Congress is poised to bring big changes to PBMs
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Congress may be about to make long-sought changes to pharmacy benefit managers' business practices — though the impact on drug costs could be limited.
Why it matters: PBMs negotiate drug prices with drug manufacturers on behalf of health plans and the prospect of changing how they're compensated could remove what critics say are warped incentives that can encourage the use of higher-priced drugs.
- "One needs to start somewhere and I think that these provisions are very important starting points," said Mariana Socal, associate professor of health policy and management at Johns Hopkins University.
Driving the news: A bipartisan health care deal attached to the six-bill government funding package in the Senate would "delink" PBM compensation from the price of a drug in Medicare Part D and pay the companies flat fees instead.
- That change could then filter down to patients by lowering their coinsurance payments, which are tied to the drug price.
- "This is really the first time that there will be any potential legislation that helps to hold [PBMs] accountable," said Merith Basey, CEO of Patients for Affordable Drugs Now. "Obviously a first step, not the completed package, but we'll take it."
Another provision would impose new transparency and reporting requirements, which could help health plans look for better deals.
- "PBMs are kind of the last bastion of significant opacity in how our U.S. health care system works," said Rena Conti, associate professor at Boston University Questrom School of Business.
- "And this is a piece of legislation that really aims to increase sunshine on how these entities are are functioning," she added.
The House passed the legislative package, but it still faces uncertainty in the Senate because it is packaged with homeland security funding, which Senate Democrats are threatening to block.
- It still seems likely the health package will eventually pass, given the bipartisan support, though the path forward is not fully clear.
Between the lines: Major PBMs like CVS Caremark, Express Scripts and Optum Rx are owned by insurance companies and have long drawn scrutiny from lawmakers who say they contribute to rising health costs.
- The changes in the health care deal add to the pressure health insurers are facing from Congress and the Trump administration over consolidation, denials of care and excessive Medicare Advantage costs.
Yes, but: Part of the challenge in regulating PBMs is their shifting business models, especially their use of subsidiaries known as group purchasing organizations.
- Critics say a PBM could insist that it is passing along all of the rebates it receives from drugmakers and use the purchasing arms to hide profits from the health plan sponsor.
- "These multiple layers that are being added, they are adding complexity to this problem and challenges to the real effectiveness of these policies," Socal said.
- "But by no means, I would like to say, should this disincentivize us from pursuing this policy," she added. "I think they're very important."
The other side: PBMs dispute the idea that they are part of the drug cost problem. They say they are the part of the system that's keeping prices lower and that drug companies are seeking to shift blame away from themselves.
- PBMs are particularly critical of a provision in the package that would make changes in the private health insurance market, by requiring the companies to pass on 100% of the rebates they receive to the employer or other plan sponsor.
- PCMA, the PBM trade group, singled out Senate health committee Chair Bill Cassidy (R-La.) for backing the provision, saying it would "restrict PBMs' ability to fight for lower prices."
- "The Senate can prevent drug price and premium increases by stripping Sen. Cassidy's anti-free market provisions from the funding bill," PCMA spokesperson Greg Lopes wrote in an email.
"Republicans and Democrats in both chambers agree that drug discounts are meant to lower prices for patients, not pad the profits of health care middlemen," Cassidy wrote on X when the bill passed the House last week.
The bottom line: Some earlier versions of the legislation would have further taken aim at PBMs by banning "spread pricing" in Medicaid, a practice in which a PBM charges a health plan more than it pays a pharmacy for a drug.
- Still, if the package gets through the Senate, it would mark the first significant legislative changes targeting a key player in the drug supply chain.
