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A bipartisan effort to rein in prescription drug prices advanced Thursday as a key U.S. Senate committee approved a bill aimed at reforming pharmacy benefit managers.
PBMs are powerful middlemen who negotiate between drug companies and health insurers and can influence consumers’ and insurers’ costs for medications, patient access to drugs, and payment terms for pharmacies.
The PBM reform bill, which advanced out of the Senate Health, Education Labor and Pensions Committee by a vote of 18 to 3, would prohibit a PBM practice known as “spread pricing,” or charging health plans more for a drug than the PBM reimburses to the pharmacy, and implement new requirements designed to increase the transparency of complex PBM contracts and pricing practices. The committee also voted to advance several bills designed to ensure timely access to lower-cost generic drugs.
The vote came a day after the committee’s hearing featuring executives of major PBMs CVS Health
CVS,
Cigna Group’s
CI,
Express Scripts, and UnitedHealth Group’s
UNH,
OptumRx, as well as insulin makers Eli Lilly & Co.
LLY,
Sanofi
SNY,
and Novo Nordisk
NVO,
During the hearing, each group of players in the U.S. prescription-drug system sought to blame the other for high drug costs. “Pharma wants to blame PBMs; PBMs want to blame pharma and health plans,” said Robin Feldman, professor at University of California College of Law, San Francisco. While there’s plenty of blame to go around, she said, the bottom line is that our system pushes patients away from cheaper, effective drugs “in favor of overpriced brands. Ultimately, Americans are overcharged through the cost of insurance and taxpayer-supported government expenditures.”
The bill advanced Thursday is one of several major bipartisan PBM reform efforts in the Senate. The Senate Commerce Committee in March approved a bill that would also prohibit spread pricing and require PBMs to disclose the aggregate amount of the difference between how much each health plan paid the PBM for prescription drugs and how much the PBM paid each pharmacy. The Federal Trade Commission is also investigating PBMs, saying it wants to look at tactics used by the industry to steer patients toward PBM-owned pharmacies, methods for calculating pharmacy reimbursements, and other issues.
PBMs say they play a key role in prescription affordability and access and generally pass on the savings they negotiate with drugmakers to health plans and employers. That “benefits Americans in the form of lower premiums, reduced out of pocket costs, and expanded coverage,” Express Scripts president Adam Kautzner said in written testimony for the hearing Wednesday.
Critics and some academic researchers say that PBMs’ interests are not aligned with lower drug prices, as these middlemen profit when they negotiate bigger discounts off higher-priced drugs, and that a lack of transparency in the industry can make it difficult to gauge to what extent savings ultimately benefit health plans and consumers.
Pharmaceutical companies at Wednesday’s hearing said they’re trying to prioritize affordability in a healthcare system that incentivizes other players to prefer higher list prices.
“Higher list prices allow for higher fees and rebates, which can increase patients’ out-of-pocket costs while benefiting insurance companies, employers, and people who don’t need medicines,” Eli Lilly chair and CEO David Ricks said in his testimony. Last year, he said, 80 cents of every dollar spent on Lilly’s insulins went to pay rebates and fees. “Some say that most of the rebates are passed on to health plans,” he said. “We don’t have the visibility to verify that, but either way it’s one step short. Not enough of those savings are passed along to people at the pharmacy counter who are prescribed the rebated medicine.”
The ERISA Industry Committee, a nonprofit representing the largest U.S. employers, has said that any PBM reform ultimately passed by Congress should ban spread pricing, require pass-through of all rebates, discounts and fees to ensure patients benefit, give employers more details on how the PBM makes money and the costs of drugs, and apply fiduciary standards to PBMs, in the same way that employers are required to act in the best interests of the plan and its beneficiaries.
The Pharmaceutical Care Management Association, a PBM trade group, said in a statement last week that the PBM reform bill advanced Thursday would impose “one-size-fits-all” contracting mandates, negatively impacting “the ability of employers to choose the contract terms with pharmacy benefit companies that fit their benefit design requirements.”
