Congress Making Progress on Bills to Regulate PBMs

Confused by all the bills being introduced in Congress to regulate pharmacy benefit managers (PBMs)? You’re not alone.

Not only is the Senate Finance Committee working on legislation to regulate the PBMs — the “middlemen” between health insurers and patients who negotiate with drug companies to determine how much insurers and patients will pay for prescription pharmaceuticals — but so are at least four other congressional committees.

Here is a roundup of some of the bills, including which committees are working on them, what they would do, and what experts are saying about them:

House Education and Workforce Committee. This bill, called the Hidden Fee Disclosure Act, would require PBMs to disclose their compensation to health insurers. “PBM compensation is a blind spot for the American public,” committee chair Rep. Virginia Foxx (R-N.C.) said during a markup of the bill last month. “We know they leverage their market power to extract rebates from drug makers. We know they leverage their relationships with health insurers to decide which drugs should be covered. So, we have a right to know if they do so in an unfair way to the consumer. [This bill] ensures PBMs are not above the law.”

Senate HELP Committee. This bill, called the Pharmacy Benefit Manager Reform Act, would require PBMs to report annually to the health plans they work for on particular elements, including the amount of prescription drug copayment assistance funded by drug manufacturers, a list of covered drugs billed under the plan during the reporting period, and the total net spending by the health plan on prescription drugs. The bill also bars “spread pricing,” which is when a PBM charges the insurers more for the drug than the price that was paid to the pharmacy. And the measure requires PBMs to give to the plan sponsor all rebates, fees, alternative discounts, and other remuneration received from a drug manufacturer.

Senate Finance Committee. This bill, called the Modernizing and Ensuring PBM Accountability Act, would prevent PBM compensation from being tied to a drug’s “sticker price,” instead requiring PBMs to be paid a “bona fide service fee” in a flat-dollar amount. It also would require PBMs to annually report drug prices and other information to Medicare Part D plan sponsors and to the HHS secretary.

House Energy & Commerce Committee. This bill is named the Pharmacy Benefit Manager Sunshine and Accountability Act and it was also referred to the House Ways and Means Committee. It would require PBMs to report annually to the health plans they work for on a whole raft of information, including the aggregate dollar amount of all rebates and administrative fees received from drugmakers as well as “post-claim adjudication payments” that the PBM collected from pharmacies.

The first two bills listed have been passed by their committees and sent on to the full House or Senate for a vote. The Senate Finance Committee approved the language for its bill, but the bill still has to be formally introduced, and the timeline for that is uncertain. The House Energy & Commerce Committee is still working on its bill.

Matthew Fiedler, PhD, a senior fellow at the Brookings Schaeffer Initiative on Health Policy, in Washington, noted that all the bills “include some type of requirement for PBMs to disclose additional information to their customers about drug utilization, prices, and the like.” But would more transparency really change anything?

“The PBM market is highly concentrated, with just three firms controlling around 80% of the market,” Fiedler said in an email. “PBMs are likely using that market power to extract excessive profits. Greater transparency could help squeeze those profits a bit. If an employer has a better picture of how its deal with its current PBM works, that may make it easier to assess offers from competing PBMs. That, in turn, could help more employers choose better deals and put pressure on PBMs to price their services a bit more competitively. Similarly, greater transparency might make it easier for an employer to discover if its current PBM is offering it particularly unfavorable terms and then push for a better deal.”

On the other hand, he added, “the potential gains from transparency are likely pretty modest. Where PBMs are earning excessive profits, it’s probably mostly because employers lack alternatives, not because employers are in the dark about what is going on. Consistent with that, the Congressional Budget Office’s estimate for the Energy & Commerce Committee bill was that the transparency provisions in that bill would reduce PBM revenues by about $900 million per year in the near term — and that these savings would fade over time” — a relatively small amount compared to the $18 billion in profits the three largest PBMs made last year.

Madelaine Feldman, MD, vice president for advocacy and government affairs at the Coalition of State Rheumatology Organizations, said in an email that she especially appreciated the part of the Finance Committee’s bill that “de-links” PBM fees from drug prices because it would “decrease the PBM’s incentive to prefer higher-priced drugs … The number of fees has grown considerably over the last 5 years.” She noted that two committee members — senators John Cornyn (R-Texas) and Tom Carper (D-Del.) offered but later withdrew a “pass-through” amendment that would pass along rebates to patients with chronic diseases. “Pass-throughs are only good if the patient benefits,” she said.

Despite all these bills, however, “no one has gotten to the heart of the matter in terms of PBMs and drug prices,” Feldman added. Construction of a formulary — the list of drugs that insurers will cover — that is “based on a kickback system (on a percentage of list price for the rebate) will continue to incentivize PBMs to choose higher-priced drugs and switch patients around midyear from drug to drug that makes them the most money.”

“If the bid to get on the formulary was based on the lowest-priced drug, we would have a race to the bottom,” she said. “Get PBMs out of the formulary construction business altogether and make formulary construction a non-profit business where efficacy, safety, and lowest price determine placement — that would definitely incentivize the use of biosimilars with the lowest prices.”

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