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Mid-Year Updates on PBM Legislation

The Senate Finance Committee recently passed a pharmacy benefit managers (PBM) reform package, one of the most significant steps towards potential changes in the industry.

The bill, the Modernizing and Ensuring PBM Accountability Act, contains 8 sections aimed at regulating PBMs in the Medicare Part D, Medicare Advance, and Medicaid spaces. The bill requires PBMs to be regulated directly by CMS, giving the agency jurisdiction not just over the Part D Plan Sponsors (with whom it contracts directly), but also PBMs (who contract with Part D Plan Sponsors).

Jesse C. Dresser, Esq, a partner in Frier Levitt’s life sciences department who heads the firm’s pharmacy practice group, noted that the bill requires PBMs’ compensation be delinked from drug prices, shifting to a “bona fide service fee” framework. The bill also establishes requirements around the methods PBMs can use in assessing pharmacy performance, aiming to level the playing field between independent providers and PBM-owned pharmacies.

Next Steps

The road to official approval could, however, be a long journey.

Brandon Newman, CEO of Xevant, said the next steps include the proposed bill moving to the Senate for full consideration and debate. It would need to pass the Senate vote before moving to the House of Representatives to earn final approval, before the President can approve or veto it.

“The likelihood of the reform package moving forward depends on various factors, including the level of support from Senators and other government officials, the political climate, and any potential amendments or compromises that could need to be made throughout the approval process,” he said. “Healthcare legislation can be extremely complex and subject to intense debate, which can further complicate approval, and can be more challenging to predict the outcome. However, the passing of the package signals there is great momentum and support behind it.”

Dresser noted there is a strong possibility that the bill will clear the entire Senate, as it has been a bipartisan effort from the start, enjoying broad support from both parties in the Committee.

“The bill presents a measured first step in regulating the heretofore unregulated PBM industry, and has scored very well with the CBO,” he said.

As for the House, in May 2023, the House Committee on Oversight and Accountability held the first of a series of hearings on PBM abuses, where lawmakers on both sides of the aisle sought to hold PBMs accountable for their role in driving up drug costs, while harming patients and independent providers, alike. So, it has also seen strong support for Congressional action to reign in PBMs.

People within the health care industry, as well as patients and consumer groups, are closely watching the progress of the PBM reform package with a strong sense of hope. If the package passes, it could lead to significant changes in the PBM and healthcare landscapes, including more affordable and accessible healthcare.

In addition to bringing PBMs under direct CMS oversight, the bill creates substantial opportunities for pharmacies to get involved in shaping policy, while also potentially changing reimbursement frameworks in future years. For example, pharmacy providers would have the opportunity to participate in stakeholder discussions relevant to establishing performance metrics used by PBMs to assess pharmacy performance. Likewise, Congress has signaled a desire to potentially move to a NADAC framework, requiring CMS to study cost-plus style pricing, while compelling providers to supply greater levels of acquisition cost data.

“This reform could also lead to changes in how PBMs operate, potentially altering their role in the pharmaceutical supply chain and industry,” Newman said. “The hope is that such reforms would result in more competitive pricing, better medication access, and a more transparent system for patients and healthcare providers alike.”

Still, the sentiment regarding the reform package varies among different stakeholders. Although many are hopeful for positive changes, there may also be validity in opposing viewpoints or arguments that may require consideration during the legislative process.

Christopher Holler, PharmD, a pharmacist with Marley Drug, said the 3 big PBMs control over the market has been detrimental to Americans for well over a decade.

“Employers, taxpayers, and patients are paying far too much for their medications compared to what the actual cost is,” he said. “PBMs try to make money off everyone involved, meaning they’re marking up medication to payers (taxpayers/employers), increasing copays for patients, and reducing pharmacy filling fees to a point where it's hardly profitable for a pharmacy to fill certain medications through insurance. In many cases, pharmacies actually lose money on a prescription covered through insurance. We lose as much as $50 every time we fill Ozempic, for example.”

And even though this legislation helps bring DIR fees to the front, he doesn’t feel the bill does enough.

“As an independent pharmacy, we still need to fill medications to remain as a network pharmacy,” he said. “It just means we now know when we are losing money on a prescription upfront, rather than 6 months down the road.”

August 24, 2023


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