Why the Senate Must Act on Pharmacy Benefit Manager Transparency Legislation

By Peter Matz, Director, Food & Health Policy, FMI

Summer is typically a time in Washington when the flurry of activity on Capitol Hill slows down as lawmakers take a break to return to their districts and meet with their constituents. But this summer has been anything but quiet for those of us advocating for reforms to pharmacy policy.

Recently, the U.S. Senate Commerce, Science and Transportation Committee approved the bipartisan Pharmacy Benefit Manager Transparency Act of 2022 (S. 4293) aimed at addressing the anticompetitive practices of pharmacy benefit managers (PBMs) and achieving meaningful PBM oversight. FMI strongly supports the bill, which would address many of the unfair and deceptive business practices of some PBMs and require greater transparency when PBMs contract with pharmacies, plan sponsors and employers.

OK, but what does that mean exactly and why is this such a big priority for FMI?

As we have explained previously, the largest PBMs have strategically created a complex web of vertically integrated, opaque corporations at the center of the U.S. prescription drug system. Contracted by insurance carriers to negotiate on their behalf with pharmaceutical companies, these PBMs are “middlemen” that have quietly become a major and unavoidable part of our nation’s health care system.  Whether they realize it or not, American consumers today – not to mention supermarket pharmacies and FMI member companies that sponsor health plans – are at the mercy of a PBM marketplace that has become unacceptably consolidated and anticompetitive.

Historically, PBMs played an important role in the administration of prescription drug programs – designed to take the paperwork burden away from pharmacists.  However, in recent years, the PBM marketplace has transformed considerably, and they are doing just the opposite. As a result of consolidation among PBMs, health insurance companies and acquired pharmacies, a small number of large corporations now wield nearly limitless power and influence over the prescription drug market for 260+ million Americans. Among other things, PBMs negotiate drug costs, dictate which drugs will be included on plan formularies, and control how those drugs are dispensed.  In other words, they control which medicines are prescribed to patients, which pharmacies patients can access, how much patients will pay at the pharmacy counter, and the amount pharmacies are ultimately reimbursed – decisions that are increasingly made after the patient leaves the pharmacy. 

Despite their outsized influence, PBMs are one of the least regulated sectors of the healthcare system and drug supply chain. There is almost no federal antitrust enforcement, oversight, or regulation.  These PBMs have created endless schemes to reduce reimbursement, claw back funds, restrict networks, and effectively force pharmacies to provide drugs below cost driving many supermarket pharmacies particularly in underserved, low-income and rural neighborhoods out of the business or preventing expansion into these important communities. 

We are pleased the federal government has begun to hear these concerns about predatory PBM practices and has determined that regulatory action is needed.  FMI worked with allied organizations and our congressional champions to generate a favorable rulemaking addressing the inappropriate use of pharmacy DIR fees by PBMs, and earlier in the summer, we blogged about the importance of a Federal Trade Commission (FTC) inquiry into the PBM industry that aims in part to examine unfair and anticompetitive practices on the part of PBMs.  Now, Congress has an opportunity to advance legislation that would bring greater transparency and accountability to PBMs while addressing many of their abusive practices.  More specifically, the PBM Transparency Act would:

• Empower the FTC and state attorneys general to stop unfair and deceptive PBM business practices;
• Prohibit anticompetitive pricing schemes that frequently result in pharmacies being reimbursed less than their drug acquisition costs, e.g., “spread pricing” and arbitrarily increasing fees or clawing back payments made to pharmacies;
• Require PBMs to file an annual report with the FTC, including the total amount they pocket through “spread pricing” and pharmacy fees; and
• Incentivize transparent PBM practices, such as providing full disclosure of cost, price, reimbursement and all charged fees, markups, and discounts to plan sponsors and pharmacies.

You can take action in five minutes or less to make a difference:

Tell Your Senators to Pass the PBM Transparency Act