LUGPA Policy Overview - Pharmacy Benefit Manager Reform in 2024

Pharmacy Benefit Managers (PBMs) serve as intermediaries between insurers and pharmacies, aiming to reduce administrative costs for insurers. PBMs determine patient eligibility, administer plan benefits, and negotiate prices between pharmacies and health plans. They collaborate with drug manufacturers, wholesalers, pharmacies, and health insurance providers but do not handle the physical distribution of prescription drugs; their role is limited to negotiations and payments.

A recent report released in July by the Federal Trade Commission (FTC) highlighted the vast power and scale of Pharmacy Benefit Managers (PBMs) and their negative impact on consumers and independent pharmacies. The report details how consolidation and vertical integration among PBMs lead to higher prescription drug prices and reduced accessibility for consumers. Although the FTC stops short of recommending breaking up PBMs, it calls for further scrutiny and potential regulation of certain business practices.

Key findings from the report included:

• PBMs can hike drug costs and overcharge patients, including for critical medications like cancer drugs.
• Dominant PBMs (Caremark Rx, Express Scripts, OptumRx, Humana Pharmacy Solutions, Prime Therapeutics, and MedImpact Healthcare Systems) control about 80% of prescriptions, steering patients towards affiliated pharmacies, often resulting in higher costs.
• Independent pharmacies face unfair contract terms and existential threats due to PBM practices.
• The FTC plans to investigate whether PBMs exclude generic drugs and biosimilars to secure higher rebates from manufacturers.
• The report underscores the need for regulatory scrutiny of PBM practices to ensure fair pricing and accessibility of prescription drugs for consumers.

While PBMs have effectively reduced administrative costs, concerns have been raised by regulators and healthcare advocacy groups about their profit mechanisms and impact on drug costs, particularly generic drugs. The increasing cost of drugs and lack of transparency in PBM pricing have prompted both state and federal governments to introduce new regulations. These reforms include new licensing rules, pharmacy audit requirements, and pricing reforms for generic drugs to shift some pricing control away from PBMs.

According to a Wall Street Journal report, the FTC will file lawsuits against the major PBMs for their prescription rebate tactics for several drugs in addition to this report.

This policy brief provides an overview of the Pharmacy Benefit Manager (PBM) legislation introduced in the 118th Congress. Several bills in the House and Senate address PBM operations, transparency, and drug pricing. The summary below highlights key provisions of each bill and their status within their respective committees.

Key Provisions of PBM Legislation:

ASC Price Transparency: H.R. 4822 mandates Ambulatory Surgery Centers (ASCs) to publish prices, a requirement not included in other bills.

PBM Transparency to Plan Sponsors: All bills require PBMs to report various drug-related information to plan sponsors.

Delink Rebate from Price of Drug in Part D: Only the Senate MEPA Act includes this provision, aiming to separate rebates from drug prices.

Cost-sharing Cap for Highly Rebatable Drugs: H.R. 4822 and Senate S. 1339 include caps on out-of-pocket costs for certain drugs.

Spread Pricing Ban: Spread pricing and clawback fees, which increase medication costs for patients and providers, are targeted by H.R. 3561 (for Medicaid) and the Senate MEPA Act (for group health plans and Medicaid).

Pass-through Requirements: Both Senate bills require a pass-through pricing model, where the price charged by the pharmacy to the PBM is passed through to the plan sponsor, along with a per-claim administrative fee.

Site Neutrality for Part B Drug Administration: Only House bills include provisions for site neutrality, ensuring the same payment for rehabilitation regardless of the treatment location.

Prior Authorization Reforms in Medicare Advantage: Only the Senate HELP bill includes reforms for prior authorization in Medicare Advantage, requiring approval for healthcare services or medications before care is provided.

Reporting of Ownership: Only H.R. 3561 includes provisions for reporting the ownership of health providers.

Manufacturer Justification of Drug Price Increases: Only Senate S. 1339 requires manufacturers to justify price increases.

LUGPA's Position

LUGPA supports legislative efforts targeting PBMs to address unfair policies that negatively impact patient access to care and the ability of urologists to provide appropriate treatment. The PBM legislation introduced in the 118th Congress addresses transparency, drug pricing, and PBM operations. As these bills progress, LUGPA will monitor developments and respond to any new legislation accordingly.

House Bills:

H.R. 3561 - The PATIENT Act of 2023

• Advanced by the Energy & Commerce Committee with unanimous support (49-0 vote).
• Expands hospital price transparency requirements and establishes additional reporting requirements for prescription drugs and PBMs.
• Extends funding for programs like the Teaching Health Center Graduate Medical Education program, Community Health Center program, and National Health Service Corps.
• It includes provisions for ASC Price Transparency and PBM Transparency for Plan Sponsors.

H.R. 4507 - Transparency in Coverage Act

• Advanced by the Education & Workforce Committee with broad support (38-1 vote).
• Ensures patients have access to real-time pricing information for healthcare services.
• Requires PBMs to share cost information with plan sponsors and includes provisions related to the Safe Step Act for Commercial Plans.

H.R. 4822 - The Health Care Price Transparency Act of 2023

• Advanced by the Ways & Means Committee with a party-line vote (25-16).
• Focuses on PBM Transparency to Plan Sponsors and Delinking Rebates from Drug Prices in Part D.
• Requires clinical laboratories to publish cash prices for their services and allows the Department of Health and Human Services to mandate the publication of deidentified minimum and maximum insurer-negotiated rates.

H.R. 5378 - The Lower Costs, More Transparency Act

• Passed by the House on December 11, 2023.
• Enhances oversight and transparency in the PBM industry by establishing specific reporting requirements for group health plans and PBMs.
• Prohibits agreements with third parties that include "gag clauses" preventing compliance with reporting obligations.

H.R. 6283 - The Delinking Revenue from Unfair Gouging Act

• Introduced by a bipartisan group on November 8, 2023, as a companion to Senate bill S. 1542.
• Prohibits PBMs from receiving remuneration for services related to prescription drugs, except for flat bona fide service fees.
• Bans spread pricing, differential payments favoring PBM-affiliated pharmacies, and steering patients to such pharmacies.
• Imposes a $10,000 daily penalty for violations.

H.R. 6844 - The Ensuring PBM Competition Act

• Prohibits Part D prescription drug plan sponsors from contracting with PBMs that directly or indirectly own, control, or have a financial interest in a pharmacy.

H.R. 6856 - Prescription Drug Rebate Reform Act of 2023

• Introduced by Representative Mike Gallagher (R-WI) on December 19, 2023.
• Seeks to reform prescription drug pricing and reduce consumer out-of-pocket costs.
• Requires group health plans and health insurance issuers to base coinsurance obligations on a drug's net price.
• Proposed to go into effect on January 1, 2025.

Senate Bills:

S. 127 - The Pharmacy Benefit Manager Transparency Act of 2023

• Prohibits PBMs from clawing back reimbursement payments except in cases of fraud or contract violations.
• Prevents PBMs from increasing fees or lowering reimbursements to offset changes in federally funded health plans.
• Requires an annual commission report analyzing the Act's effects on PBM mergers and competition.

S. 1339 - The Pharmacy Benefit Manager Reform Act

• Advanced by the HELP Committee with significant support (18-3 vote).
• Establishes requirements for PBMs regarding services provided to health insurance plans.
• Includes PBM Transparency to Plan Sponsors, a cost-sharing cap for highly rebatable drugs, and a spread pricing ban.

S. 2973 - The Modernizing and Ensuring PBM Accountability (MEPA) Act

• Requires that contracts between PDP Sponsors and a PBM meet specific requirements starting in plan year 2026.
• Mandates standard Part D measures for assessing network pharmacy performance.
• Bans PBM spread pricing in Medicaid.
• Requires the HHS OIG to investigate the impact of vertical integration on costs.

S. 3548 - Health Care Prices Revealed and Information to Consumers Explained Transparency Act

• Imposes additional transparency requirements on healthcare providers and health plans.
• Requires public disclosure of rate and payment information for medical and pharmacy services.
• Includes provisions specifically addressing PBM transparency under ERISA.