Recently, the National Association of Attorneys General (NAAG) sent a letter to Congressional leaders, urging the United States Senate and House of Representatives to engage in a meaningful debate and ultimately reform the current practices of pharmacy benefit managers (PBMs). The bipartisan letter notes the urgent need for legislative action to target potential abuses within the PBM industry, with specific focus on three bills currently pending before Congress.
The three bills – the DRUG Act (S1542/HR6283), Protecting Patients Against PBM Abuses Act (HR2880), and the Lower Costs, More Transparency Act (HR5378) – are together meant to limit PBMs from excessively increasing drug prices and to mandate steps that would increase the transparency of their practices. The attorneys general believe that the legislation would allow health plans to negotiate more advantageous agreements with PBMs and allow regulators to hold PBMs accountable for their actions.
The letter notes that while the original purpose of PBMs was to “protect and negotiate on behalf of employers and consumers after pharmaceutical manufacturers were criticized for overpricing medications,” they have “only made the pharmaceutical market more opaque and have been a cause of rising drug prices.”
The attorneys general note that it’s a small number of PBMs that hold a significant portion of the market and “are reaping abundant profits at the expense of the patients, employers, and government payors” that the PBMs were originally intended to help.
The letter cites to state legislation that has targeted PBMs, specifically in Ohio and Arkansas, which both passed legislation that prohibits spread pricing – when a PBM charges payors (such as Medicare) more than the PBM pays to the pharmacies that supply the medication and the PBM pockets the difference. While the United States House of Representatives recently passed legislation prohibiting spread pricing, the legislation is still pending a vote in the Senate. The letter goes on to note the importance of federal legislation on the issue, as PBMs often argue that “federal jurisdiction and preemption limit states’ authority to regulate PBMs.”
One way the attorneys general believe that PBMs can be reigned in is by requiring PBMs to produce pricing data to health plans and federal and state regulators in a standardized format. They believe this would allow health plans to negotiate better deals with PBMs and would allow regulators to better hold PBMs accountable.
The attorneys general also called on the Federal Trade Commission (FTC) to stop the ability of PBMs to “unreasonably raise the price of drugs” and to “require greater transparency.” The FTC has also announced an investigation into PBM practices, as have several Congressional committees (including the House Committee on Oversight and Accountability and the Senate Finance Committee).