Warren, Braun Urge Department of Health and Human Services (HHS) Inspector General to Determine if Vertically-Integrated Health Care Companies Are Hiking Prescription Drug Costs, Evading Federal Regulations

Letter

"In functioning markets, generic drugs cost 80 to 85 percent less than their name-brand equivalents, giving patients much-needed relief from high drug costs and saving taxpayer dollars. But patients -- including patients in public health care programs like Medicare and Medicaid -- who either use or are compelled to use vertically integrated specialty pharmacies are not seeing this relief."

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"By owning every link in the chain, a conglomerate like UnitedHealth Group -- which includes an insurer, a PBM, a pharmacy, and physician practices -- can send inflated medical payments to its pharmacy. Then, by realizing those payments on the pharmacy side -- the side that charges for care -- rather than the insurance side, the insurance line of business appears to be in compliance with MLR requirements, while keeping more money for itself."

"This anticompetitive behavior raises costs, hurts independent pharmacies, and undercuts Congress' ability to rein in excessive profits of insurance companies. Over a decade ago, Congress instituted the MLR to limit the percentage of premium dollars insurers could spend on administrative costs and profits to 15 percent. Federal law requires companies to spend the remaining 85 percent on medical claims. But insurance companies are exploiting loopholes in the law by buying up entities that are eligible for medical claims payments, including pharmacies, so they can get a cut from both sides of the transaction."

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