Featured Excerpt
Over the past several years, legislators nationwide have scrutinized Pharmacy Benefit Managers (PBMs) due to various industry practices, resulting in state-level legislation and multiple federal proposals. Currently, 28 bills are proposed in the 118th Congress, with bipartisan support, aiming to enhance transparency and accountability among PBMs. Key themes include mandatory reporting on drug-related financials, eliminating spread pricing, and preventing anti-competitive practices.
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Over the past several years, legislators across the country have focused their attention on Pharmacy Benefit Managers (PBMs) due to concerns expressed over a variety of industry practices. To date, there has been legislation adopted in every state related to Pharmacy Benefit Manager (PBM) practices (e.g., Michigan – Pharmacy Benefit Manager Licensure and Regulation Act; Florida – The Prescription Drug Reform Act) and a number of proposals at the federal level, however, no federal legislation has passed. There are 28 proposed bills for the 118th Congress; 15 bills have been brought forth in the House of Representatives and 13 bills in the Senate. Most of these bills have bipartisan co-sponsorship. Recently, on February 20, 2024, 39 state attorneys general sent a letter to Senate and House leaders pushing for federal legislation to be enacted. They specifically identified the DRUG Act (H.R. 6283), Protecting Patients Against Pharmacy Benefit Manager (PBM) Abuses Act (H.R. 2880), and the Lower Costs, More Transparency Act (H.R. 5378) and remarked they “believe several of the proposals they convey would be an important step toward reforming this industry. With stronger federal law, state and federal regulators can work together to better meet their shared responsibility to hold Pharmacy Benefit Managers (PBMs) accountable and improve the country’s health care system overall.”
Below is a summary of the common topics currently drafted in the 28 proposed bills and highlights of the DRUG Act, Protecting Patients Against Pharmacy Benefit Manager (PBM) Abuses Act, and the Lower Costs, More Transparency Act.
Key Themes Across Legislative Action
The 28 proposed bills vary in their content and the programs they address. Depending on the bill, modifications were suggested for Medicare, Medicaid, Employee Retirement Income Security Act (ERISA), and/or the Affordable Care Act (ACA) health plans. The following are common themes collectively viewed across the proposed legislation:
Greater Transparency to Health Plans and Regulators
- Pharmacy Benefit Managers (PBMs) to report to health plans and regulators on drug-related financials and utilization, such as:
- Rebates
- Remuneration received (e.g., pharmacies, manufacturers)
- Administration fees/Bona Fide Services fees
- Direct or indirect remuneration
- Specific Pricing parameters: Average Wholesale Cost (AWP), Wholesale Acquisition Cost (WAC), and other methodologies used by Pharmacy Benefit Managers (PBMs)
- Enrollee level reporting: Cost-sharing amounts, Out-of-Pocket amounts, utilization statistics
- Utilization and cost by drug category/class
- Copay Assistance Programs
- Reporting of formularies and the rationale for drug placement.
- Payments made to other entities outside of the Pharmacy Benefit Manager (PBM) such as consultants or referral groups.
- Negligence of reporting can result in hefty financial fines from the government.
Transparency of Rebates from Manufacturers
- Provisions that send rebates and any additional fees received by the Pharmacy Benefit Managers (PBM) to the health plan.
- Reporting of amounts that are received by Pharmacy Benefit Mana(PBM) for services in addition to the actual rebate amount (e.g., administering, invoices, collecting rebates).
- Reporting rebate amounts that are kept by the Pharmacy Benefit Manager (PBM).
Pharmacies/Networks
- Elimination of spread pricing.1
- Some bills suggest reporting spread, but still permitting this type of reimbursement model.
- Affiliate pharmacies of the Pharmacy Benefit Manager (PBM)
- Reporting of affiliate pharmacies and their dispensing data. Such as: retail, specialty, and mail-order pharmacies
- Anti-Competition clauses requiring contracted rates for the network pharmacy reimbursement rates to be the same as the rates the Pharmacy Benefit Manager (PBM) would provide to an affiliate pharmacy for dispensing the same drug or for providing the same service.
- Preventing steering of enrollees to specific pharmacies
- Requiring reporting of Pharmacy Benefit Manager (PBM) claw-back amounts that were exercised from the pharmacies, with explanations.
- Preventing Pharmacy Benefit Managers (PBMs) from administering what are known as “gag-clauses” in contracts that prevent pharmacies/pharmacists from discussing pricing other than what is charged through the patient’s insurance.
Oversight and Studies
- Suggestions for the Secretary and/or Government Accountability Office to review reporting and data collected from Pharmacy Benefit Managers/Health Plans for further study and evaluation of the Pharmacy Benefit Manager (PBM) industry.
Summaries of DRUG Act, Protecting Patients Against Pharmacy Benefit Manager (PBM) Abuses Act, and the Lower Costs, More Transparency Act
The Delinking Revenue from Unfair Gouging (DRUG) Act, H.R. 6283, sets out to limit Pharmacy Benefit Manager (PBM) revenues to “fair-market service fees” by banning spread pricing, banning steering of participants to pharmacies owned by the Pharmacy Benefit Manager (PBM) or otherwise affiliated, and prohibiting unaffiliated pharmacies from receiving a lesser amount of reimbursement than affiliated pharmacies. Violations by the Pharmacy Benefit Manager (PBM) will be subject to monetary penalties. Amends ERISA, Internal Revenue Code of 1986, Public Health Service Act, and Title 5 USC.
The Protecting Patients Against Pharmacy Benefit Manager (PBM) Abuses Act, H.R. 2880, sets out requirements under Part D of the Medicare program around Pharmacy Benefit Managers (PBMs) and limits their fees to a flat dollar amount for “covered Part D drugs furnished under the plan,” provides for a written agreement around fees that must not be based on or contingent on the price of covered drugs, any discounts, rebates, fees or other remuneration, prohibits spread for Part D drugs, and prohibits unaffiliated pharmacies from receiving a lesser amount of reimbursement than affiliated pharmacies. For part D drugs on the formulary with an AB rated equivalent that is not on the formulary, the Pharmacy Benefit Manager (PBM) will need to provide a report to the plan discussing the difference between the national average drug acquisition cost (NADAC) of the non-formulary drug and the negotiated price for the drug that is on the formulary. The bill also seeks increased transparency by requiring public reporting of all rebates and fees the Pharmacy Benefit Manager (PBM) receives from drug manufacturers. Amends the Social Security Act.
The Lower Costs, More Transparency Act, H.R. 5378, is a more expansive bill that targets healthcare providers and insurers to be more transparent about healthcare costs. The Pharmacy Benefit Manager (PBM) specifics of the bill require reporting the parameters to which Pharmacy Benefit Managers (PBMs) will be subjected. A minimum of semiannual reporting to health plan sponsors will require an assortment of information such as: list of drug claims filed and the corresponding brand name/NDC, dispensing channel (retail, mail order, specialty), pricing information per dispensing channel, claim volume, information on spending, rebates, and fees associated with drugs covered during the time period.
For employer-sponsored health plans, compensation paid for brokers, consultants, or other firms involved for the referral to the Pharmacy Benefit Manager (PBM) will be reported. Additionally, a fiduciary must be allowed to audit claims and cost information without undue restrictions.
Payment to Pharmacy Benefit Managers (PBMs) under Medicaid would require pass-through pricing models and prohibit spread pricing. Under Medicare, it requires consistency in payments for drug administration services between off-campus hospital outpatient departments and other provider settings. Amends ERISA, Social Security Act, Public Health Service Act, Patient Protection and Affordable Care Act, Internal Revenue Code of 1986, Federal Food, Drug and Cosmetic Act, and Title 18 USC.
Conclusion
As with all bills (and subsequent laws), Pharmacy Benefit Managers (PBMs), health plans, drug manufacturers, pharmacies, and other participants in the supply chain will be impacted differently. We have provided a high-level summary of these proposals and have omitted some sections for brevity. Ankura recommends that your organization review each proposal for interpretation and determine its potential effect on your organization. We will continue to monitor the proposed legislation as it progresses and discuss any trends that emerge to help your organization prepare for compliance and operational changes that may ultimately be required.
Additional Proposals 118th Congress
House of Representatives
The following proposals are slated for the 118th Congress. These proposals are listed in the order of which they were introduced or prefiled.
[ Proposal Number - Title of Proposal | Sponsor of the Proposal, (Date proposal with introduced or prefilled)]
H.R. 1613 – Drug Transparency in Medicaid Act of 2023 | Rep. Buddy Carter (3/17/2023)
H.R. 2534 – PROTECT 340B Act of 2023 | Rep. Abrigail Spanberger (4/6/2023)
H.R. 2679 – Pharmacy Benefits Manager Accountability Act | Rep. Ann Kuster (4/18/2023)
H.R. 2816 – Protecting Patients Against PBM Abuses Act | Rep. Diana Harshbarger (4/25/2023)
H.R. 3282 – Promoting Transparency and Healthy Competition in Medicare Act | Rep. Diana Harshbarger (5/15/2023)
H.R. 3561 – PATIENT Act of 2023 | Rep. Cathy McMorris-Rodgers (5/22/2023)
H.R. 4507 – Transparency in Coverage Act 2023 | Rep. Bob Good (7/10/2023)
H.R. 4508 – Hidden Fee Disclosure Act of 2023 | Rep. Joe Courtney (7/10/2023)
H.R. 4822 – Health Care Price Transparency Act of 2023 | Rep. Jason Smith (7/24/2023)
H.R. 5385 – Medicare PBM Accountability Act | Rep. Greg Landsman (9/12/2023)
H.R. 5400 – NO PBMs Act | Rep. Buddy Carter (9/12/2023)
H.R. 6844 – Ensuring PBM Competition Act | Rep. Claudia Tenney (12/15/2023)
Senate
S. 113 – Prescription Pricing for the People Act of 2023 | Sen. Chuck Grassley (1/26/2023)
S.127 – Pharmacy Benefit Manager Transparency Act of 2023 | Sen. Maria Cantwell (1/26/2023)
S.1131 – Drug Price Transparency Act of 2023 | Sen. Mike Braun (3/30/2023)
S.1217 – Ending the Prescription Drug Kickback Act of 2023 | Sen. Josh Hawley ( 4/19/2023)
S. 1339 – Pharmacy Benefit Manager Reform Act | Sen. Bernie Sanders (4/27/2023)
S. 1967 – PBM Act | Sen. Bob Menendez (6/14/2023)
S. 2254 – Medicare PBM Accountability Act | Sen. Catherine Cortez Masto (7/12/2023)
S. 2406 – PBM Oversight Act of 2023 | Sen. Tom Carper (7/20/2023)
S. 2436 – No PBMs Act | Sen. Joe Manchin (7/20/2023)
S.2493 – PBM Reporting Transparency Act | Sen. Mark Warner (7/25/2023)
S. 2973 – Modernizing and Ensuring PBM Accountability Act | Sen. Ron Wyden (9/28/2023)
S. 3330 – A bill to require the Secretary of Labor to conduct a study on the fiduciary duty of pharmacy benefit managers | Sen. Mike Braun (11/15/2023)
1 Spread pricing is when a PBM reimburses a pharmacy for dispensing a drug at a particular rate then charges a different rate to the health plan for the service that was performed by the pharmacy. The difference (aka “spread”) is retained by the PBM.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
