The PBM Act provides a three-year grace period for those entities not in compliance, but that grace period includes a one-way limitation.
On December 11, 2024, Senators Elizabeth Warren, D-Mass., and Josh Hawley, R-Mo., introduced in the Senate the Patients Before Monopolies Act (PBM Act), a bill “[t]o prohibit pharmacy benefit managers and pharmacies from being under common ownership, and for other purposes.” The PBM Act would make it unlawful for any person to “own, operate, control, or direct the operation of” any type of pharmacy if that person also “own[s], operate[s], or control[s]” an insurance company or pharmacy benefits manager (PBM). This bill follows nearly a year of heightened government scrutiny of PBMs and allegations of harm resulting from vertical integration and price fixing. If passed, the PBM Act would prevent PBMs and payors from being in a position of control over pharmacies through which they can effect the competitive harms alleged.
The PBM Act provides a three-year grace period for those entities not in compliance, but that grace period includes a one-way limitation. The PBM Act does not state that noncompliant entities would have three years to become compliant. Rather, it states that noncompliant entities would have three years to divest themselves of their pharmacy. While this legislation is still pending, making its text subject to change, this language suggests that persons owning or operating both a pharmacy and a PBM or payor would need to leave the pharmacy business and operate only on the insurance side; they would not be able to leave the insurance business and operate only on the pharmacy side.
The PBM Act gives enforcement authority to numerous federal and state government actors. If a party were found to be noncompliant after the grace period, a civil suit could be brought against it in United States court by the inspector general of the Department of Health and Human Services, the assistant attorney general in charge of the Antitrust Division of the Department of Justice, the Federal Trade Commission (FTC) or the attorney general of any state. Upon finding a violation, courts would be able to issue an order requiring the party to cease and desist, to divest themselves of the pharmacy and to disgorge any revenue received from the pharmacy from the sale of prescription drugs.
Primary responsibility for the PBM Act would likely lie with the FTC—the agency currently investigating and suing the nation’s largest PBMs. Any revenue received through disgorgement would be placed into a fund managed by the FTC and used to serve “the health care needs of the harmed community, including consumers overcharged at vertically integrated pharmacies.” The FTC would also be the agency responsible for promulgating rules implementing the PBM Act.
Though the PBM Act is just a newly introduced bill, it is also the next step in a long line of recent actions taken against PBMs. These actions include: the aforementioned FTC investigation and lawsuits (see our prior Alert for a timeline of key events in the FTC-PBM feud); congressional accusations against executives from CVS Caremark, Express Scripts and OptumRx of providing false testimony before Congress (see our prior Alert on the accusations); and even state-level lawsuits against PBMs (see our prior Alert on Michigan’s lawsuit against Express Scripts and OptumRx).
As the requirements of the PBM Act could significantly change ownership and operation structures for pharmacies, any providers likely to be affected should begin assessing their business structure to determine how the PBM Act could impact them. We will continue to monitor the situation as it progresses.
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If you have any questions about this Alert, please contact Jonathan L. Swichar, Bradley A. Wasser, Taylor Hertzler, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.
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