Yesterday, December 16th, a number of consumer groups and unions submitted a letter in support of H.R. 5304, a bill to regulate pharmacy benefit managers (PBMs) and lower drug prices. They urged that the proposal be included in the end of year spending bills and passed as soon as possible.
The letter was signed by Consumer Action, Consumer Federation of America, End AIDS Now, People's Action, SEIU (Service Employees International Union), and Treatment Action Group. Representatives Kurt Schrader (D-OR-5) and Greg Gianforte (R-MT) introduced the bill just a couple of weeks ago. Formally titled the Transparency in Prescription Drug Costs Act, it establishes substantial regulation of the PBM market.
First, H.R. 5304 requires quarterly reports on the costs, fees, and rebate information associated with PBM contracts. The PBM market lacks transparency and accountability, and while PBMs claim they are saving money and reducing drug costs, they oppose any efforts to shed light on their work. This bill means that payors will now know "the true costs of the services they are paying for. Instead of secret and needlessly complicated schemes, PBM contracts will be less complicated and more honest."
Second, the bill makes "spread pricing" optional, giving employers and plans more control over their decisions. Spread pricing is when health plans contract with PBMs to manage their drug benefits, and PBMs keep some of the money they are paid by health plans for drugs instead of passing all the payments on to pharmacies. This leads to a “spread” between the amount that the health plan pays the PBM and the amount that the PBM reimburses the pharmacy for a prescription. H.R. 5304 makes it so PBMs are only allowed to charge to charge the employer or plan a greater amount than the pharmacy is paid if the payor agrees. This will help lower drug prices.
Finally, and most important, the bill requires PBMs to pass all rebates and discounts they receive from drug companies to the health plans and patients, instead of withholding the money for themselves. PBMs profit from higher rebates, and since most rebates are based on a percentage of a drug's list price, this creates a perverse incentive for PBMs to increase drug prices and choose more expensive medicines. Again, PBMs claim that they pass most rebates and discounts on, but oppose transparency and attempt to pull back the curtain. This bill ensures that PBMs will be paid what their clients contractually agree to pay them, and gets rid of that bad incentive.
Schrader's bill will effectively regulate PBMs and bring down prescription drug costs. It should be included in the end of year spending packages, or failing that, approved by the House and Senate when they come back into session.