WASHINGTON – 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 empower the Federal
Trade Commission (FTC) to increase drug pricing transparency and hold pharmacy benefit
managers (PBMs) accountable for unfair and deceptive practices that drive up
the costs of prescription drugs at the expense of consumers.
The Pharmacy Benefit Manager
Transparency Act of 2022 would ban deceptive unfair pricing schemes;
prohibit arbitrary claw backs of payments made to pharmacies; and require PBMs
to report to the FTC how much money they make through spread pricing and
pharmacy fees.
“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,” 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,” 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.”
PBMs were initially formed in the
1960s to process claims and negotiate lower drug prices with drug makers. Now,
PBMs administer prescription drug plans for hundreds of millions of Americans.
Today, three PBMs control nearly
80 percent of the prescription drug market. They serve as middlemen, managing
every aspect of the prescription drug benefits process for health insurance
companies, self-insured employers, unions and government programs. They operate
out of the view of regulators and consumers — setting prescription costs,
deciding what drugs are covered by insurance plans and how they are dispensed –
pocketing unknown sums that might otherwise be passed along as savings to
consumers and undercutting local independent pharmacies. This lack of
transparency makes it impossible to fully understand if and how PBMs might be
manipulating the prescription drug market to increase profits and drive-up drug
costs for consumers.
Some PBMs have been known to engage in “spread pricing”
in which a PBM charges a health insurance plan more to process a prescription
than it reimburses the pharmacy, keeping the difference – the spread. For example, when a pharmacist fills a
prescription, a PBM handles the process, informing the pharmacy it will be reimbursed
$90. The PBM then charges the health insurance plan $100 for processing the
same prescription. The spread of $10 is pocketed by the PBMs.
In some cases, the pharmacy is reimbursed below its
cost, driving independent pharmacies out of business, creating pharmacy deserts
and increasing costs for health plans that can result in higher premiums. PBMs
can also practice unfair claw backs, retroactively rescinding reimbursement
payments made to pharmacies based on arbitrary guidelines and evaluations.
Specifically, the legislation:
- Prohibits arbitrary, unfair or deceptive practices:
Prohibits PBMs 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.
Grassley and Cantwell’s bipartisan proposal is supported by the National
Community Pharmacists Association, Community Oncology Alliance, Biotechnology Innovation Organization, American Pharmacy Cooperative, Association of Mature American Citizens,
American Pharmacists Association, Autoimmune Association, Iowa Pharmacy Association, Hy-Vee, Inc., Hartig Drug Company and Partnership for Employer-Sponsored Coverage.
“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.”
“The Biotechnology Innovation Organization (BIO)
applauds Senators Maria Cantwell (D-WA), Chair of the Committee on Commerce,
Science and Transportation and Chuck Grassley (R-IA), Ranking Member of the
Judiciary Committee, for introducing the Pharmacy Benefit Manager Transparency
Act of 2022 that would increase transparency and authorize the Federal Trade
Commission (FTC) to hold pharmacy benefit managers (PBMs) accountable for
unfair practices that harm patients." -- Biotechnology Innovation Organization
“Unfair and deceptive
PBM practices drive up drug costs, reduce access to care, and harm patients,
taxpayers, community pharmacies, and other providers. APCI, our member
pharmacists, and their patients are grateful to Senators Cantwell and Grassley
for their leadership and commitment to fighting abusive PBM practices. This
legislation is a critical first step in taking back our healthcare system from
the grasp of PBMs and will increase transparency and accountability in the
marketplace while at the same time protecting state PBM laws throughout the
nation,” said Tim Hamrick, CEO of American Pharmacy Cooperative.
David Balat, Director of the Right on Healthcare Initiative
at the Texas Public Policy Foundation,
wrote,
“Pulling Back the Curtain on Pharmacy Benefit Managers” discussing the importance of the bill.
Full bill text is available
HERE.
A summary of the bill is available
HERE.
Grassley’s
Leadership on Holding PBMs Accountable
In 2018, Grassley
called for the FTC to
investigate PBMs. Grassley saw the ongoing consolidation in the pharmaceutical
supply chain and its impact on drug prices. A lot has changed since the FTC
last studied the PBM industry in 2005 when they looked at ownership of
mail-order pharmacies.
In 2021, Grassley
completed a two-year
landmark bipartisan insulin investigation with Sen. Ron Wyden (D-Ore.), which studied
why and how the price of insulin has increased so dramatically in recent years.
The investigation found that manufacturer rebates are associated with high list
prices in the insulin therapeutic class. PBMs leverage their size to extract
higher rebates, discounts and fees from insulin manufacturers because PBMs
consider insulin products to be interchangeable. While rebates are used to keep
insurance premiums low, for those patients with high-deductible health plans,
no insurance or for those who are underinsured, the practice of offering
rebates results in high list prices at the counter. This causes some patients
to ration their medication or forgo their medication entirely.
In April 2021, Grassley and Cantwell introduced
the
Prescription Pricing for the People
Act, a reintroduction of their 2017 bill. The
bill
unanimously
passed out of the Judiciary Committee in July
2021. The bill 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.
Earlier this month, the Commerce Committee held a
hearing on “Ensuring
Fairness and Transparency in the Market for Prescription Drugs.” The hearing
recognized Grassley’s
leadership multiple times on prescription drug pricing reform.
Recently, Grassley
submitted public comments
with Sens. Ron Wyden (D-Ore.) and Mike Braun (R-Ind.) to the FTC, pressing the
agency for a rigorous review of the impact that PBM business practices have on
the price of insulin. Grassley has also
pressed the FTC to
investigate PBMs’ role in consumer drug prices. He urged the FTC to find
consensus and move forward on a study examining bipartisan concerns about
competition within the PBM industry.
Grassley’s
Commitment to Bipartisan, Comprehensive Drug Pricing Reform
In addition, Grassley has never stopped working to pass his balanced,
bipartisan and comprehensive drug pricing bill, the Prescription Drug
Pricing Reduction Act (PDPRA). Beginning in 2019, as chairman of the Senate
Finance Committee, Grassley held three hearings on lowering the cost of
prescription drug prices and conducted numerous meetings to advance a
bipartisan solution. Under Grassley’s leadership, PDPRA passed the Finance
Committee on a bipartisan vote, 19 to 9. According to the nonpartisan
Congressional Budget Office (CBO), PDPRA would lower costs for seniors, saving
$72 billion, and it would save taxpayers $95 billion.
The bill also establishes robust transparency and accountability for
PBMs by requiring public disclosure of drug discounts and PBM financial audits
to account for the true net cost of a drug. It is the only comprehensive
prescription drug bill that could pass the U.S. Senate with more than 60 votes.
You can find additional details about the bipartisan PDPRA by clicking
HERE.
Throughout 2021 and 2022, Grassley has spoken about his bipartisan
efforts to lower prescription drugs costs with President Biden, Speaker Pelosi,
HHS Secretary Becerra, members of the Problem Solvers Caucus Health Care
Working Group, rank-and-file members of Congress and White House staff.
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