Reform of the pharmacy benefit manager fails to cut the federal funding package

CNN
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For a moment, it appeared that Congress would actually pass reforms to controversial pharmacy regulators after years of introducing bills and holding hearings.

But it wasn’t to be. The list of measures that would have brought more transparency to the industry and changed some of its practices were removed from the massive bipartisan government funding package that was torpedoed by President-elect Donald Trump and billionaire Elon Musk on Wednesday.

The final, heavily slimmed-down legislation that prevented the federal government from shutting down was signed into law by President Joe Biden on Saturday.

However, efforts to overhaul the PBM industry will likely continue next year. Trump blasted the industry at a recent press conference at Mar-a-Lago after saying Americans pay too much for drugs.

“We have a thing called the middleman. You know the middleman, right?” said Trump at his property in Florida. “The horrible middleman that makes more money than the drug companies, and they don’t do anything except be a middleman. We are going to cut out the middleman.”

Pharmacy benefit managers act as intermediaries between drug manufacturers and insurance companies, employers and governments. They negotiate discounts from pharmaceutical companies, determine which drugs are covered by insurance plans and pay pharmacies. But they have drawn the ire of Congress and others with their opaque practices.

The now-dead funding agreement would have required PBMs to provide more information about the rebates 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 compensation the PBMs receive in Medicare Part D drug plans and moved the payment model to fixed fees.

The agreement also would have required the industry to pass on all rebates to health plan sponsors, which include insurers and employers, in the commercial insurance market. That would have effectively eliminated so-called spread pricing — where PBMs retain 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 favor more expensive drugs since they can negotiate greater discounts on them.

The PBM trade group argued that the legislation would have impaired their ability to lower drug costs and could have resulted in higher premiums for senior citizens.

“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 by the removal of the provisions.

“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.

Congress is not alone in trying to curb PBMs’ 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 allegedly inflating 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 medication 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 solution that could ripple across the insulin market and restore healthy competition to drive 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 running a biased investigation with predetermined anti-industry outcomes,” the association said in a statement.