For a moment, it looked like Congress would actually pass controversial reforms pharmacy benefit manager after years of introducing bills and holding hearings.
But it was not to be. The list of measures that would have injected more transparency into the industry and changed some of its practices were removed from the massive bipartisan government funding package that was was torpedoed by President-elect Donald Trump and billionaire Elon Musk on Wednesday.
The final, a lot slimmed down legislationthat prevented the federal government from shutting down, was signed by President Joe Biden on Saturday.
But efforts to overhaul the PBM industry are likely to continue next year. Trump blew up the industry on one latest press conference at Mar-a-Lago, after saying Americans pay too much for drugs.
“We have a thing called the go-between. You know the go-between, right?” Trump said at his Florida estate. “The horrible middleman that makes more money frankly than the drug companies, and they do nothing but be a middleman. We’re going to knock out the middleman.”
Intermediaries of the healthcare industry
Pharmacy benefit managers act as intermediaries between drug manufacturers and insurance companies, employers and governments. They negotiate discounts from pharmaceutical companies, determine which medications are covered by insurance and pay pharmacies. But they have drawn the ire of Congress and others with their opaque practices.
The now-dead funding deal would have required PBMs to provide more information about the discounts they negotiate and keep, as well as what they pay for drugs and how much they reimburse pharmacies. It would have removed the link between the price of drugs and the reimbursement PBMs receive in Medicare Part D drug plans and moved the payment model to flat fees.
The agreement also would have required the industry to pass all rebates to health plan sponsors, which include insurers and employers, in the commercial insurance market. It would have effectively eliminated so-called spread pricing — where PBMs keep a portion of the payment they receive for drugs from pharmacies — in Medicaid.
The effort was aimed at increasing transparency and changing the industry’s compensation structure, said Ross Margulies, a partner at Manatt, Phelps & Phillips, a law firm specializing in health care. The concern has been that PBMs may be incentivized to prefer more expensive drugs because they can negotiate greater discounts on them.
The PBM trade group argued that the legislation would have weakened their ability to lower drug costs and could have resulted in higher premiums for retirees.
“This bill does nothing to lower costs, nothing to improve access to pharmacies, nothing to benefit patients,” the Pharmaceutical Care Management Association said in a statement earlier this week.
But opponents of the industry said they were disappointed the regulations were removed.
“PBM reform would rein in the big health insurance lobby, save taxpayers $5 billion and throw a lifeline to the thousands of small, family-owned pharmacies on the brink of closure,” B. Douglas Hoey, CEO of the National Community Pharmacists Association, said in a statement Friday.
Federal Trade Commission lawsuit
Congress is not alone in trying to curb PBM practices.
The Federal Trade Commission in September sued the largest PBMs—CVS Health’s Caremark Rx, Cigna’s Express Scripts and UnitedHealth Group’s Optum Rx—for alleged inflate insulin prices. These three companies administer about 80% of all prescriptions in the United States, according to the FTC.
“Millions of Americans with diabetes need insulin to survive, but for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade, thanks in part to powerful PBMs and their greed,” Rahul Rao, deputy director of the FTC’s Bureau of Competition, said in a statement at the time, adding the agency’s action “marks an important step in fixing a broken system — a fix that could ripple beyond the insulin market and restore healthy competition to bring down drug prices for consumers.”
The industry trade group argued that PBMs are reducing insulin costs by leveraging greater competition.
“The FTC’s action ignores significant progress PBMs have made in lowering costs in the insulin market and is yet another example of the agency pursuing a biased investigation with predetermined anti-industry outcomes,” the association said in a statement.
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