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Vertical integration in health care – ‘We really need to bust it up’


Congressman discusses current state of competition – or lack of it – and business conditions hurting independent practitioners in health care.

clouds over capitol congress: © Daniel - stock.adobe.com

© Daniel - stock.adobe.com

Rep. Earl L. “Buddy” Carter made his career as owner and pharmacist of Carter’s Pharmacy Inc., an independent business that dispensed medicines to patients of south Georgia.

In Congress, the Republican is a member of the House Energy & Commerce Committee, where he chairs the Subcommittee on Environment, Manufacturing, and Critical Materials, and the House Budget Committee.

Carter’s official biography said he “is dedicated to working towards a health care system that provides more choices, less costs and better services.” Sometimes that means being an outspoken critic of elements of the U.S. health care system. Government overregulation creates unnecessary burdens on small and independent businesses, including those of physicians and pharmacists. But unchecked growth of massive health care and pharmaceutical enterprises has led to consolidation and vertical integration that also hurts those small and independent businesses.

Carter spoke with Medical Economics about legislation he supports regarding telehealth, how pharmacy benefit managers are hurting health care, and consolidation in the sector.

This transcript has been edited for length and clarity.

Medical Economics: You're a sponsor of the Telehealth Modernization Act of 2024. What would that bill do? And why telehealth is so important?

Rep. Earl L. “Buddy” Carter (R-Georgia)

Rep. Earl L. “Buddy” Carter (R-Georgia)

Rep. Buddy Carter: Well, first of all, as we went through the pandemic, one of the things that we witnessed is the proliferation and the importance of telemedicine and telehealth and how it has now become an integral part of our health care system. And that's very important, and what this Modernization Act does is to simply extend the flexibilities for two more years. I wanted to make it permanent, I had to kind of compromise on that, so we want to make it for two more years. And I think we're going to be able to do that. But it will be important. Look, there was a headline and one of the national papers that said that telehealth add advanced more in a month than it had in the last 10 years during the pandemic. And I think that's true, as I say. And now it's become, as I said before, an integral part of our health care system, particularly in the rural areas. Look, whether you're a Republican or a Democrat or an independent, we all want the same thing in health care and that is accessible, affordable, quality health care. Accessibility is extremely important, not only because of the distances we have to travel. One thing we have to keep in mind now, and this is one of the advantages to telehealth, is that we're having trouble attracting physicians anymore and you know, particularly in certain specialties, particularly in psychiatry, and in primary health, and all of that is important. This gives the opportunity, particularly for those in rural areas, again, to have access to those specialists and to those positions.

Medical Economics: The Health Subcommittee of the Energy and Commerce Committee had 23 different items of legislation to consider and markup. What are some of the bills that primary care physicians should be paying attention to?

Rep. Buddy Carter: Well, I actually had a couple of bills in that. One was, of course dealing with telehealth. We had a number of them that dealt with PBM reforms. In fact, one of the PBM reforms is the Protecting Patients Against PBM Abuses Act. We all know about the vertical integration that exists now particularly in the drug pricing chain, where you have the insurance company that owns the PBM, that owns the group purchasing organization, that owns the pharmacy, that in many cases owns the doctor and employs the doctor. And that vertical integration has led to an increase in prescription drug prices. Well, one of the things that this will do is that this will de-link the compensation of the PBM from the drug, from a percentage of the drug I should say, and instead it will just be a flat fee. What we find is that so many of these PBMs are getting discounts from manufacturers that are not being passed on to the patient. This will eliminate that and make sure that these PBMs can't profit from these negotiated rates that they're getting.

Medical Economics: as a pharmacist, can you discuss your experience with pharmacy benefit managers and I guess what other provisions or rules would you like to see for them?

Rep. Buddy Carter: Well, I will tell you that they haven't been good ones, they haven't been good experiences. Look, I'm not opposed to capitalism. I get it, we live in a capitalistic society and I'm not opposed to people making money. Look, I owned my own pharmacy for 32 years. Yes, I wanted to service patients but I also wanted to make a living as well. And there's nothing wrong with that. However, as I mentioned before, what has happened is that PBMs evolved into something they were never intended to be. When they started out all they were, were just processors, they just processed claims, that's all they did. Well, you get into the situation, where hospitals have formularies drugs fent mom, manufacturers try to get their drug on the formulary. PBMs started controlling the formularies in order to control the formulary at a hospital or in the insurance especially. Then they were negotiating discounts from the pharmaceutical manufacturers to be included on their formularies and, again, they're not being passed on to the patients or to the plan sponsors. Now they may tell you, well, we pass them on as decreased insurance, or, that's the way we keep our premiums down. Well, I don't know about you, but my premiums haven’t gone down. That's just simply not happening. If the discounts were being given at the point of sale, and if they were going to the patient or to the plan sponsor, I wouldn't have any problem with that. But that's not what's happening. And it’s a result of the vertical integration, as I mentioned before, that exists now. And that's why we really need to bust it up, in my opinion. And it's not just in prescription drug pricing. Whereas I appreciate the health care systems, I appreciate the hospitals, look at them, they’re giant corporations now. And that just does not lead to competition and to lower prices and I think that's a big problem.

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