‘In the crosshairs’: PBM reform effort intensifies on Capitol Hill

Politico Pro
February 17, 2023
By Megan R. Wilson


But pharmacy management companies are fighting back, insisting they’re misunderstood.


The drumbeat of calls to enact reforms to pharmaceutical middlemen is growing louder after years of largely unsuccessful attempts by lawmakers to make sweeping changes to how the industry operates — and advocates hope that conditions are ripe this year for action.

Democrats and Republicans on Capitol Hill pledge to rein in so-called pharmacy benefit managers, or PBMs, which design and manage the formularies that determine which medicines and treatments health plans will cover. Two bipartisan bills putting the spotlight on PBMs have been reintroduced, and more are expected.

A number of other factors — including Democrats’ drug pricing victory last year and increased pressure from states and federal regulators — have paved the way for movement on PBM measures, said lobbyists for providers, community pharmacists, drugmakers and congressional staffers.

Critics — both inside and outside Congress — said the industry has become too consolidated and opaque, hurting patients and independent pharmacies in the name of profit.

“PBMs are in the crosshairs. It seems to be a perfect storm,” said Adam Harbison, senior director of congressional affairs at the National Community Pharmacists Association — an industry group that’s pushed to reform PBMs on the state and federal levels. “Everybody wants to take a look at them.”

The Senate Commerce Committee, led by Sen. Maria Cantwell (D-Wash.), held a hearing on PBM transparency Thursday to focus on the bipartisan bill she reintroduced with Sen. Chuck Grassley (R-Iowa). The legislation takes aim at a number of PBM practices — including a ban on so-called spread pricing, where a PBM charges an insurance plan more than it reimburses a pharmacy for a drug; compel increased transparency about how they charge plans and pharmacies for prescription drugs; and force them to pass all rebates through to patients.

Rep. Buddy Carter (R-Ga.), a former pharmacist and vocal PBM critic, reintroduced another bipartisan measure that would require PBMs and plans to apply any co-pay assistance a patient receives toward their cost-sharing requirements.

The community pharmacists, manufacturers, employer groups, a group of oncology providers and the pharmaceutical industry say success on any number of legislative proposals could be a boon for patients, independent pharmacies and others involved in the health care system.

The PBM industry, meanwhile, argues that it’s a misunderstood player in the pharmaceutical supply chain that delivers value for patients by negotiating discounts on drugs and passing the savings they generate from manufacturers, called rebates, to plans that result in lower premiums.

Many proposals, they said, involve requirements they already have to comply with, including providing disclosures and transparency about some of their activities.

“While we prefer to be out there promoting positive policy solutions — which we are — we’re also being very aggressive in correcting misinformation that’s been put into the debate, and we see a lot of that, and it’s important that we all get the facts straight,” said JC Scott, the CEO of the Pharmaceutical Care Management Association, a PBM industry group.

POLITICO spoke with 15 lobbyists, policy analysts and congressional staffers about the factors increasing pressure on PBMs and what may come from them.

One such factor is the “clearing of the decks” that occurred with the Inflation Reduction Act’s passage, which achieved Democrats’ 30-year goal to allow Medicare to negotiate the cost of certain drugs.

Under the leadership of then-Speaker Nancy Pelosi, “all the focus was on manufacturers,” said an insurance industry lobbyist granted anonymity to speak freely about the environment on Capitol Hill. The industry is “gearing up” for the increased scrutiny — including hearings and legislation, the lobbyist said.

“Things are different because we are post-IRA; that was a Pelosi legacy item,” the lobbyist added. “The decks have been cleared, so there is more of an interest in PBMs.”

Senate Finance Committee Chair Ron Wyden (D-Ore.), another longtime PBM critic whose committee staff played a major role in the IRA’s drug pricing provision, has hired Polly Webster — a former lobbyist for the generic drug lobbying group — to handle the panel’s drug policy. Multiple lobbyists pushing for action on PBMs have already met with her, they told POLITICO.

“She knows health care like the back of her hand,” said Ted Okon, the executive director of the Community Oncology Alliance, who met with Webster last month to discuss PBMs. “She’s all over it.”

In the House, where Republicans regained control this year, the new GOP majority outlined its main policy priorities, which highlighted a measure led by the new leader of the House Energy and Commerce Committee, Rep. Cathy McMorris Rodgers (R-Wash.), last year that would limit spread pricing in Medicaid, among other things. She’s said she wants to return to the issue this year.

PBMs, like other segments of the health care industry, have become increasingly consolidated.

Three of them, CVS Caremark, Express Scripts and OptumRx, control roughly 80 percent of the prescription market, and they each are owned by or owners of insurance companies — Aetna, Cigna and UnitedHealth Group, respectively. Additionally, many PBMs also own pharmacies.

Critics, including new House Oversight and Accountability Chair James Comer (R-Ky.), argue that the vertical integration of PBMs creates a conflict of interest. Comer has vowed to hold hearings on PBMs this Congress.

In recent years, lawmakers have largely focused on providing more transparency requirements involving the fees collected by PBMs, banning practices like spread pricing and “patient steering,” where PBMs treat PBM-owned or -affiliated pharmacies more favorably in coverage.

But that’s also something states have increasingly been doing in recent years: Almost every state has at least one PBM-related law on the books, enacting more than 100 in total. In turn, that has increasingly pressured the federal government to act.

PBMs, through PCMA, are pushing back against the millions of dollars spent in ads by pharmaceutical manufacturers and grassroots efforts of community pharmacists by initiating their own seven-figure media campaign.

One set of ads takes on the Cantwell-Grassley bill, and claim that the measure would do nothing to lower drug prices and actually threatens pharmacy benefits — while another touts the benefits of PBMs and advocates for measures that would crack down on drugmakers’ use of the patent system to maintain the exclusivity of medicines.

“What people forget is that the PBM industry has actually already taken its lumps. We have been legislated multiple times on transparency — and we’re of course complying with those reporting requirements — and have also faced regulatory challenges,” said Katie Payne, a PCMA spokesperson.

Last year, CMS issued a final rule that prohibited PBMs from clawing back certain fees — called direct and indirect remuneration fees — on Part D drugs from a pharmacy retroactively.

The rhetoric by PBM opponents, she added, “ignores what has already been enacted and takes attention away from real solutions and the many bills on the table right now that actually would achieve reduced costs for patients and employers.”

However hopeful some advocates might be, there is underlying skepticism about whether widespread changes are possible.

The Trump administration issued a rule in 2019 that sought to ensure rebates negotiated with drugmakers were passed through to Medicare beneficiaries at the pharmacy counter. But the proposal faced so much opposition over increased Medicare premiums and overall Medicare spending that it was never finalized — and its formal repeal eventually became one of the IRA pay-fors.

Even when policymakers agree — like on bolstering transparency even more or on tackling spread pricing — once they delve deeper into the weeds, it becomes more complicated, both staffers and consultants told POLITICO.

“The one benefit that PBMs have is the complexity of the industry — you can kind of run out the clock,” said a consultant who has worked for the PBM industry granted anonymity to talk about the work. ”It makes it challenging for people to get stuff pushed through.”

Correction: Ted Okon’s last name was spelled incorrectly in an earlier version of this story.



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