By Shelby Smoak, PhD
If you’ve been watching the news, you have likely heard some chatter about Congress investigating Pharmacy Benefit Managers (PBMs) and creating legislative bills to address concerns with PBMs. You may have also seen a frequent anti-PBM commercial where a patient tries to pick up her doctor–approved medication at a pharmacy. A man jumps in and takes it away, saying she can’t have that particular medication; that she will have to use another one. She then replies, “But you’re not my doctor.” But, he is her PBM...
What are PBMs? What do they do? And why is Congress investigating them? Let’s get started.
What is a PBM?
A pharmacy benefit manager, or PBM for short, is a third-party partner with a health insurance plan that provides prescription drug benefits to the plan members. PBMs function as an intermediary between the entities involved in getting prescription drugs from the manufacturer to the patient’s individual insurance plans.
PBMs create drug formularies, establish drug inclusions and exclusions, and institute specialty drug-cost tiers; they negotiate drug rebates, create pharmacy networks, and handle the claim billing, processing, and payment for drug benefits.
PBMs began operating in the 1960s when they helped insurers control drug spending by using formularies and administering drug claims. Their role expanded slightly in the 1970s and 1980s. It wasn’t until the 1990s that PBMs began to change and expand more broadly. Initially, they were acquired by pharmaceutical companies, but the Federal Trade Commission (FTC) ended the practice, citing concerns over conflicts of interest.
Today, there are over 66 PBMs; however, the top three control almost 89% of the market. Many PBMs are also owned by an insurance provider, a position that echoes the FTC’s concerns expressed several decades ago.1
PBMs work in the background on prescription drugs. They play no role in the physical distribution of drugs, but handle payment and rebate negotiations between the manufacturers, wholesalers, pharmacies, and insurance plans.1
Do I have a PBM?
Yes. If you have a health insurance plan, you have a PBM. In commercial plans, the PBM may be more controlling and restrictive, but even government plans like Medicare use a third-party PBM to help manage prescription drugs for their members.
Is my bleeding disorder medication impacted by a PBM?
Maybe. Historically, PBMs have not been involved in injectables like bleeding disorder medications because these drugs fell almost exclusively on the medical benefit side of insurance benefits and were thus immune from pharmacy claims. But recently, coverage for products to treat bleeding disorders has fallen under prescription drugs, and thus PBMs.
With that, PBMs have made inclusions and exclusions of certain hemophilia and VWD products on their drug formulary. If a VWD, hemophilia A or hemophilia B product is excluded by your PBM, they may not pay for that particular product and will likely intend for you to use another medication.
This means if you are a patient subscriber and your PBM does not support the bleeding disorder medication you are currently using or intend to start using, it may not be covered. Check with your health insurance plan and PBM for more information.
What about copay accumulator adjusters and copay maximizers? Are those part of PBMs?
Yes! Copay accumulator adjusters and copay maximizers are operated by PBMs. When the PBM institutes a copay accumulator, the money paid by manufacturer copay cards for your infusion brand product does not count towards your deductible and out-of-pocket but is instead absorbed by the PBM. You are still responsible for those out-of-pocket cost-sharing amounts.
PBM Investigation and the Law
Why is Congress investigating PBMs?
To answer that question, you must first understand how PBMs make their money.
PBMs earn their money in three primary ways:1
Through an administrative fee for their services
Through “spread pricing,” which is the difference between what is paid to pharmacies and the negotiated payment to health plans.
Through shared savings, which is the amount a PBM keeps from a discounted or rebated price from drug manufacturers.
PBMs also earn income by driving patients to in-house pharmacies or PBM-owned specialty pharmacies.
According to testimony by a senior economics fellow, Karen Van Nuys, PhD, provided to the Senate Finance Committee this year, evidence shows that PBMs “leverage their position to extract profits in ways that are detrimental to patients, payers, and the drug innovation system more broadly.”
In other words, PBMs negotiate drug prices that are often more favorable (profitable) to themselves than more affordable for patients, and PBMs take money from the healthcare ecosystem that might be better served in drug development. Van Nuys also claims that PBMs increase drug costs and, as example, states that Medicare pays almost 21% more for the same drugs that can be purchased at Costco.2
Going back to how PBMs earn money, some economists argue that the structure inherently favors PBMs seeking a higher drug price from a manufacturer because they could then increase the rebate amount and thus increase the PBM’s earnings. Furthermore, as another testifier to Congress put it, “PBMs force manufacturers to raise their list price, in exchange for formulary placement.”3 Remember, PBMs include and exclude drugs from their formularies. If a PBM excludes a manufacturer’s drug, not only will patients lose access to that drug, but manufacturers would, necessarily, lose revenue from those potential drug sales.
Congress is investigating the truth of these matters and trying to answer the question: Do PBMs increase drug costs?
Are there any proposed legislative bills to address the PBM issue?
Yes, there are several proposed bills in Congress and the Senate. Here are a few:
HELP Copays Act (H.R. 830|S. 1375): “Help Ensure Lower Patient Copays Act”
Seeks to require any third-party payment, financial assistance, product discounts or vouchers, copay assistance or other reductions to apply to a patient’s out-of-pocket expenses.4,5
Patients Before Middlemen (PBM) Act: (S. 1967)
Seeks to prohibit PBM compensation based on the price of the drug as a condition of entering into a contract with Medicare Part D plan.6
Strengthening Pharmacy Access for Seniors Act (S. 2405):
Seeks to increase transparency measures on PBMs and provide seniors with additional options to fill their prescriptions. The bill would end limitations or restrictions that PBMs often place on certain medications without the PBM clarifying its reasoning.7
Pharmacy Benefit Manager Transparency Act of 2023 (H.R. 2816|S.127):
These bills would make “spread pricing” (charging the plan a different amount than the PBM reimburses the pharmacy) illegal and would end “clawbacking” reimbursement payments made to pharmacies.8,9 Pharmacies do not “pay” the PBM, the PBM “clawsback” or deducts paid claim funds directly from the pharmacy’s bank account often without notice and/or with questionable reasoning, often weeks or months later.
Health Care Price Transparency Act (H.R. 4822|S. 1130):
Aims to give transparency and access to pricing information on prescription drugs. Insurance plans must publish the in- and out-of-network charges for covered items and services and the negotiated prices for covered prescription drugs. Plans must provide a tool for consumers to search for this cost information.10,11
Hidden Fee Disclosure Act (H.R. 4508):
Requires that providers give patients transparent cost data from price comparisons before providing treatment. Aims to bolster requirements for PBMs to disclose compensation to plan sponsors and other fiduciaries.12
What’s going on in Florida regarding PBMs?
So glad you asked! Florida is the first state to pass legislation restricting PBM operations within the state. The bill increases oversight of PBM operations and stops a PBM from requiring patients to use an in-house or mail-order pharmacy also owned by the PBM. Its intent is to return business to local pharmacies.13
How is this going to affect me and my medication?
For the time being, nothing will change. Florida residents on state plans may see some differences next year through fewer restrictions and increased pharmacy choices for their prescriptions. The Congressional bills are yet in the future but can result in positive outcomes for patients should they gain support and become law.
What about the Federal Trade Commission (FTC)?
The Federal Trade Commission is also investigating PBMs for anti-competitive practices, the same issue that caused them to intervene in the 1990s with pharmaceutical manufacturers and their own PBMs. The six largest PBMs have been issued “compulsory orders.” These require those PBMs to provide information and records of their business practices.
The FTC has indicated it is seeking information on leveraging fees and clawbacks to non-affiliated pharmacies; steering patients to affiliated pharmacies; using opaque reimbursement methods; and negotiating rebates with pharma manufacturers that impact patient drug cost.
The FTC has also withdrawn its past letters of advocacy for PBMs and has deemed their past conclusions unreliable at this point. Basically, the FTC is saying that what they determined ten or more years ago about PBMs is no longer valid; they want to re-investigate PBMs and draw a more current conclusion regarding anti-competitive behavior.14
What can I do?
If you want to learn more about PBMs, reach out to the BioMatrix Education Team at education@biomatrixsprx.com. You can also contact your Congressional representatives in support.
Financial Resource Guide
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DISCLAIMER: THIS IS NOT MEDICAL OR LEGAL ADVICE. All information, content, and material is for informational purposes only and is not intended to serve as a substitute for the consultation, diagnosis, and/or medical treatment of a qualified physician or healthcare provider or as legal advice. Please consult a physician or other health care professional for your specific health care and/or medical needs or concerns and never disregard professional medical advice or delay in seeking it because of something you have read here or on our website.
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References
“Pharmacy Benefit Managers.” NAIC, 1 June 2023, content.naic.org/cipr-topics/pharmacy-benefitmanagers#:~:text=Background%3A%20When%20insurance%20companies%20began,formularies%20and%20administered%20drug%20claims.
Van Nuys, Karen. “Testimony on Pharmacy Benefit Managers and the Prescription Drug Supply Chain.” USC Schaeffer, 31 Mar. 2023, healthpolicy.usc.edu/research/testimony-on-pharmacy-benefit-managers-and-the-prescription-drug-supply-chain/.
Levitt, Jonathan. “Pharmacy Benefit Managers and the Prescription Drug Supply Chain: Impact on Patients and Taxpayers.” United States Senate Committee on Finance. 30 March 2023. https://www.finance.senate.gov/imo/media/doc/Jonathan%20Levitt%20Testimony%20US%20Senate%20Committee%20on%20Finance%20-%20Frier%20Levitt%20 %20March%202023_Redacted1.pdf
Text of S. 1375: HELP Copays Act (Introduced version) - GovTrack.us. (n.d.). GovTrack.us. https://www.govtrack.us/congress/bills/118/s1375/text.
Carter, Barragán, Miller-Meeks, and DeGette introduce bipartisan legislation to ensure copay assistance counts for patients. (2023, February 9). Congressman Buddy Carter. https://buddycarter.house.gov/news/documentsingle.aspx?DocumentID=10927.
Wyden, Crapo, Menendez, Blackburn, Tester and Marshall introduce bipartisan legislation to reform PBMs and bring down the cost of prescription drugs. (2023, June 14). https://www.finance.senate.gov/chairmans-news/wyden-crapo-menendez-blackburn-tester-and-marshall-introduce-bipartisan-legislation-to-reform-pbms-and-bring-down-the-cost-of-prescriptiondrugs#:~:text=The%20PBM%20Act%20would%3A,%2C%20rebates%2C%20or%20other%20fees.
Thune introduces bill to increase transparency of the prescription drug supply chain. (n.d.). U.S. Senator John Thune. https://www.thune.senate.gov/public/index.cfm/2023/7/thune-introduces-bill-to-increase-transparency-of-the-prescription-drug-supply-chain
Rep. Harshbarger Introduces the PBM Sunshine and Accountability Act. (2023, April 26). Representative Diana Harshbarger. https://harshbarger.house.gov/media/press-releases/rep-harshbarger-introduces-pbm-sunshine-and-accountability-act#:~:text=2816%2C%20the%20PBM%20Sunshine%20and,and%20value%2Dbased%20PBM%20choices.
United States, Congress, Senate. “Pharmacy Benefit Transparency Act of 2023.” Congress.gov. https://www.congress.gov/bill/118th-congress/senate-bill/127#. 118th Congress. Senate Bill 127. Introduced Jan. 26, 2023.
Rubin, J. (2023). Ways and Means Committee Approves Legislation Injecting Greater Transparency in Health Care Prices And Lowering Costs for Patients. House Committee on Ways and Means. https://waysandmeans.house.gov/ways-and-means-committee-approves-legislation-injecting-greater-transparency-in-health-care-prices-and-lowering-costs-for-patients/.
United States, Congress, Senate. “Health Care Price Transparency Act.” https://www.congress.gov/bill/118th-congress/senate-bill/1130. 118th Congress. Senate Bill 1130. Introduced Mar. 30, 2023.
McDermottPlus Check-Up: July 14, 2023 - McDermott+Consulting. (2023, July 14). McDermott+Consulting. https://www.mcdermottplus.com/blog/weekly-check-up/mcdermottplus-check-up-july-14-2023/.
Morgan, Lewis and Eric P. Knowles. “Florida Enacts Long-Awaited PBM Transparency and Accountability Bill Into Law.” Frier Levitt Attorneys at Law. 11 May 2023. https://www.frierlevitt.com/articles/florida-enacts-long-awaited-pbm-transparency-and-accountability-bill-into-law/.
FTC Deepens Inquiry into Prescription Drug Middlemen. (2023, May 17). Federal Trade Commission. https://www.ftc.gov/news-events/news/press-releases/2023/05/ftc-deepens-inquiry-prescription-drug-middlemen.
