Bipartisan legislative activity related to pharmacy benefit manager (PBM) oversight is at an all-time high in both the House and Senate. As we noted last week, several bills that address PBM activities are moving through the Senate and House committees with what appear to be high approval rates. There has also been an uptick in general investigations into PBM business practices. This post, which is the second of a two-part series, highlights recent House and federal agency activity targeting the PBM industry.
Pharmacy Benefit Manager Sunshine and Accountability Act
On April 25, 2023, Congresswoman Diana Harshbarger (R-TN) introduced a bipartisan bill that would increase the reporting requirements of PBMs across all health insurance markets. If enacted, the Pharmacy Benefit Manager Sunshine and Accountability Act would amend Section 1150A of the Social Security Act to expand PBM transparency and include public reporting requirements. The proposed bill would require PBMs to provide, and for HHS to annually publish on its website, information on (i) the aggregate dollar amount of all rebates, administrative fees, and any other revenue received from drug manufacturers, health insurers, or plan sponsors, including the dollar amount of all rebates and administrative fees received but not passed through, (ii) highest, lowest, and total aggregated retained rebate percentages, and (iii) post-adjudication payments, including any fees, reimbursements or other claw backs that PBMs collect from pharmacies.
Pharmacy Benefits Manager Accountability Act
On April 18, 2023, Congresswoman Annie Kuster (D-NH), along with Representatives Earl “Buddy” Carter (R-GA), Anna Eshoo (D-CA), and Brett Guthrie (R-KY), introduced a bipartisan bill aimed at increasing transparency in the drug supply chain. If enacted, the Pharmacy Benefits Manager Accountability Act would (i) require PBMs to annually report to plan sponsors certain information pertaining to the PBMs’ drug coverage, including but not limited to drugs covered and dispensed, including the wholesale acquisition cost and beneficiary out of pocket spending, the dollars amount of rebates, fees, and discounts received by the PBM for certain therapeutic drugs, and total plan spending on prescription drugs; (ii) require GAO to report on practices of pharmacy networks, including pharmacies owned by group health plans, and (iii) set enforcement guidelines, by allowing the Secretaries of Health and Human Services, Labor, and Treasury to impose civil monetary penalties on PBMs.
Promoting Access to Treatments and Increasing Extremely Needed Transparency Act of 2023
On May 24, the House Energy and Commerce Committee voted by a 49 to 0 margin to advance to the House an amended version of the bipartisan Promoting Access to Treatments and Increasing Extremely Needed Transparency (PATIENT) Act of 2023, which would, among other things, increase drug pricing transparency and PBM oversight under the Medicaid program. The PATIENT Act would amend Section 1927(e) of the Social Security Act by adding pass-through pharmacy reimbursement requirements for any payments made by PBMs to pharmacies under PBM services contracts with states. The proposed bill would require (i) any payments for drugs to be limited to the ingredient cost and a professional dispensing fee, no less than the fee states would pay were they paying the dispensing fee directly, and for any such payments to pass through entirely to the pharmacy or the dispensing provider; (ii) any administrative fees paid for PBM services to be limited to cover reasonable costs of providing the administrative services; and (iii) managed care entities and PBMs, as applicable, to make available information pertaining to costs and payments for covered outpatient drugs and accompanying administrative service fees incurred, received or made by such managed care entity or PBM, including, but not limited to, any direct or indirect remuneration. Additionally, the proposed bill would ban spread pricing for the purpose of claiming federal matching payments under the law.
House Committee on Oversight and Accountability PBM Investigation
On March 1, 2023, House Committee on Oversight and Accountability (HCOA) Chairman James Comer (R-Ky) launched an investigation into PBM industry practices. As part of the investigation, Chairman Comer called on CMS, the Office of Personnel Management, and the Defense Health Agency to provide documents identifying how PBM practices impact the administration of federal healthcare programs. The investigation also requested that some of the largest PBMs provide records related to their business practices. On May 23, 2023, HCOA held its first public hearing to discuss PBMs' role in the healthcare industry and the need to closely examine PBMs' system of using rebates and fees.
CMS Proposed Rule on Medicaid Transparency
In its May 23, 2023 notice of proposed rulemaking, CMS proposes, among other things, to increase the transparency of drug pricing in Medicaid-managed care programs. The proposed rule would require contracts between states, Medicaid-managed care plans, and PBMs to include provisions detailing PBM use of spread pricing arrangements, whereby the PBM pays pharmacies less than what they charge the Medicaid-managed care plan for the cost of drugs. Under the proposed rule, PBMs would be required to report the cost of drugs and the dispensing fees separately from any other costs and fees charged to the Medicaid-managed care program.
FTC Inquiry into PBMs
As previously reported, on June 7, 2022, the FTC issued compulsory orders to six of the largest PBMs, requiring these PBMs to provide certain information and records related to the PBMs’ business practices. In issuing the orders under Section 6(b) of the FTC Act, the FTC notes that it aims to understand PBM practices, including fees charged to unaffiliated pharmacies, steering patients toward PBM-owed pharmacies, pharmacy reimbursement method, the negation of rebates, and other fees.
On May 17, 2023, the FTC expanded its inquiry to include two group purchasing organizations that negotiate drug rebates.
What to expect for the remainder of 2023
In addition to the above PBM-targeted legislation, a number of related bills are pending in the House and Senate that further aim to change the prescription drug industry. Given the number of proposals targeting the same topics and the Agency and congressional effort to further scrutinize PBM practices, it is possible that we see bipartisan efforts that are poised to move forward this year.