What the Alexander-Murray Bill Could Mean for PBMs

As the public and policy makers give greater scrutiny to healthcare, one of the recent targets has been PBMs. In late May, Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) unveiled a plan that they say will lower healthcare costs and remove surprise bills. One major part of that plan could radically change PBMs in the future.

The proposed bill, S 1895, moved through the Senate Health Committee with a vote of 20 to 3 and could hit the senate floor by the end of July. The only votes against the bill were from Sen. Rand Paul (R-Ky.), along with outspoken proponents of Medicare for All Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.).

Sanders reportedly felt the bill lacked adequate funding for community centers, while Warren voted against the bill because she believes it fails to address drug costs.

While the bill focuses on a myriad of healthcare reforms-from network matching to a standardized benchmark for physician pay-some of its key points could directly impact PBMs. Specifically, the bill aims to ban spread pricing, requires PBMs to report rebate amounts and net and list prices-by drug-to their clients, and pass through 100% of rebates or discounts to clients.

Related article: Survey Sheds Light on Frequency of Surprise Medical Bills in America

Jeremy Schafer, SVP at Precision for Value says the bill’s provisions aimed at PBMs, if passed, could have consequences for all of healthcare.

“The requirements around drug cost transparency and rebate pass-through create a complication for PBMs in particular,” Schafer says. “PBM profitability and revenue has a reputation of being opaque and difficult for employers and health plans to understand. This transparency will give employers and health plans more negotiating leverage on PBMs due to more information being available.”

The requirement for 100% rebate pass-through, Schafer adds, could also provide benefits to PBM clients in terms of rebates. This could be especially true for smaller employers and health plans that are too small to currently leverage that 100% pass-through, Schafer adds.

“However,” Schafer warns, “healthcare execs will need to be watchful on how other PBM fees may change as PBMs attempt to make up the lost revenue.”

He also points out that the ban on spread pricing may not have a huge effect on PBMs, as most have testified that they have already stopped the practice and would be comfortable with the new rule.

Nicholas Hamm is an editor with Managed Healthcare Executive