Pharmacy Benefits Managers are once again at the center of a heated debate in the U.S. Congress, as lawmakers consider changes to the rules governing these entities.
PBMs have for years been criticized for their role in the drug pricing system, prompting Congress to consider a range of ways to improve transparency and reduce prescription drug costs.
In March, in a bipartisan vote of 18-9, the Senate Committee on Commerce, Science and Transportation advanced a bill, the Pharmacy Benefit Manager Transparency Act, to increase PBM transparency and crack down on what legislators and many policymakers are calling “deceptive practices.”
The PBM industry group Pharmaceutical Care Management Association has pushed back on these reform efforts, arguing that drug companies are to blame for high drug prices.
What follows is a look at the current situation, what's happening in Congress, and the potential implications of the proposed rule changes.
Background: The Role of Pharmacy Benefits Managers
PBMs are intermediaries between drug manufacturers, insurance companies, and pharmacies. Their primary functions include negotiating drug prices with manufacturers, managing drug formularies for insurers, and processing pharmacy claims.
These organizations have become increasingly influential in the healthcare industry, with the three largest PBMs — CVS Health, Express Scripts, and OptumRx — controlling nearly 80% of the market.
Criticism and Controversy
PBMs have long been criticized for their lack of transparency and their role in driving up prescription drug costs.
Critics argue that PBMs often prioritize profits over patients' well-being, leading to higher drug prices and limited access to essential medications.
One of the main concerns is the practice of collecting rebates from drug manufacturers, which some argue incentivizes PBMs to include higher-priced drugs on their formularies.
Congressional Action: Proposed Rule Changes
In response to the mounting criticism and public outcry, various members of Congress have pushed for potential changes to the rules governing PBMs. These changes generally aim to increase transparency, reduce drug prices, and ensure that patients have access to the medications they need.
One of the most significant proposals at the moment would prohibit PBMs from engaging in certain practices, including engaging in what’s known as “spread pricing,” in which the PBM charges a health plan a different amount than the PBM pays the pharmacy and then pocket the difference.
The bill also prohibits PBMs from arbitrarily, unfairly, or deceptively clawing back reimbursement payments, or increasing fees or lowering reimbursements to pharmacies to offset changes to federally funded health plans.
What Might Happen Next?
As Congress continues to debate these proposed rule changes, several outcomes are possible:
Successful implementation: If Congress manages to pass legislation enacting these changes, the PBM industry could undergo a significant transformation. Increased transparency, a ban on rebates, and a shift to a fee-for-service model may help to reduce drug prices and improve patient access to essential medications. However, the implementation process could be challenging, as PBMs, insurance companies, and drug manufacturers would need to adapt to the new rules.
Compromise legislation: It is also possible that Congress will pass a compromise bill, incorporating some but not all of the proposed changes. In this case, the impact on the PBM industry and drug prices would likely be more moderate, and the transformation may take longer to materialize.
Stalled efforts: Given the complexity of the issue and the powerful lobbying efforts of PBMs, drug manufacturers, and other stakeholders, it is possible that Congress will be unable to pass meaningful legislation. In this scenario, the PBM industry and drug pricing landscape would likely remain largely unchanged, and patients could continue to face high drug costs and limited access to essential medications. Public pressure and advocacy efforts, however, might continue to push for change in the future.
State-level action: If federal legislation fails to pass, state governments may take matters into their own hands. Several states have already enacted or are considering legislation to regulate PBMs and address prescription drug pricing. While state-level action can create meaningful change, a patchwork of state regulations could lead to inconsistencies and challenges for the PBM industry.
As Congress deliberates on rule changes for Pharmacy Benefits Managers, the future of the PBM industry and its impact on prescription drug pricing hangs in the balance. The outcome of these debates could have far-reaching consequences for patients, insurers, and the healthcare industry as a whole.
While it is difficult to predict the exact outcome, it’s clear that the issue of PBM regulation and drug pricing is a pressing concern for lawmakers and the public alike.
Some kind of action is likely. But we’ll all have to wait to see just what.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.