The format was familiar: Seven CEOs sit in front of a Senate Committee probing their industry’s business practices.
But whereas a Congressional hearing a decade ago marked a key moment in what was a costly public reckoning for the tobacco industry, today’s hearing produced little more than a consensus among Senators that drug pricing is complicated.It’s still likely that Congress and the White House will eventually move to constrain drug prices somehow, it’s clear from today’s hearing that “eventually” is far, far away.
Senate Committee chair Senator Chuck Grassley, (R-Iowa) ha previous pushed legislation to do away with techniques that drug companies use to stave off competition from generics and that remains a good candidate for a first legislative move in this area. And then, of course, there’s the idea, more identified with Democrats than Republicans, to enable the Federal government to negotiate drug prices for the Veterans Administration and Medicare and Medicaid.But the proceedings didn’t generate much fire that I could see.“They [drug companies] realize there’s a problem and I think every one of them is going to help us solve it,” Grassley said to reporters after the hearing.
For their part drug company officials stuck to their position that drug companies aren’t the source of higher drug prices. They blamed incentives elsewhere in the healthcare sector for pushing drug prices higher. The drug company officials trotted out their well-rehearsed argument that rebates paid to pharmacy-benefit management companies were a big part of the problem. In 2018 the three largest pharmacy-benefit management companies, CVS Health (CVS), UnitedHealth Group’s OptumRX, and Cigna’s Express Scripts processed 76% of all U.S. prescriptions, according to the Drug Channels Institute.
Pharmacy-benefit management companies are expected to get their own grilling in front of the committee.In today’s trading most drug makers and pharmacy-benefit management stocks closed lower–with the exception of Merck (MRK), which closed up 0.45% Pfizer (PFE) and Bristol-Myers Squibb (BMY) were off 0.14% an 0.97%, respectively. CVS Health (CVS) and United Health Group (UNH) were down 0.90% and 0.61%, respectively. Merck and Pfizer are members of my Dividend Portfolio.
