Pharmacy Benefit Managers: Not Campaign Fodder So Far. But the Push for Reform May Be Gaining Traction

Second of five parts

It is a safe bet that pharmacy benefit managers (PBMs) aren’t going to become a big issue in the presidential election. PBMs are still not widely known or understood by the public; they don’t make for easy mention in a stump speech. Yet their profile has grown recently,with most of the added attention casting them in a negative light. And if PBMs were to get linked to culpability for high drug prices, they might very well become a target for both Democrats and Republicans alike.

Meanwhile, at several notches below the clamor of political ads and applause lines in speeches, the political desire to increase regulation and oversight of PBM practices seems to be coalescing, favored by members of Congress from both parties; employer healthcare purchasing groups; independent pharmacies (the industry’s longtime nemesis) and a handful of smaller PBMs who are promising to operate in a more transparent, less self-interested manner. The major PBMs have moved to respond to the disapproval with products and contracts that they say have the transparency and other feature that the critics want,

Joseph M. Shields

“There’s wide bipartisan and political support for a reform of a broken part of the industry in terms of PBMs and, more broadly speaking, drug pricing,” Joseph M. Shields, managing director of Transparency-Rx, a coalition of smaller PBMs that launched in September 2023. “People are coming to terms with the fact that a healthcare system based on spread pricing and market concentration isn’t working for families in America, independent pharmacies and small transparent PBMs.”

Over the past several years, the once obscure PBM industry has come under increased scrutiny from news organizations, congressional committees and watchdog groups. The Federal Trade Commission, which launched an investigation two years ago, issued an interim report in June 2024 critical of the industry. Momentum for Congress passing legislation seemed to be building last year, and the House voted for the Lower Costs, More Transparency Act by a wide margin. The legislation had several provisions that would have imposed new reporting requirements on PBMs. Some industry critics said the legislation didn’t go far enough in reforming business practices, while the trade association for the large PBMs, the Pharmaceutical Care Management Association (PCMA), said it undermined PBM efforts to bargain with large pharmaceutical companies for lower net prices to reduce prescription drug costs. The PCMA has sought to deflect criticism of PBMs with criticism of pharmaceutical companies for using their monopoly position to set high prices to begin with.

A Senate Finance Committee hearing earlier this year focused on PBM transparency and on “delinking” PBM fees from drug prices. But legislative movement has since stalled.

“Macro politics have made PBM reform more complicated than any of us would have liked,” Shields said. “Congress hasn’t been setting any records in terms of its legislative accomplishments this session.”

But Shields said he is optimistic about meaningful PBM legislation passing eventually — if not this fall, then during the 119th Congress, which will be seated in January 2025. “The [House] Ways and Means vote [on the Lower Costs, More Transparency Act] is an indication that elected officials reflected the community interests and considered the impact that PBMs are having on independent pharmacies and competitors and the impact they’re having on patient care,” Shields said.

Although some in Congress who supported the PBM legislation are retiring after this session — such as House Energy and Commerce Committee Chair Cathy McMorris Rodgers, R.-Wash., — there is broad support for PBM reform, Shields said. “If reform is delayed until after the election, I think there are plenty of opportunities going into 2025 to see meaningful, comprehensive reform,” he said.

Shields said that the reauthorization of the Accountable Care Act and other large policy bills are expected to be considered next year, “where a broader conversation about middlemen and a broken drug pricing system is going to play a significant role,” said Shields.

Trump and Biden have espoused similar views on PBMs, according to Shields. During the Trump administration, a rule was issued to eliminate rebates between pharmaceutical companies and PBMs or health plans in Medicare Part D plans. The implementation was delayed until 2032.

At the time the rule was proposed in 2019, the Congressional Budget Office projected that spending for Medicare would increase by approximately $170 billion and spending for Medicaid by about $7 billion.

During his term in office, Trump proposed several other measures to address prescription drug prices. One would have established a Most Favored Nation Model for reference pricing but was blocked by a court ruling. Trump also proposed Medicare Part D design changes that would have capped out-of-pocket costs, but they were not implemented. The Heritage Foundation’s Project 2025, which Trump has tried to distance himself from, doesn’t specifically mention PBM reform. It proposes reforms to Medicare, including repealing the Inflation Reduction Act (IRA) of 2022 and its drug price negotiation program, eliminating the coverage cap in Part D and reducing the government share in the catastrophic tier.

The IRA is the Biden administration’s most substantive healthcare achievement, and Harris has trumpeted the legislation’s popular provisions, which include the annual $2,000 cap on Part D out-of-pocket costs, the $35 cap on monthly out-of-pocket costs for insulin for Medicare beneficiaries and Medicare drug price negotiation.