Bipartisan Bill Aims to Require Transparency Among PBMs

The bill would allow the Federal Trade Commission to impose penalties on PBMs of up to $1 million for unfair and deceptive practices.

Sens. Chuck Grassley (R-Iowa), ranking member of the Judiciary Committee, and Maria Cantwell (D-Wash.), chair of the Committee on Commerce, Science and Transportation, have introduced legislation that would require PBMs to report to the Federal Trade Commission how much money they make through spread pricing and pharmacy fees.

“The increasing cost of prescription drugs has a devastating effect on the pocketbooks of American consumers,” Cantwell said in a press release. “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.”

Called the Pharmacy Benefit Manager Transparency Act of 2022, the proposed legislation would ban deceptive unfair pricing schemes and prohibit arbitrary claw backs of payments made to pharmacies. The bill would also eliminate “spread pricing” in which a PBM charges a health insurance plan more to process a prescription than it reimburses the pharmacy, keeping the difference.

Additionally, the FTC would be able to enforce the mandates and could impose penalties of up to $1 million.

Three PBMs—CVS/Caremark, Express Scripts, and OptumRx—control almost 80% of the prescription drug market.

In response to the legislation, the Pharmaceutical Care Management Association (PCMA), which represents PBMs, said in a statement they support legislation that examines anti-competitive practices within the entire pharmaceutical supply chain that may impact the cost of prescription drugs.

“We are confident that a comprehensive examination by the FTC will validate that role and ultimately conclude that drug manufacturer price setting is the root cause of high drug costs,” JC Scott, president and CEO of the PCMA said.

A study prepared by Visante on behalf of the PCMA found that PBMs save payers and patients an average of $962 per person per year. Additionally, for every $1 spent on their services, PBMs reduce costs by $10.

Grassley has been a critic of the PBM industry, and since 2018 has been working to have the FTC investigate the PBMs and their pricing tactics. In 2021, Grassley and Cantwell reintroduced a bill, the Prescription Pricing for the People Act, that would direct the FTC to issue a report addressing whether PBMs charge certain payers a higher price than reimbursement rates for competing pharmacies and steer patients to pharmacies in which the PBM has an ownership stake.

In July 2020, Grassley introduced the Prescription Drug Pricing Reduction Act of 2020, which Grassley indicated would save seniors and Americans with disabilities $72 billion in out-of-pocket costs in Medicare Part D and reduce premiums by $1 billion. The entire bill would save taxpayers nearly $100 billion, he said in a statement.

The new legislation:

  • Prohibits arbitrary, unfair or deceptive practices: Prohibits P,BMs from engaging in spread pricing; arbitrarily, unfairly or deceptively reducing or clawing back drug reimbursement payments to pharmacies; and unfairly charging pharmacies more to offset federal reimbursement changes;
  • Incentivizes fair and transparent PBM practices: Provides exceptions to liability for PBMs that pass along 100 percent of rebates to health plans or payers and fully disclose prescription drug rebates, costs, prices, reimbursements, fees and other information to health plans, payers, pharmacies and federal agencies;
  • Improves transparency and competition: Requires PBMs to report the amount of money they obtain from spread pricing, pharmacy fees and claw backs; report any differences in the PBMs’ reimbursement rates or fees PBMs charge affiliated pharmacies and non-affiliated pharmacies; report whether and why they move drugs in formulary tiers to increase costs; and it directs the FTC to report to Congress its enforcement activities and whether PBMs engage in unfair or deceptive formulary design or placement; and
  • Enhances enforcement: Authorizes the FTC and state attorneys general to enforce the legislation and hold bad actors accountable.