House and Senate members from both parties have launched at least nine bills, parts of which may be packaged together this fall, that take aim at Pharmacy Benefit Managers (PBMs), companies that channel prescription drugs to patients. And NPR just published a primer to help decipher this recent activity.
Members from both parties talk indignantly about PBM behavior and have fired up bills to address it. The Senate Finance Committee, whose jurisdiction over Medicare and Medicaid gives it a lead role, has introduced a bill that would prohibit PBMs from collecting rebates and fees calculated as a percentage of a drug’s list price, to discourage PBMs from favoring expensive drugs.
The committee also plans legislation to require PBMs to pass along discounts directly to seniors, allow patients to use the pharmacy they prefer, and release more information about where their money ends up.
Sen. Bernie Sanders, who leads the Senate Health, Education, Labor and Pensions Committee, introduced a bill that bans spread pricing, while measures in the Senate and House would crack down on PBM practices seen as harming independent and rural pharmacies. Other measures require more transparency or limit patient waits for drug approvals.
PBMs, were created in the 1960s to help employers and insurers select and purchase medications for their health plans. The industry mushroomed as prescription drug spending grew about 200-fold between 1967 and 2021. In addition to negotiating discounts with manufacturers, PBMs set payment terms for the pharmacies that buy and dispense the drugs to patients. In effect, they are the dominant middlemen among drugmakers, drugstores, insurers, employers, and patients.
There are around 70 PBMs in the U.S. Through mergers, three of them – CVS Caremark, Optum Rx, and Express Scripts – have come to control 80% of the prescription drug market, and each brings in tens of billions of dollars in revenue annually. The PBMs control the drug pipeline from manufacturers to the pharmacy counter.
Their buying power allows them to obtain discounted drugs for health plans while setting prices and terms for sales at drugstores. The big three are part of massive conglomerates with important stakes in almost every sector of health care; each of them owns a powerful health insurer – Aetna, UnitedHealth, and Cigna, respectively – as well as pharmacies and medical providers.
Other sectors of health care are alarmed by the power of the PBMs and are appealing to the Biden administration and Congress to rein them in. Drugmakers are especially up in arms, but employers, pharmacies, doctors, and even patients chafe at PBM practices like “spread pricing,” in which the companies pocket money negotiated on behalf of health plans.
Non-PBM-affiliated pharmacists, from mom and pop stores to large chains like Kroger, say the PBMs squeeze their businesses by forcing them to sign opaque contracts that include clawbacks of money long after sales take place. PBMs often steer patients using expensive drugs to their affiliated pharmacies, cutting revenue to independents.
Doctors say PBMs act as gatekeepers for the insurers they represent, blocking or slowing coverage of necessary drugs.
Finally, the pharmaceutical industry has lost a share of sales revenue to PBM middlemen in recent years – even while getting most of the bad publicity for high drug prices. (The median launch price for newly marketed brand-name drugs went from $2,100 to $180,000 a year between 2008 and 2021, yet net revenues for drug companies have stagnated in recent years.)
PBMs in some cases prefer high producer list prices, because the rebates that drugmakers pay the PBMs in exchange for favorable health plan coverage of their drugs often are calculated as a percentage of those list prices.
In recent months ominous ads about prescription drugs have flooded the TV airwaves. Perhaps by design, it’s not always clear who’s sponsoring the ads or why.
The Pharmaceutical Research and Manufacturers of America (PhRMA), the trade group for most of the big drug companies, is the top driver of the anti-PBM campaign. Some of the ads are sponsored by the PBM Accountability Project, a pop-up lobby, funded partly by the drug industry, that includes unions and patient advocates whose membership complains of restrictive PBM and insurance industry policies.
In one PhRMA ad, a smarmy guy in a suit snatches away a young woman’s prescription. The Pharmaceutical Care Management Association, the PBM trade group, has responded with its own ads, blaming drug companies for high prices and for “targeting your pharmacy benefits.” AHIP, the health insurance lobby, has piled on with its own campaign.
Meanwhile, several states have taken a pragmatic path to lower PBM-related costs, using high-tech auctions to get the best deals for their employee health care plans.