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Pharmacy Benefit Managers are on the Federal Government’s Radar: Senate, House, and Agency Proposals Seek to Increase PBM Oversight – Part 1

In conjunction with the surge in state legislative efforts to regulate the pharmacy benefit manager (PBM) industry, Congress and federal agencies have ramped up PBM oversight efforts as part of the ongoing battle to lower prescription drug costs. Several bills that address PBM reporting requirements, including increased transparency as it relates to a PBM’s use of spread pricing and the retention of certain rebates and administrative fees, are moving through Senate and House committees. Further, last month the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) proposed a rule to increase transparency related to spread pricing in Medicaid-managed care contracts with PBMs, and recently, the Federal Trade Commission (FTC) expanded its ongoing investigation into PBM practices to include information requests from two group purchasing organizations.

Below, we highlight recent Senate activity as well as a proposed bipartisan Senate and House bill that would impact PBM activity in the Medicaid-managed care space. This blog post is the first in a series of two posts detailing recent federal activities aimed at increasing oversight of the PBM industry.

Senate Bills

Pharmacy Benefit Manager Reform Act

As previously reported, on April 27, 2023, Senator Bernie Sanders (I-VT) introduced the bipartisan Pharmacy Benefit Manager Reform Act (PBM Reform Act), which, if enacted, would require PBM entities to operate with increased transparency and limit certain avenues by which PBMs may retain profits.

As of May 11, 2023, the Senate Health, Education, Labor, and Pensions (HELP) Committee voted by an 18 to 3 margin to advance an amended version of the PBM Reform Act to the full Senate. The current markup retained proposals to (i) ban PBMs’ use of spread pricing; (ii) require PBMs to disclose all fees, rebates, and other payments and remunerations received from manufacturers, and pass 100% of those proceeds to plan sponsors; (iii) require health issuers and/or PBMs to submit detailed annual and semi-annual reports; and (iv) commission certain studies to determine the effects of PBM regulation on the U.S. health care market. The markup also added, among other provisions, (i) a requirement for the Secretary of Labor to conduct a study and report on the impact of a policy change that would result in PBMs being considered fiduciaries within the meaning of the Employee Retirement Income Security Act (ERISA) of 1974, and (ii) a ban on entering into agreements with PBMs that prevent or restrict third parties from accessing or using consumer decision-support tools. Additionally, although generally supported by the HELP Committee, the amended bill leaves out a proposal to delink PBM administrative fees from drug prices by banning PBMs from charging fees based on a percentage of a drug’s list price. This proposal was tabled pending a congressional budget estimate before it is put before the HELP Committee for a vote.

Pharmacy Benefit Manager Transparency Act of 2023

On January 26, 2023, Senators Cantwell and Grassley reintroduced the Pharmacy Benefit Manager Transparency Act  (PBM Transparency Act) in the Senate. As previously reported, the PBM Transparency Act would make it illegal for PBMs to (i) engage in spread pricing, (ii) arbitrarily claw back any portion of reimbursements paid to pharmacists or pharmacies for a prescription drug’s ingredient cost or dispensing fee, and (iii) arbitrarily increase or lower fees and reimbursements to pharmacies to offset reimbursement changes under any federally funded health plan. The PBM Transparency Act also requires PBMs to provide an annual report to the FTC detailing certain PBM practices, thereby increasing transparency of PBM operations. The 2023 amended version of the PBM Transparency Act added an additional provision requiring the U.S. Government Accountability Office (GAO) to submit to various committees, within one year of the bill’s enactment, a report that addresses at a minimum: (i) the role of PBMs in the pharmaceutical supply chain; (ii) the state of competition in the PBM industry and the market share of the nation’s 10 largest PBMs; (iii) the use of rebates and fees by each such PBM, including whether and what amount of rebates collected for each drug on each  PBM’s formulary is passed to patients and/or payors; (iv) whether PBMs structure formularies in favor of high-rebate prescription drugs over lower-cost alternatives; (v) details around prior authorization and step therapy practices; and (vi) a summary of the extent to which PBMs participate in spread pricing practices.

Prescription Pricing for the People Act of 2023

On January 26, 2023, Senators Grassley and Cantwell also reintroduced the Prescription Pricing for the People Act of 2023, which would direct the FTC to issue a report within one year of its enactment that addresses, among other things, whether PBMs (i) charge payors a higher price than the reimbursement rates PBMs reimburse PBM-owned pharmacies and unaffiliated pharmacies; (ii) steer patients for competitive advantage to any pharmacy, including pharmacies in which the PBM has an ownership stake; (iii) audit or review proprietary data of unaffiliated pharmacies to increase revenue or market share for competitive advantage; or (iv) use formulary designs to increase the market share of higher-cost prescription drugs or depress the market share of lower-cost prescription drugs (each net of rebates and discounts).  The bill would further require the FTC to provide policy and legislative recommendations to improve transparency, prevent anticompetitive behavior in the pharmaceutical supply chain, and ensure that consumers benefit from any cost savings or efficiencies that may result from mergers and consolidations.

Bipartisan House and Senate Bill

Drug Price Transparency in Medicaid Act of 2023

A bipartisan group in the House (H.R. 1613) and Senate (S. 1038) re-introduced the Drug Price Transparency in Medicaid Act of 2023. The proposed bill would require pass-through pricing and prohibit “spread pricing” for payment arrangements with PBMs under the Medicaid program. This bill defines “spread pricing” as any amount charged or claimed by the PBM in excess of the amount paid to the pharmacies, including any post-sale or post-invoice fees, discounts, or related adjustments such as direct and indirect remuneration fees or assessments (after allowing for a reasonable administrative fee).

Stay tuned for Part 2 in which we highlight recent House and federal agency activity targeting PBMs. 

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Bridgette advises health care providers, ACOs, health plans, PBMs, and laboratories on regulatory, fraud and abuse, and business planning matters, applying her experience in health system administration and ethics in health care to her health law practice.

Sophia Temis


Sophia Temis is an Associate at Mintz who focuses her practice on health care transactions and advising health care organizations on a broad spectrum of regulatory and governance matters. She represents physicians, hospitals, ambulatory surgery centers, and other for-profit and nonprofit health care clients.