While much of Washington, D.C., was glued to debt ceiling negotiations between the White House and House Speaker Kevin McCarthy (R-CA), another high-stakes drama played out on Capitol Hill.
Bipartisan support began building for pharmacy benefit managers (PBM) to be more transparent and accountable for their influence on prescription drug prices and costs. This public policy goal should ultimately redound to the benefit of U.S. employers and millions of employees who rely on their healthcare plans.
In early May, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on drug pricing and PBM reforms, grilling among others the executives of three large PBMs. HELP Committee members representing both parties voiced their shared concerns about PBM profit motivations contributing to formulary design, as well as the steering of patients toward high-priced brand drugs over generic or biosimilar products. Members of Congress also questioned the impact of vertical integration, in which PBMs belong to a broader corporate entity such as health plans or pharmacies.
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The upshot of the hearing: The next day the HELP Committee voted out of committee (18-3) the Pharmacy Benefit Manager Reform Act, one of the strongest, bipartisan pieces of PBM transparency and accountability legislation to advance to date. The measure, supported by The ERISA Industry Committee (ERIC), includes many of the key transparency and accountability reforms put forth by ERIC and nearly 40 other employer and business groups.
ERIC and nearly 40 employer and business groups that collectively provide health insurance benefits to more than 160 million Americans sent to the HELP Committee members a letter outlining what we consider to be essential changes Congress should require of the PBM industry to ensure meaningful transparency and accountability, namely:
- Require complete and unrestricted transparency into the PBM "black box," PBMs' concealment of drug costs and of what entities in the pharmaceutical supply chain are generating fees and making money.
- Ban so-called "spread pricing," the PBM practice of charging an employer-sponsored plan more than the PBM actually pays for a drug.
- Require 100% pass-through of rebates, discounts, fees and other payments received by PBMs from drug manufacturers.
- Apply the same fiduciary standards to PBMs as are applied to employers regarding the management of health plans for employees and their dependents.
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The letter was referenced by HELP Committee Ranking Member Bill Cassidy (R-LA) and submitted for the record as evidence of the need for true reforms. Other Senate committees, likewise, have taken action or signaled future action on PBM reforms this year, including a bipartisan framework for PBM reform released this spring by the Senate Finance Committee.
The House also has been working on this issue. The Committee on Oversight and Accountability held a hearing whose description questioned whether the role of PBMs in prescription drug markets was actually tied to healthcare or self-interest.
Chairman James Comer's (R-KY) opening statement reinforced the tenor of that meeting: "Today, healthcare premiums have increased faster than inflation. List prices for prescription drugs have gone through the roof, even though net prices have declined. And despite this increase in healthcare costs, life expectancy has remained stagnant. That means someone is benefitting, and it isn't patients. Look no further than PBMs, or pharmacy benefit managers."
Like Cassidy, Comer submitted the 40-organization letter in recognition of the importance of the employer/business groups' voice on what true PBM reforms are needed.
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While PBM oversight activity persists, House committees have also begun to craft legislation to address the problem. The Energy and Commerce Committee included PBM transparency requirements in its broader bipartisan transparency and healthcare package, H.R. 3561, the Promoting Access to Treatments and Increasing Extremely Needed Transparency Act of 2023 (PATIENT Act), which passed out of committee 49-0. Unfortunately, the PBM provisions do not incorporate the policies that are needed for real reform.
Additional policy reform proposals are forthcoming from two other House committees: Ways and Means and Education and the Workforce Committees. ERIC and other members of the employer and business group community are advocating that forthcoming policy reforms mirror those contained in S. 1339, the HELP Committee PBM bill.
There's a growing realization in both political parties that a more accountable and transparent PBM industry has the potential to save employers billions of dollars and lead to more affordable drug costs and insurance for employees and their families.
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