On May 24, 2022, a bipartisan duo of Senators introduced legislation to crack down on certain pharmacy benefit manager (PBM) practices, including spread pricing. The Pharmacy Benefit Manager Transparency Act of 2022 is sponsored by Senator Chuck Grassley and Senator Maria Cantwell and would empower the Federal Trade Commission (FTC) to increase drug pricing transparency and hold PBMs accountable for “unfair and deceptive practices” that increase consumer costs of prescription drugs.
Specifically, the legislation bans “deceptive unfair pricing schemes,” prohibits “arbitrary claw backs of payments made to pharmacies,” and requires PBMs to report to the FTC the amount of money they make through spread pricing and pharmacy fees.
Under “spread pricing,” a PBM charges a health insurance plan more money to process a certain prescription than it reimburses to the pharmacy, resulting in income to the PBM. The legislation would prohibit PBMs from engaging in spread pricing, unfairly reducing or clawing back drug reimbursement payments to pharmacies, and unfairly charging pharmacies more to offset federal reimbursement changes.
The legislation would also provide exceptions to liability for PBMs that pass along 100% of rebates to health plans or payors and fully disclose prescription drug rebates, costs, prices, reimbursements, fees, and other information to health care plans, payors, pharmacies, and federal agencies.
As indicated above, the legislation also would require PBMs to report any money they make through spread pricing and pharmacy fees, as well as claw backs. PBMs would also need to report whether and why they move drugs in formulary tiers to increase costs.
Senator Statements
“I hear stories about rising drug costs all the time at my 99 county meetings, and middlemen pocketing consumer and taxpayer money is a big reason for those high costs,” Senator Grassley said. “Pharmacy benefit managers and other intermediaries in the pharmaceutical supply chain must be held accountable for increasing the cost of health care in the United States. It is critical for Congress to direct the Federal Trade Commission to go after these arbitrary, unfair and deceptive practices while also establishing more transparency and accountability.”
“The increasing cost of prescription drugs has a devastating effect on the pocketbooks of American consumers,” Senator Cantwell said. “PBMs are the middlemen in the prescription drug supply chain and it’s time for Congress to give the FTC the ability to shine a brighter light on any deceptive and abusive practices.”
Supporting Statements
“PBM-insurers have manipulated our complex health care system so they can set their competitors’ prices, dictate their competitors’ reimbursements, use competitors’ data to steer patients to PBM-affiliated retail, specialty and mail-order pharmacies, and limit where and what consumers can buy,” said National Community Pharmacists Association CEO B. Douglas Hoey, pharmacist, MBA. “There are plenty of PBM actions for policymakers and regulators to address in order to ease the havoc they have wreaked on patients and small business independent pharmacies. NCPA is grateful to Sens. Cantwell and Grassley for their ongoing support of PBM reform. We’re proud to endorse their latest effort, the Pharmacy Benefit Manager Transparency Act, and will work to help it advance.”
“Senator Cantwell and Senator Grassley’s critical legislation will help stop PBM abuses and bring much-need transparency to the shroud of secrecy they operate in,” said Ted Okon, executive director of the Community Oncology Alliance. “The top PBMs use their inordinate market leverage to delay and even deny patients their cancer medications, lowball payments to pharmacists resulting in pharmacy closures, and fuel drug health care costs for all Americans. The Senators’ leadership is so critical and appreciated.”
“Small pharmacies are losing money to deceptive, opaque PBM practices. Here in the San Juan Islands, all three of the pharmacies that serve the community are independent. In order to qualify for rebates, these PBM companies force us to purchase the brand-name versions of vital medications like epinephrine pens and inhalers that often cost up to three times more than the generic versions – without explanation or recourse,” said Dr. Holly Whitcomb Henry, a pharmacist at Friday Harbor Drug and the former president of both the Washington State Pharmacy Association and the National Community Pharmacists Association.
May 2022 Senate Hearing
On May 6, 2022, the consumer protection subcommittee of the Senate Commerce committee held an hour-long hearing that included discussion of PBM contracts with pharmacies and claw backs.
Senator Richard Blumenthal commented on the lack of transparency of PBMs, which does not allow for verification of their claims that they are saving consumers money. Senator Marsha Blackburn raised concerns over reports of PBMs steering business to pharmacies that are part of the same company as the PBM and “onerous” audits of pharmacies competing with the PBM-affiliated pharmacy.
David Balto, a hearing witness and antitrust attorney who previously worked for both the Department of Justice and FTC said that PBMs “know darkness is the best environment for them to engage in anti-competitive conduct.”
Quick Links
For Senator Grassley’s press release, click here.
For Senator Cantwell’s press release, click here.
For a link to the text of the bill, click here.
For a link to the bill summary, click here.
For a link to the NCPA’s statement of support, click here.
For a link to the Community Oncology Alliance statement of support, click here.
For video of the May 2022 Senate Hearing that covered PBM practices, click here.