Historic levels of dysfunction and infighting may be roiling Congress these days, but lawmakers appear primed to act as soon as they can on at least one issue: Cracking down on pharmacy benefit managers.
Members of Congress, Capitol Hill staffers and industry stakeholders put high odds on some suite of healthcare bills winding up on President Joe Biden's desk before the legislative session ends. Several bipartisan bills tackling pharmacy benefit manager business practices emerged from House and Senate committees this year, making the legislation ripe for broader consideration. And lawmakers are always eager to brag to voters that they took action against high prescription drug prices.
“I think that PBMs—my characterization—are the train that drives the healthcare agenda in Congress in both the House and the Senate. Enormous interest,” Senate Finance Chair Ron Wyden (D-Ore.) said.
It’s a remarkable statement after concerns about PBMs on Capitol Hill previously failed to gain serious traction. But now Senate Majority Leader Chuck Schumer (D-N.Y.) has pledged to move a healthcare package this year that, while yet undefined, likely will gather in three major PBM bills that emerged from key committees. The Republican-led House has already united many of its measures targeting PBMs into one larger bill, which is among the first in line to get floor consideration once the lower chamber chooses a new speaker following the ouster of Rep. Kevin McCarthy (R-Calif.) from the post last week.
All told, the bills could make dramatic changes to how pharmacy benefit companies do business by opening a window into a notoriously opaque industry and, depending on which bills ultimately pass, placing unprecedented limitations on how PBMs earn money.
All of the measuress include transparency provisions that would require PBMs to reveal, to varying degrees, how much they pay for drugs, how much money they keep for themselves and what costs and savings get passed along to health plan sponsors and patients. All of the bills include some new restrictions on spread pricing, which is when PBMs charge insurers more for drugs than they paid. And provisions from the Senate would bar PBMs from linking compensation to the list prices of drugs, a practice that lawmakers and many advocates say incentivizes higher prices.
These legislative efforts coincide with an ongoing Federal Trade Commission investigation into PBM business practices that signals the Biden administration's interest in targeting PBMs.
Consolidation brought clout, attention
Pharmacy benefit managers attracted political scrutiny by significantly increasing their power in the healthcare marketplace over the decades. Companies that started out essentially as subcontractors to health insurance companies seeking savings on drug spending grew into sophisticated, opaque and lucrative operations. Furthermore, consolidation and vertical integration led to CVS Health subsidiary CVS Caremark, Cigna subsidiary Express Scripts and UnitedHealth Group subsidiary OptumRx controlling about 80% of the PBM market.
Moreover, it simply appears to be the PBM industry's turn to absorb flack about drug prices on Capitol Hill. Congress already took a cut at reducing pharmaceutical costs last year when Democrats passed the Inflation Reduction Act of 2022, which includes provisions lowering insulin costs and allowing Medicare to begin negotiating prices for 20 major drugs. That seems as far as lawmakers are prepared to go against the powerful pharmaceutical industry for now, leaving PBMs next in line.
“There are few concerns that connect more with people at the kitchen table than healthcare,” said Wyden. “Within that frame of how strongly people feel about healthcare is prescription drugs at the top of every list.”
The pharmaceutical industry, which is challenging the drug negotiations law in court, was largely cast as the villain during debates last year, but did its best to point at a different culprit: pharmacy benefit managers. According to drugmakers—and the expensive advertising campaign the Pharmaceutical Research and Manufacturers of America has waged—PBMs have become monopolistic middlemen that inflate costs to reap bigger profits.
The PBM industry naturally disagrees. These companies note that pharmaceutical companies are the ones that set the prices that function as the starting point for negotiations, and that PBM profit margins are slim. The Pharmaceutical Care Management Association, which represents PBMs, has expressed adamant opposition to the various legislative proposals, which it argues unfairly focus on its members and would be ineffective at reducing drug prices.
Still, Congress appears to have heard the drugmakers' arguments. Republicans and Democrats in both chambers introduced a slew of measures targeting PBMs this year, and key committees have boiled down many of those proposals and passed four broad pieces of legislation that could get considered on the floors of their respective chambers at any time.