New PBM Reform Bill Would End Spread Pricing at Medicaid Pharmacies

Several weeks after the House Committee on Energy and Commerce’s Subcommittee on Health held a hearing to discuss creating competition in the pharmacy benefit manager industry, several senators have introduced a bipartisan bill that would limit PBMs’ spread pricing at pharmacies used by Medicaid beneficiaries.

Senators Peter Welch, a Democrat from Vermont, Roger Marshall, a Republican from Kansas, Mark Warner, a Democrat from Virginia, and Bill Cassidy, a Republican from Louisiana, have introduced the Protecting Pharmacies in Medicaid Act, which would require Medicaid’s payments to PBMs to be passed directly to pharmacies, excluding administrative fees.

The bill also requires all pharmacies participating in state Medicaid programs to report National Average Drug Acquisition Costs (NADAC) to increase transparency in drug pricing and ensure reimbursements to pharmacies reflect the true costs of prescription drugs. NADAC is the approximate invoice price pharmacies pay for medications in the United States.

“Prohibiting PBM spread pricing will cut costs for prescription drugs relied upon by Medicaid enrollees while simultaneously preserving access to local pharmacies that have financially struggled in recent years due to PBMs cutting them out of their share of payments,” Senator Marshall said in a news release.

Eliminating spread pricing would save about $2.2 billion over a 10-year period, according to information provided last year to Congress by the Congressional Budget Office.

“Pharmacies are essential to the care and wellbeing of our rural communities. But spread pricing by pharmacy benefit managers is making it harder than ever for community pharmacies to stay in business and lining the pockets of middlemen,” Welch said.

Welch pointed out that between 2018 and 2021, more pharmacies closed than opened in across the country. In Vermont alone, 28 pharmacies have closed in the past five years, leaving only 126 pharmacies operating in the state, and many residents of the state lived in a “pharmacy desert,” an area with low access to a pharmacy.

The Protecting Pharmacies in Medicaid Act is endorsed by the Food Industry Association (FMI), the National Association of Specialty Pharmacy, the National Association of Chain Drug Stores, and the National Community Pharmacist Association.

Steven C. Anderson, president and CEO, National Association of Chain Drug Stores, said in the news release that “every day that PBM reform is delayed is another day that Americans pay inflated drug prices, that care gets more remote for people and for communities, and that pharmacies are forced out of business.”

Congress has made several attempts at PBM reform, and last session 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. But provisions for PBM reform were removed from the December 2024 reconciliation