The regulation of pharmacy benefit managers (PBMs), the intermediaries in the prescription drug supply chain, took a significant step forward on Wednesday as a key Senate committee advanced bipartisan legislation. The Senate Finance Committee approved the measure by a vote of 25-1, highlighting the broad bipartisan interest in PBM reform. The lone dissenter, Sen. Ron Johnson (R-Wis.), voiced concerns about increased government interference. Other committees have also passed PBM reform bills, but the Finance Committee’s jurisdiction over Medicare and Medicaid, which represent a significant portion of U.S. health spending, makes their approval crucial. However, before any legislation can be enacted, the separate bills in the House and Senate must be combined into a single package that can garner floor support.
Committee Chairman Ron Wyden (D-Ore.) confirmed ongoing discussions with Majority Leader Charles Schumer (D-N.Y.) about the bill, but did not provide specific details. The legislation includes various provisions, such as delinking PBM compensation from drug prices to eliminate the incentive for PBMs to favor higher-priced drugs. Additionally, the bill seeks to ban spread pricing, a practice by which PBMs charge Medicaid higher prices for prescription drugs than what they pay. Wyden and ranking member Sen. Mike Crapo (R-Idaho) acknowledged that additional proposals related to PBMs could be added over the August recess if deemed necessary.
PBMs play a critical role in determining the coverage list of drugs, known as the “formulary,” and the cost-sharing requirements for patients. CVS Health’s Caremark, UnitedHealth’s OptumRx, and Cigna’s Express Scripts currently dominate the U.S. market. With the healthcare industry spending over $4 trillion annually, Wyden emphasized the need to address outdated middlemen practices that waste significant resources. By shifting the incentives of PBMs towards lower prices instead of higher prices, the proposed legislation aims to rectify these issues, as Wyden explained. While PBMs often receive blame for high prescription drug costs, they argue that their role is misunderstood, with executives pointing fingers at manufacturers.
PBMs engage in rebate agreements with drug manufacturers in exchange for coverage by health plans. They argue that their ability to negotiate with insurers and manufacturers leads to lower drug costs and greater discounts on medications. These savings are then passed on to insurance plans, resulting in lower premiums for consumers. However, while PBMs have faced criticism from lawmakers, it’s important to recognize that they are not solely responsible for the high prices of prescription drugs. Sen. Sheldon Whitehouse (D-R.I.) urged the committee to avoid being swayed by the pharmaceutical industry and to remain focused on the larger issue of drug manufacturers setting their own prices.
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