U.S. House and Senate Committees Move Legislation to Reform Pharmacy Benefit Managers

May 24, 2023

Both the House and Senate are considering multiple bipartisan bills concerning pharmacy benefit managers (PBMs), meaning action is likely this year. However, the timeline and path forward remain unclear, since the two bodies have not yet coordinated activity.

Although they are not directly involved in physically distributing prescription drug products, PBMs work with insurance providers, pharmacies, drug manufacturers and wholesalers to create prescription drug lists called formularies, negotiate discounts and payments with manufacturers, and process claims. Therefore, the business practices of PBMs impact prescription drug prices and out-of-pocket costs for patients.

The Senate Judiciary Committee has acted on the Prescription Pricing for the People Act, which directs the Federal Trade Commission (FTC) to issue a report addressing alleged anti-competitive PBM behaviors, and requests the FTC make recommendations for related policy or additional legislation. Also in the Senate, the Commerce Committee favorably reported the Pharmacy Benefit Manager Transparency Act, which would ban PBMs from reimbursement clawbacks and other practices deemed deceptive.

Most recently, the Senate Health, Education, Labor, and Pensions (HELP) Committee marked up the Pharmacy Benefit Manager Reform Act. In the markup, the committee worked off a managers amendment which was a new version of the bill. The bill bans spread pricing, a practice PBMs use to charge health insurance plans more for a drug than they paid to pharmacies for dispensing it. The bill also requires the reporting of rebates, payments and fees to insurers and requires that these rebates be passed through to group health plans or health insurers. Rather than retain the rebates for themselves, which incentivizes higher list prices for prescription drugs, this bill requires PBMs to pass rebates, fees and any alternative discounts to the health plan in a timely manner.

The HELP Committee also included seven amendments to the managers amendment that was considered. Those amendments were:

  • Require drug companies to provide a transparency and justification report before raising drug prices by certain thresholds.
  • Require the Secretary of Labor to conduct a study of the fiduciary duties of PBMs.
  • Require a study on access to medication for opioid overdose reversal.
  • Prohibit group health plans and health insurance issuers from entering into contracts that would prevent or restrict patient access to drug pricing information otherwise available through consumer decision-support tools.
  • Clarify the requirement to disclose any indirect compensation from entities providing pharmacy benefit management services or third-party administrative services.
  • Require group health plans and health insurance issuers to provide health claims, networks and cost information through electronic means.
  • Require ERISA group health plans, or health insurance coverage offered in connection with such a plan, to provide an exception process for any medication step therapy protocol.

The committee declined to consider two amendments: one that would have permitted insurance plan sponsors to opt into spread pricing, so long as the PBM also offered customers an alternative to the spread-pricing model, and a second amendment that would have required health plans to apply pharmaceutical discounts or coupons to beneficiary copays.

The package, as amended, passed by a vote of 18-3.

In the House, the Energy and Commerce Subcommittee on Health sent to the full committee for consideration a bipartisan bill to ban spread pricing by PBMs in Medicaid programs. That markup is expected in the near future.

Soon, the House Oversight and Accountability Committee will hold a hearing on PBMs as a follow-up to an investigation the committee began in March 2023 concerning PBMs. The hearing will focus on anti-competitive practices and their impact on patients, the pharmaceutical market and healthcare programs administered by the federal government.

Several other bills were introduced in the House and Senate and have not yet been considered. In the Senate, Majority Leader Chuck Schumer (D-N.Y.) would like a legislative package related to drug pricing considered before the end of the year, although the contours of that package are fluid. It is clear, however, that there is bipartisan support for PBM reform that no doubt will be part of that drug-pricing package.

As the bill moves through the legislative process, industry players should be advised as to how the Pharmacy Benefit Manager Reform Act could impact their operations. For example, PBMs would need to ensure that they comply with the bill’s reporting requirements and that pricing models appropriately pass rebates through to group plans. For additional information or assistance regarding the Pharmacy Manager Reform Act, please contact one of the authors of this alert.