Sen. Cruz: We Need To Think Carefully About Advancing Legislation to Dramatically Expand the FTC’s Power
February 16, 2023
WASHINGTON, D.C. – In his opening statement at today’s full committee hearing titled “Bringing Transparency and Accountability to Pharmacy Benefit Managers,” Ranking Member Ted Cruz (R-Texas) raised concerns about new powers being given to the Federal Trade Commission in light of the abrupt resignation announcement by Commissioner Christine Wilson. Ranking Member Cruz stressed that legislation regulating Pharmacy Benefit Managers, or PBMS, should be viewed with “extreme caution” given both the possibility the bill would raise drug prices and that the Commission will soon lack a single minority commissioner.
Ranking Member Cruz’s opening remarks, as prepared for delivery:
“Much like everything in health care, the costs of drugs historically have risen faster than overall inflation. Since 1980, per capita drug spending, as adjusted for inflation, has increased more than //sevenfold.
“And while Americans spend more on health care than people in many other parts of the world, we also spend less out-of-pocket on prescription drugs than those in many developed countries, including Switzerland, Canada, and Ireland. Thus, much of the higher spending on pharmaceuticals is baked into insurance premiums.
“Insurance companies know Americans won’t choose an unaffordable plan so they hire a Pharmacy Benefit Manager (PBM) to manage the drug portion of a policy. The PBM manages a formulary, or list of covered drugs, which gives the PBM leverage to negotiate lower prices with big drug companies.
Of course, the relationships between insurers, PBMs, drug companies, and others are complex, opaque, and confusing both to consumers and providers.
It’s easy to see why PBMs might be singled out for more government regulation: they are the “middlemen” who are supposed to be negotiating lower drug costs from the big drug companies, wholesalers, and pharmacists. There’s a lot of potential for PBMs to make enemies. Whether PBMs are deserving of this scrutiny is a question I hope we can answer today.
“The other question I hope we can answer is this: do PBMs harm or benefit consumers? That answer should be decided by looking at the economic data across the entire drug supply chain - not just related to PBMs.
“The bill before us from Senator Grassley and Cantwell, the Pharmacy Benefit Manager Transparency Act, would give the FTC substantial regulatory power over PBMs. It seems the FTC has become a “catch-all” agency that Congress and the White House can use to regulate complex markets like prescription drugs or gas prices even when those markets might be reflecting problems caused by other government policies.
“I’ve long had concerns with FTC’s vague statutory authority, but at this moment, we can’t ignore the current state of affairs at the FTC. Under Chairwoman Lina Khan, the FTC has gone down an alarming path of regulatory activism and overreach. The extreme partisanship and concerning direction of Ms. Khan’s FTC were exposed earlier this week with the announced resignation of the sole Republican FTC Commissioner Christine Wilson who wrote in an op-ed, “I refuse to give [Khan’s] endeavor any further hint of legitimacy by remaining.”
“Ms. Wilson detailed how the agency had lost its way, citing Ms. Khan's willful disregard of Congress’ limits on the FTC, including an attempt to regulate whole swaths of the U.S. economy with the agency’s first “unfair method of competition” rulemaking.
“It is shocking that a commissioner would rather resign than watch an agency’s bipartisan tradition crumble in front of her eyes. Sadly, Commissioner Wilson’s departure will now leave the FTC without a counterweight to Chairwoman Khan’s activist agenda.
“I worked at the FTC, and I can tell you that with the agency’s overreach and activism - which will be difficult to sustain in court - it’s no surprise that FTC staff morale has dramatically dropped. And so, I will approach any bill to expand FTC powers, including this one, with extreme caution, especially now that there will be NO Republican commissioners.
“I’ll flag another concern with this bill: it would pre-judge the results of the FTC’s current study on the economic effects of PBMs.
“Last summer, the FTC unanimously voted to initiate a study on PBMs considering the access and affordability of prescription drugs. Consistent with the current FTC dysfunction, this study had its controversies. Chairwoman Khan reportedly attempted to skew the study by refusing to study PBM impact on consumers, which is probably THE most important question. That departure from standard economic analysis caused major internal disagreement and the resignation of the FTC’s chief economist. But thanks to the hard work of the FTC staff, Commissioner Wilson, and former Commissioner Philips, the study was greatly improved, and I will be closely monitoring it to ensure – in light of the turbulence at the FTC – that it is conducted objectively.
“Interestingly, the FTC has previously conducted robust economic analysis of PBMs and found that PBMs benefit consumers by lowering drug prices. They also found disclosure regulations similar to those in S. 127 could increase prices on consumers’ drug and health plans.
“In short, I think we need to think carefully about advancing legislation to dramatically expand the FTC’s power – especially with no Republican counterweight – and to do so before the agency has even completed its PBM study.
“I look forward to hearing from our witnesses today on this topic. I want to thank Casey Mulligan for accepting an invitation to testify today and I also want to recognize Debra Patt – a fellow Texan – and welcome her to the Committee.