PBM Reform is Part of Congress’ End of Year Bill

Congress is working on an end-of-year package for funding the government through March 2025 that includes some changes for pharmacy benefit managers (PBMs) and group purchasing organizations. The proposed bill as currently written includes changes to Medicare and Medicare and some important measures intended to increase transparency into PBM business practices.

Patrick Cooney, president of the lobbying group The Federal Group, said the big surprise is that the PBM provisions will reach affect how the industry deals with its commerical customers.

“We’ve expected changes, but the new element is PBM reform,” he said in an interview. “Congress is also going to institute private insurance reforms for PBMs.”

The measures that impact PBMs in the commercial space would be effective two and half years after the bill is enacted. The bill has an extensive list of transparency requirements that PBMs will have to meet, including providing information to both their health plan and employer clients and the indivdiual members

PBM transparency would be a win, Shawn Gremminger, president and CEO at the National Alliance of Healthcare Purchaser Coalitions, said in an interview today. “Transparency would provide plan sponsors like my members information that they can use to try to craft better rebates."

He said that transparency alone won't change the way that PBMs do business, but “we think transparency could then be used to leverage for future legislation in upcoming Congresses.”

The bill requires PBMs to provide health plans and employers a semiannual report that includes the contracted compensation for each covered drug, including acquisition cost; net price; out-of-pocket spending for patients, including copays, coinsurance, and deductibles; claims incurred and utilization; payments for copay cards and assistance from manufacturers; rebate information, price concessions and discounts; PBM fees; and top 50 drugs with the highest spending

For Medicare Part D and Medicare Advantage plans, the bill aims to modernize and ensure PBM accountability and pharmacy access and choice for beneficiaries. The bill requires that rebates and discounts be passed through to and that PBMs charge only “bona fide service fees.” The bill also requires transparency in how fees and rebates are determined, total rebates received from manufacturers; member copayments, coinsurance and deductibles; formulary tier placement, including for biosimilars and written justification for more favorable coverage of reference products

In terms of pharmacies, the bill requires plans to provide reports on trends on pharmacy reimbursement, incentive programs and other fees. The bill would also require comparisons for both “essential retail pharmacies” with “not essential retail pharmacies” in terms of cost-sharing and volume for covered part D drugs, including generics. The bill defines essential pharmacies as those located in underserved areas and rural or suburban or urban areas without pharmacies

In Medicaid program, the bill aims to prevent “abusive spread pricing” by requiring pass through pricing and more transparency between the states and a managed care companies. PBMs and insurers will be required to provide information on costs and payments for covered drugs, dispensing fees, administrative fees, direct and renumeration fees. This information is to be published on an annual basis.

In a written statement, Transparency-Rx said the “legislation helps inject much needed transparency in the public sector. These reforms open up the hidden profits and offshoring of drug discounts by big PBMs, their so-called GPOs, mail-order pharmacies and rebate aggregators." Transparency-Rxnis a trade group for smaller PBMs who have positioned themselves as an alternative to the "big 3" PBMs: CVS Caremark, Optum Rx and Express Scripts.

“For far too long, Mega-PBMs have operated in the dark with no oversight – explicitly undermining Medicare, Medicaid, and public trust. Mega-PBMs’ schemes of spreading pricing, their misconduct and anti-competitive practices are on notice," said the group's statement.