PBM Transparency Legislation Expected to be Brought by Congress

Any federal bill regulating the pharmacy benefit management (PBM) industry that makes it Pres. Joe Biden’s desk will likely be focused on transparency issues and not on providing broad changes to the industry, according to speakers at the Pharmacy Benefit Management Institute’s annual conference in Orlando.

Over the last two legislative sessions, many bills have been introduced in the both the House and the Senate. But there are four bills that are important to watch, said Patrick Cooney, president, The Federal Group. “On the heels of the Inflation Reduction Act, PBM legislation has blossomed,” he said.

The bills come out of a four different committees, but have common themes: addressing transparency of drug and PBM pricing, pharmacy clawbacks, spread pricing and drug rebates.

In the Senate, one bill is the Pharmacy Benefit Reform Act (S.1339), which was adopted by the Senate Committee on Health, Education, Labor and Pensions. This bill prevents spread pricing, includes reporting requirements and requires 100% pass-through of rebates from drug manufacturers. A second bill in the Senate is the Pharmacy Benefit Manager Transparency Act of 2023 (S.127). It was submitted in Senate Committee on Commerce, Science and Transportation. The bill would eliminate spread pricing and pharmacy clawbacks. It also requires PBMs to pass 100% of the rebate to the plan or payer and to disclose the cost and reimbursement of drugs, as well as any fees or discounts the PBM charges.

In the Senate Committee on Finance, the Modernizing and Ensuring PBM Accountability Act, bill focuses on PBMs that provide coverage in Medicare Part D plans. It would separate PBM income from the price of the drug and set new requirements for reporting about drug costs and pricing, formulary placement of generic drugs and financial arrangements.

In the House, the PATIENT Act of 2023 (H.R.3561) would establish reporting requirements for prescription drugs and PBMs, as well as disclosure requirements for rebates, fees, alternative discounts or other payment from pharmaceutical companies.

Cooney said, however, this will likely change now that Congress has come back from its summer break. Congress now will likely come up with a single bill that packages many of the elements in these bills.

“House Republicans will craft their bill and the Senate Democrats will craft their bill,” he said. “They will be packaged into a much larger bill that will include pandemic related issues, Medicare, Medicaid and a wide range of other healthcare concerns.”

Panelists at the session, however, indicated that the PBM aspects of this single bill will not likely create a wholesale change to the industry but provide incremental change. The panelist agreed that the final bill will focus on providing increased transparency.

Transparency is what PBMs need to be thinking about, Brandon Newman, founder and CEO of Xevant, a data analytics company. “We have to show we’re not hiding behind something, we’re not trying to keep something from our clients or the market,” he said. “And that leads us to the conversation about value.”

Employers want transparency and access to their data, said Robyn Crosson, JD, vice president, government relations, Navitus Health Solutions.“They want to be able to assess what’s going and they want to be able to assess their data,” she said during the session. “This seems to have brought Congress together. But outside of government program, we won’t see anything on spread pricing. There is a hesitance to dictate contracts.”

Modern data platforms will be able to handle changes in data transparency and reporting, Josh Golden, senior vice president, strategy of Capital Rx, said during the session.

Transparency, however, is a precursor to something more significant. “Transparency gives you visibility into the supply chain and how money is being made,” Golden said. “But once people figure out how the money is made and understand whether those sources of profit are contributing to overall healthcare, then the next aim is the misalignment that exists.”

He said the discussions about other changes to the PBM industry — such as pass-through rebates, elimination of spread pricing and delinking drug price from PBM profit — would force significant changes in the industry.

But they are also an indication of where directionally the industry could be headed. “If we zoom out, what you see here is a massive tectonic shift in the industry similar to what the retirement industry saw in the early 2000s. That was radical and culminated in the Pension Protection Act and a full disclosure of fees and that these fees be reasonable and turned up the heat on fiduciaries. We are seeing a lot of parallels.”

Golden said the changes in that industry addressed misaligned incentives, helping people make smarter decisions about their retirement. “Potentially, there is a similar upside here,” he said.

This article originally appeared on Managed healthcare Executive.