PBM Drug Pricing Practices Under Increased Scrutiny from Senate HELP Committee

Bipartisan Support for PBM and Prescription Drug Reform

On Thursday, May 11, 2023, the Senate Health, Education Labor and Pensions (HELP) Committee approved four new bills and eight bipartisan amendments by a vote of 18-3. One of the bills introduced, the Pharmacy Benefit Manager Reform Act (S. 1339), establishes new requirements for pharmacy benefit managers (PBMs) as well as associated civil penalties. The committee aims to increase transparency, improve employer decision-making and reduce prescription drug costs.

PBMs are important intermediaries between drug manufacturers, pharmacies, insurers and plan sponsors. PBMs negotiate drug rebates and fees with drug manufacturers, reimburse pharmacies for patients’ prescriptions and create drug formularies for insurers and plan sponsors. PBMs are an integral part of understanding and reducing healthcare costs.

Proposed Rules Under the Pharmacy Benefit Manager Reform Act

Under the proposed Act, PBMs will have additional reporting requirements. The Act also requires PBMs to provide plan sponsors with detailed information about prescription drug copayment assistance funded by drug manufacturers, a list of covered drugs billed under the plan and the total net spending on the plan’s drug utilization. Twice a year, PBMs would be required to disclose what pharmacies they owned, in part or in whole, and provide a list of pharmacies utilized to dispense drugs on the plan.

The proposed Act restricts the common PBM practice of “spread pricing.” Spread pricing occurs when a PBM charges the insurer or plan sponsor more for a drug than it would the dispensing pharmacy. The PBM would then keep the difference of this “overpayment.” Some Senators opted not to ban the practice, instead offering an amendment requiring PBMs to provide plan sponsors with an alternative business model during negotiations. This amendment aims to provide plan sponsors with more transparency and choice. This can lead to more competition among PBMs to offer the most cost-effective and advantageous business model for plan sponsors and their employee population.

Finally, the proposed Act will require PBMs to remit all rebates, fees, alternative discounts and any remunerations received from a drug manufacturer to the plan sponsor.

Additional Acts Aimed at PBMs and Prescription Drug Reform

The Senate HELP Committee was aided by the Senate Finance Committee, the House Energy and Commerce Subcommittee on Health, the House Education and the Workforce Committee, and the House Ways and Means Committee in approving several bills promoting PBM reform. These committees have introduced several bills this year:

• Ensuring Timeline Access to Generics Act (S.1067)
• Expanding Access to Low-Cost Generics Act (S. 1114)
• Retaining Access and Restoring Exclusivity (RARE) Act (S. 1214)
• Patients Before Middlemen (PBM) Act (S.1967)
• Fairness for Patient Medications (H.R.3285)
• Help Ensure Lower Patient (HELP) Copays Act (H.R.830)
• Protecting Patients Against PBM Abuses Act (H.R.2880)

The Federal Trade Commission (FTC) is also investigating PBMs and their role in rising healthcare costs. Concerned about PBMs’ undue influence, the inquiry aims to shed light on how PBMs charge fees and “clawbacks” on unaffiliated pharmacies; steer patients towards PBM-owned pharmacies; conduct potential unfair auditing on unaffiliated pharmacies; use complicated and opaque pharmacy reimbursement methods; and how rates and fees are negotiated with drug manufactures that potentially skew the formulary incentives and impact the costs of prescription drugs for payers and patients.

Summary

Pharmacy benefit managers play an integral role in consumer healthcare and are facing increased scrutiny from Congress. Bills introduced in both the House and the Senate have bipartisan support and aim to increase transparency, promote competition, provide more data for plan sponsors, and protect consumers from the ever-increasing costs of healthcare.

EPIC offers this material for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.