Congress Probes PBM Link to Higher Drug Prices

The spotlight on rising prescription drug costs also is focusing more attention on the role of drug plan middlemen in shaping patient access to and outlays for medicines drugs. Congressional leaders are investigating how pharmacy benefit managers (PBMs) determine health plan coverage and charges for medicines, as is the Federal Trade Commission (FTC). Independent pharmacists also are loudly protesting certain PBM practices, and pharma companies readily support the shift in focus toward PBM practices and away from manufacturer launch and list prices.

The Senate Commerce Committee held a hearing in February 2023 to examine PBM business practices and their impact on costs and coverage for consumers. Health care experts testified on the need for more transparency into harmful PBM business practices, including “fail-first” and prior authorization requirements that can delay or deny coverage, limits on co-pay assistance, and efforts to steer high-cost patients away from plans. Committee Chair Maria Cantwell (D-Wash) and Sen. Chuck Grassley (R-Iowa) have proposed legislation to enhance transparency in PBM practices seen to inflate drug costs and limit patient access.

More recently, the House Committee on Oversight and Accountability announced a probe of the role of PBMs in pharmaceutical markets, an effort begun by Republicans and now revived by the panel’s chairman, Rep. James Comer (R-Ky). Minority Republicans issued a report on the role of PBMs in stifling competition in pharma markets, and now Comer is following up with letters to PBMs and federal health plans on a range of policies and practices. Letters were sent March 1 to the top three PBMs—Express Scripts, CVS Caremark, and Optum Rx—requesting a long list of documents related to formulary design and management, rebates, and fees paid to companies and insurers. The Oversight Committee analysts want to better understand whether such PBM policies compel manufacturers to pay hefty fees and to offer steep discounts to the middlemen to gain favorable formulary placement and less restrictive coverage policies for patients.

The House panel also sent letters to the Centers for Medicare and Medicaid Services (CMS), the Office of Personnel Management (OPM), and the Defense Health Agency (DHA) seeking more details on how these federal health programs interact with PBMs related to rebates, fees, and other charges involving government prescription drug coverage programs. And in response to retail pharmacists, the investigators seek information on tactics allegedly used by PBMs to steer business to those pharmacies that accept reduced reimbursement and pay retroactive rebates and fees, which shift costs from PBMs to insurers and pharmacies. The National Community Pharmacists Association (NCPA) applauded these efforts by Congress to challenge PBM practices “that are distorting the pharmaceutical market and limiting high quality care for patients.”

The FTC is analyzing similar issues in its investigation of whether a few large PBMs exercise excessive control of the pharmaceutical market. In February 2022, the Commission announced a formal inquiry into the effects of PBM consolidation and vertical integration with large health insurance companies. The resulting volume of comments and criticisms of PBMs sent in prompted the agency to unveil plans in June 2022 for ramping up enforcement against illegal rebate schemes involving drug companies and drug middlemen.

The stated goal for the legislators is to better understand whether PBMs actually reduce drug costs and save money for health plans and consumers by negotiating rebates and discounts with manufacturers—or if the middlemen merely pocket those savings and limit access to important medicines from firms that fail to ante up. Manufacturers support these efforts, insisting that PBM demands for rebates and discounts drive up list prices for all medicines. And while patients in covered health plans may benefit from the lower negotiated prices, higher list prices can boost their insurance premiums and copays.

PBMs are fighting back, as seen in efforts by the industry’s Pharmaceutical Care Management Association (PCMA). The industry maintains that the proposed Senate legislation would raise costs for employers and patients and do little to limit deceptive practices.

About the author

Jill Wechsler is Washington editor for BioPharm International.