account. 

Mr. MARINO. Mr. Arthur, I live in a rural area. We have independents and we have CVS and other pharmaceuticals—excuse me, 

pharmacies. What do you offer to your customers that you do not 

see the big chains offering, particularly if it’s through the mail? 

Mr. ARTHUR. Well, there’s a whole host of services that we’re offering on a very personalized way, you know, from comprehensive 

pharmacists, clinical services, immunizations, consultations, medication reconciliation. There’s a whole host of services that are being 

provided. And the reason why the independents, in my view, are 

more successful is based on the relationships that we’ve developed 

in our communities over a great period of time. 

Mr. MARINO. Again, this is for Ms. Pons and—excuse me, no, this 

is for Mr. Balto. 

Mr. Balto, where do you see the transparency line concerning 

what companies, larger companies or any company for that matter, 

have to divulge? Who draws that line? Where is that line? 

Mr. BALTO. By the way, just to supplement Mr. Arthur’s comment about the services, one critical issue—— 

Mr. MARINO. You aren’t dodging my question though, are you? 

Mr. BALTO. I was trying not to. 

Mr. MARINO. Okay. I was a prosecutor so that’s not going to 

work. 

Mr. BALTO. It didn’t work. 

In terms of the transparency line, I think we should listen to 

what, you know, what’s going on in the market. The Department 

of Labor proceeding that the Ranking Member mentioned before 

the ERISA subcommittee, unions and major employers and consumer groups all talked about the kind of transparency was necessary for a plan sponsor to fulfill his fiduciary duty, to make sure 

he was receiving—that the plan was receiving the benefit of the 

bargain. 

And that requires very robust disclosure of the rebates that the 

PBMs are receiving from the pharmaceutical manufacturers. And 

then the plan sponsor armed with that information can make sure 

that they’re receiving the best deal in their arrangement with 

PBM. 

Mr. MARINO. Okay. If I’m buying something from—somebody’s 

selling antique cars and I buy antique cars. Why would I divulge? 

Why would I think of divulging what the person selling the antique 

car is going to sell it to me for compared to someone else who 

wants that same car? 

Mr. BALTO. So for me as a plan, an employer or union, what I’m 

purchasing in part is their ability to negotiate rebates. And so I 

want to know how they’re doing at that specifically, for those, you 

know, for the manufacturers. And then look drug by drug, over 

time and see how effective they’re being at that. And then that 

way, I can figure out whether or not I’m getting the benefit of the 

bargain, whether those rebates are helping to lower my pharmaceutical costs. 
85 

Mr. MARINO. Ms. Pons and Ms. Bricker, I don’t think I gave you 

the opportunity, although you probably thought I passed you on it, 

on the issue of the downside of independents, collectively purchasing. Now, there was some discussion about they’re able to join 

groups to do that. But the numbers don’t seem to be indicating that 

there is fairness or a level playing field there. 

Could you expand on your answers there a little bit, Ms. Pons. 

Do you know—do you get my question? 

Ms. PONS. I guess, what I would say is that we welcome anybody 

that’s part of this value chain in helping reduce costs, provide access, and improve health outcomes. To the extent that they can be 

more efficient, just like we’re trying to be more efficient in our 

PBM and in our pharmacies, we would welcome them to be able 

to do that because that’s going to ultimately help our clients and 

help our patients that we’re all trying to serve. 

Mr. MARINO. Ms. Bricker, I’m assuming you would agree with 

that, or do you want to add something to it? 

Ms. BRICKER. At Express Scripts, our mission is to make drugs 

safer and more affordable. And we welcome in working with you 

to have a robust dialogue about the entire supply chain from manufacturer to patient. And today, we’re focused on, you know, a couple 

of areas of the supply chain, but we think there’s actually an opportunity for us to work with wholesalers, with manufacturers, 

with PSAOs, with all of the constituents within the supply chain 

to continue to lower costs for plan sponsors and patients. 

Mr. MARINO. Well, do you see—and I’ll get back to you on that. 

Do you see independents eventually going out of business because 

of the volume that your companies are able to sell and able to keep 

the price lower than what a pharmacy can? Give me your opinion 

on what you see 5 years from now or 10 years from now for independent pharmacies. 

Ms. BRICKER. We believe that independent pharmacy is viable. 

We believe that—and we’re seeing it in the data. If history is, you 

know, any indicator of the future, then, no, this industry is quite 

robust. There are 68,000 pharmacies. That’s up from the prior year. 

NCPA’s own data suggest that independent pharmacies are remaining steady and constant. 

And so, no, I believe that it’s a viable business and one that students coming out of pharmacy schools are entering the business of 

opening retail pharmacies today because it actually will pay the 

bills and it’s a wonderful career. 

Mr. MARINO. Ms. Pons. 

Ms. PONS. Yeah, no, I agree with that. And independents are a 

cornerstone of our networks. We don’t have any networks that 

don’t include independents. They’re important to our clients to 

have that access. And as Ms. Bricker pointed out, the number that 

held steady. There were well over 20,000 in the country. 

Mr. MARINO. You know, I have a dog in this hunt, and I’ve experienced this several times. My daughter has cystic fibrosis so there 

are dozens of drugs that she takes. Sometimes the prices go up; 

sometimes the prices go down. But what I find very, very important is the one-to-one, face-to-face communication with a pharmacist. 
86 

And believe me, on more than one occasion, our pharmacist here 

and even when we were traveling in England where we ran into 

a problem, they were able to communicate. What can you offer that 

the—can you offer that same thing that—that same service that 

the independents offer? 

Ms. PONS. I would say we certainly do our best within our own 

pharmacy channels, whether it’s our retail pharmacies or our specialty pharmacies, and particularly our specialty pharmacies that 

work with patients that have chronic, serious conditions, where 

they have expertise in particular disease states that a lot of normal 

pharmacists don’t. And they do develop very close relationships 

with those patients and their caregivers. 

Mr. MARINO. I’m going to wrap up here quickly, but I just want 

to give each of you 15, 20 seconds to make—give a closing statement. So Mr. Balto, you had your hand up, please. 

Mr. BALTO. Sure. First of all, these firms own their own mail 

order and specialty pharmacies. It’s in their incentive to drive consumers away from these community pharmacies that they want 

into their own pharmacies where they can maximize their profits. 

And especially for people who need specialty drugs like your daughter, that’s a real critical concern, especially when specialty drug 

spend is increasing so dramatically. And that’s why this Committee 

needs to look at the restricted networks these PBMs use. 

Mr. MARINO. Ms. Bricker. 

Ms. BRICKER. At Express Scripts we’re committed to making prescriptions safer and more affordable. We stand ready to assist our 

plan sponsors and their patients in looking into the future to understand where drug pricing is going and attempt to partner with 

them in innovative ways to make prescription drugs safe, affordable, and accessible. Thank you for the opportunity. 

Mr. MARINO. Ms. Pons. 

Ms. PONS. Yes. And I would just, you know, continue to reiterate 

the importance of independent pharmacies to our company, and 

would note that in our preferred Medicare pharmacy networks, 

over 40 percent of the participants are independent pharmacies. 

They’re just—they’re critical to helping us deliver a service to our 

Medicare population. Thank you for having us. 

Mr. MARINO. You’re welcome. 

Mr. Arthur. 

Mr. ARTHUR. Mr. Chairman. Thank you. 

As I sit here, if memory serves me correctly, I look up at the wall 

and I think that’s former Congressman Jack Brooks on the left 

there. And going back for over 25 years, we have been fighting for 

equality in the marketplace using the antitrust law to examine the 

antitrust law to seek fairness. We have survived by evolving. My 

independent pharmacy is half the size; I employee half the people 

I did 20 years ago. 

I think it’s really telling that in this environment, and the reason 

I mention that, as you asked the question, what’s the harm in allowing the pharmacies to do that, pharmacy has attempted to meet 

every challenge. We have attempted to get together to be able to 

purchase effectively. 

But when we are successful in doing that, if we run into challenges with the MAC, with the timely updates of MAC, it’s inter-
87 

esting to note that, you know, we’ve heard today about compliance 

with timely updates, and I’m sure there are very robust departments within these large corporations. Why is it that in two States 

they have fought vigorously to repeal efforts to timely implement 

MAC updates? 

We in pharmacy will continue—and independent community 

pharmacy—continue to find ways to survive and be able to provide 

the types of services that you alluded to, to the people that depend 

on us in our communities. 

Mr. MARINO. Thank you. 

Mr. Johnson and I were having a discussion really before the 

hearing began. And the two of us, most of the time we see eye to 

eye because we are looking for information. Right, Hank? 

Mr. JOHNSON. That’s right. 

Mr. MARINO. We’re looking to be educated. And we in Congress, 

we don’t have all the answers. You know, when we get elected we 

think we’re taller, smarter, and better looking right away. But we 

look to you people, experts in your area, how to improve the quality 

of life for all Americans. And I think each of you have a role to 

plan that. 

So my friend, Mr. Johnson and I, we’re looking forward to hearing from you on how we can improve the quality of life for all 

Americans. So that is my request—our request of you. So please 

participate in this with us, send us information, give us your ideas 

so we can accomplish that. 

And I want to thank everyone. This concludes today’s hearing. 

Thanks to all the witnesses for attending. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the witnesses or additional 

materials for the record. 

Mr. MARINO. The hearing is adjourned. 

[Whereupon, at 5:24 p.m. The Subcommittee was adjourned.] 

(89) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
90 

Material submitted by the Honorable Tom Marino, a Representative in 

Congress from the State of Pennsylvania, and Chairman, Subcommittee 

on Regulatory Reform, Commercial and Antitrust Law 
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92 
93 
94 
95 
96 
97 
98 
99 
100 
101 
102 

f 
103 

Material submitted by the Honorable Doug Collins, a Representative in 

Congress from the State of Georgia, and Member, Subcommittee on Regulatory Reform, Commercial and Antitrust Law 
104 
105 
106 
107 

f 
108 

Response to Questions for the Record from Amy Bricker, R.Ph., Vice 

President, Retail Contracting and Strategy, Express Scripts 
109 
110 
111 
112 
113 
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f 
115 

Response to Questions for the Record from Natalie Pons, Senior Vice President, Assistant General Counsel, Health Care Services, CVS Caremark 

Corportation 
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f 
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Response to Questions for the Record from Bradley J. Arthur, R.Ph., 

Owner, Black Rock Pharmacy 
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