Two influential congressional committees on Wednesday passed bills aimed at reigning in pharmacy benefit managers’ operations, signaling that lawmakers’ scrutiny of the prescription middlemen is here to stay.
With the Senate Finance and House Ways and Means committees’ action, every congressional committee focused on healthcare has now passed proposals to increase oversight of PBMs, which negotiate prescription prices with drugmakers on behalf of insurers. More than 80% of the PBM market is controlled by CVS Health’s Caremark, UnitedHealth Group’s OptumRx and Cigna’s Express Scripts. The three parent companies that also operate some of the largest insurers, provider groups and retail pharmacy networks.
Drugmakers cite the consolidated market and PBMs’ opaque operations for driving up the cost of prescriptions for consumers, while insurers and PBMs blame high drug costs on the manufacturers that set the list prices. Congress’ passage of the Inflation Reduction Act last August largely targeted drugmakers’ role in the prescription supply chain, and now lawmakers’ attention has now turned to PBMs. The House and Senate next face the task of negotiating a single legislative package.
“These targeted changes to Medicare and Medicaid will stop the infuriating games and steer America’s prescription drug market toward a state of rationality,” Finance Committee Chair Sen. Ron Wyden (D-Ore.) said during the hearing.
The Finance Committee voted 26-1 to advance the Modernizing and Ensuring PBM Accountability Act, which prohibits PBMs from receiving outside service fees and bars companies from incorporating such fees and drug company rebates into prescription prices for Medicare plans. It also requires PBM affiliates, such as group purchasing organizations, to disclose any non-administrative fees received from drugmakers to federal regulators.
The Senate legislation additionally mandates PBMs send annual reports to regulators and Medicare plans about their rebate and price negotiations and bans spread pricing in Medicaid. PBMs engage in spread pricing when they charge insurers more than they pay drugmakers for drugs and retain the difference. Several states have banned the practice in their Medicaid programs.
Sen. Ron Johnson (R-Wis.) cast the sole vote against the bill, arguing during the hearing that he was not convinced the reforms would do any more than add another administrative layer to the prescription supply chain.
“I would urge my colleagues to always focus on how we can simplify these things,” Johnson said.
On the other side of the Capitol, the House Ways and Means Committee voted along party lines, 25-16, with the Republican majority pushing to pass the Health Care Price Transparency Act of 2023, a package that requires PBMs disclose to employers information about their workers’ drug claims, out-of-pocket expenses, formulary placement and rebates. The bill orders the Government Accountability Office to report on group health plans’ pharmacy networks, and Medicare Advantage insurers’ provider networks.
The legislation also requires insurers and PBMs to calculate Medicare enrollees’ cost-sharing for prescriptions based on the rate negotiated with drugmakers, or the discounted cash price, whichever is cheaper–not manufacturers’ higher sticker price. It also requires Medicare Advantage insurers to disclose which services are subject to prior authorization, report rates on denials and electronically process providers’ requests.
The package includes a site-neutral payment policy that aims to ensure Medicare pays the same amount for drug administration services, whether enrollees receive care at an outpatient facility or hospital room. It also mandates that commercial insurers create a personalized, online shopping tool consumers can use to estimate their cost-sharing for a number of healthcare services.
House Democrats said the legislation did not go far enough to promote transparency because it does not compel private equity investors to disclose their hospital ownership. They also criticized the lack of a requirement for Medicare Advantage insurers to create personalized, online cost-sharing tool for members.
“It just shows the brute power of the health insurance lobby to get Medicare Advantage a special advantage,” Rep. Lloyd Doggett (D-Texas) said during the hearing.
The House also voted along party lines, 23-17, to pass the Providers and Payers COMPETE Act, which requires the Health and Human Services Department to submit an annual report to Congress on the impact of vertical integration between payers and providers on Medicare enrollees’ costs and access to healthcare services, as well as the effects consolidation has on the Centers for Medicare and Medicaid Services Innovation Center’s demonstration models.
The Pharmaceutical Care Management Association slammed the moves, saying lawmakers’ efforts to rein in PBMs’ operations prior to the enactment of the Inflation Reduction Act’s measures to control drug costs in Medicare adds uncertainty to the federal program. The lobbying group also argued that PBMs already provide insurers information about their contract terms and report detailed information to CMS about their negotiations with drugmakers.
“Pharmacy benefit companies promote and have offered to work with Congress on actionable transparency that includes appropriate guardrails to avoid disclosure of specific price concessions and proprietary information that drug companies would almost certainly use to increase the costs of prescription drugs,” PCMA said in a news release.
The House Oversight and Accountability Committee and the Federal Trade Commission have initiated separate inquiries into how PBMs’ operations contribute to drug pricing. The FTC last week also rescinded its previous guidance for state and federal lawmakers that supported PBMs.