Congress Turns Attention to PBM Reform, Sort of

In the first Congressional hearing about PBM reform in the new administration, there was bipartisan agreement on the need for change in large PBMs’ business practices. Several members of Congress, especially Democrats, pointed out that provisions for reform were removed from the December 2024 reconciliation bill by President Donald Trump and Elon Musk. Democrats also focused many of their comments and questions on Republican’s proposed cuts to Medicaid.

This morning, the House Committee on Energy and Commerce’s Subcommittee on Health held a hearing to discuss creating competition in the PBM industry and lower costs for patients.

But several members pointed out during the hearing that in the last session Congress had held about a dozen hearings and crafted legislation that was part of the end-of-year spending bill. This included changes to Medicare and Medicaid and the commercial space to increase transparency into PBM business practices.

“This committee already worked on solutions for the American people regarding PBM reform, including commercial market PBM transparency, Part D, delinking and transparency, and a ban on spread pricing and Medicaid. And yet, in December 2024, after a tweet by Elon Musk, the deal worked out by the four corners of the chambers was taken down,” Congresswoman Robin Kelly, a Democrat from Illinois, said during the question-and-answer period.

Related: House Passes Budget Blueprint with Details on Medicaid Cuts Other Healthcare Provisions Yet To Come

Democratic Representatives appeared frustrated at times.

Diana DeGette

“Here we are again. We’re having a hearing yet again about reforms that we all agreed upon, rather than just passing those reforms and moving on to other pressing business,” Diana DeGette, a Democrat from Colorado, said during opening statements.

“This subcommittee could be examining what effect indiscriminate, vast layoffs at HHS will have, including slowing down drug and device approvals and hindering our ability to assure the safety of nursing home residents. We could be talking about the threat of avian flu, which grows every day, and what this administration is doing to prevent it from becoming a pandemic, but also getting eggs back on our shelves," she said. "We could be talking about the impact gutting Medicaid for working families to pay for tax cuts for the wealthy would have, and we could be looking ahead to oversight of the PBM reforms that should have been law last December.”

Fiedler: Reform Needs to Address Lack of Competition

When members of Congress did focus on reform of PBMs, they questioned witnesses about PBMs’ impact on pharmacies and patients, drug rebates, and the need for PBM transparency.

Shawn Gremminger

One witness, Shawn Gremminger, MPH, president and CEO, National Alliance of Healthcare Purchaser Coalitions, and member of the editorial board of Managed Healthcare Executive, said the lack of transparency makes it difficult for self-insured employers to know the price and value of the drugs they pay for.

“Most self-funded employers to this day do not know how much money they are spending on any specific drug, given that employers act as prudent fiduciaries under ERISA, how can we do that?” he asked.

Under questioning from representatives, Gremminger said there was a need to move away from the PBM rebate model to one that incentivizes the clinical value of prescription drugs.

But greater transparency may not provide the savings people expect, and other efforts for reform, such as barring rebates and spread pricing or changing how PBMs manage the drug benefit, may have unintended consequences, said witness Matthew Fiedler, Ph.D., an economist and the Joseph A. Pechman Senior Fellow at the Center on Health Policy at Brookings Institution.

“Barring PBMs from collecting certain forms of compensation, such as manufacturer rebates, would likely just leave PBMs to collect more compensation than other forms. And changing the construct of formularies could reduce drug spending, but it could also reduce PBMs’ incentives to negotiate aggressively for larger rebates, which could increase spending,” he said.

The core issue, Fiedler said, was the lack of competition that has been created by vertical integration. To improve competitiveness, there needs to be more PBMs in the market. “How do we get there?” he asks. “Breaking up existing PBMs probably would be a challenging undertaking, but I do think there's some room for antitrust regulators to be looking at new entrant PBMs and making sure that those PBMs aren’t being acquired by incumbent PBMs as a way to build a more competitive market.”

Fiedler also pointed out that PBM reform is one element of having drug coverage cost less and work better. “PBM profits amount to only several percent of overall drug spending, so even eliminating those profits would only moderately reduce the overall cost of drug coverage," he said. "If policymakers want to achieve larger cost reductions, that would require reducing the prices received by other actors in the supply chain, especially drug manufacturing. Policy makers may also be concerned that high cost sharing and onerous utilization management protocols that make it hard for patients to get the drugs they need.”

Another witness, Hugh Chancy, former president of the National Community Pharmacists Association and a co-owner of Chancy Drugs in South Georgia, said during his opening statement that vertically integrated PBMs impact pharmacy patients can go to, the prices patients pay, what reimbursements pharmacies receive, and what medications are on formulary.

“We are not asking for favorable treatment, but merely a level playing field,” he said.

Chancy was asked by Congressman Earl L. “Buddy” Carter, a Republican from Georgia and chairman of the Subcommittee on Health about inefficiencies in the system and potential harm to patients. Chancy mentioned a 95-year-old who pharmacy network had been narrow and the patient had to drive 20 minutes to a new pharmacy. He also talked about patients in Medicare Part D who have had to pay a higher copay on a branded medication when generics were available.