The bill seeks to ban spread pricing—a practice by PBMs of charging health plans more than they pay pharmacies for the same drug and pocketing the difference.
On May 11, 2023, the Senate Health, Education, Labor and Pensions (HELP) Committee voted to favorably report a bill limiting what pharmacy benefit managers (PBMs) can charge for drugs, as well as imposing greater transparency requirements. The Pharmacy Benefit Manager Reform Act is a bipartisan proposal from the committee that seeks to tighten regulations on PBMs.
The bill, sponsored by committee Chair Senator Bernie Sanders, I-Vt., is co-sponsored by Senators Patty Murray, D-Wash., Roger Marshall, R-Kan., and Bill Cassidy, R-La. The bill, which passed in the HELP Committee by a margin of 18-3, will now be sent to the full Senate for consideration.
The bill seeks to ban spread pricing—a practice by PBMs of charging health plans more than they pay pharmacies for the same drug and pocketing the difference. Specifically, the bill as written would require within 30 months of its enactment that “an entity providing pharmacy benefit management services on behalf of” a group health plan or health insurance issuer offering group or individual health insurance to “ensure that the total amount required to be paid by the plan or issuer and participant, beneficiary, or enrollee for a prescription drug covered under the plan or coverage, does not exceed the price paid to the pharmacy[.]”
This prohibition on spread pricing would exclude, however, penalties paid by the pharmacy in certain instances. The HELP Committee rejected a proposal by Senator Mitt Romney, one of the three senators to vote against the bill, to create an exemption for the prohibition on spread pricing.
The bill also includes a requirement for drug companies to provide transparency and justification reports to the U.S. Department of Health and Human Services 30 days before raising the prices of certain drugs. An amendment to the bill includes a requirement that the U.S. Government Accountability Office study affordability and access for the opiate overdose drug Narcan, available both over the counter and by prescription.
Another provision of the bill focuses on forcing PBM transparency to prohibit gag clauses in PBM contracts. Gag clauses seek to prevent pharmacies from disclosing to patients lower-cost options for a given prescription.
The bill additionally includes an amendment that would require the U.S. Department of Labor secretary to submit a report to Congress studying the impact of considering PBMs as fiduciaries under the Employee Retirement Income Security Act with respect to group health plans. Another amendment sets up an exemption process for physicians and patients to avoid so-called step therapy protocols. Step therapy requires patients to demonstrate their inability to tolerate or show improvement on cheaper, often less effective medications and therapies before providing coverage for more expensive, but often more effective, medications or therapies. This oftentimes prevents access for patients to a physician’s preferred option for treatment.
The bill is still in its early stages—it must first be approved by 60 members of the Senate before moving to the House of Representatives for their comments and vote. The bill will likely go through numerous iterations before any finalization.
The Pharmacy Benefit Manager Reform Act is one of numerous efforts at the federal level to reform conduct by PBMs. For example, the committee passage of the bill comes on the heels of the Federal Trade Commission’s 6(b) study of anti-competitive PBM conduct and document requests served by the House Oversight Committee on the three major PBMs.
Duane Morris attorneys will continue to monitor developments in this area and other related issues and report on the key details for the industry in subsequent Alerts.
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