The Senate Commerce Committee approved legislation yesterday which prohibits pharmacy benefit managers (PBMs) from pocketing the rebates they collect from drug makers. The bill was approved 18-9 and is now headed to the full Senate.
A preliminary assessment by the Congressional Budget Office suggests that the proposed legislation would result in a $740 million reduction in the deficit over the next decade.
What are PBMs?
PBMs are responsible for deciding which drugs will be included in the list of medicines covered by insurance companies. Although drug manufacturers pay PBMs rebates to provide patients with cost savings, studies reveal that these savings are not being passed on to patients.
PBMs were originally established to handle claims and negotiate lower drug prices with pharmaceutical companies. However, currently, they manage prescription drug plans for millions of Americans, with three PBMs controlling almost 80% of the prescription drug market.
PBMs function as intermediaries, overseeing all aspects of the prescription drug benefits process for insurance companies, self-insured employers, unions, and government programs.
The lack of transparency makes it impossible to determine whether and how PBMs may be manipulating the prescription drug market to boost profits and raise drug prices for consumers.
PBM Transparency Act will tackle these common issues
The PBM Transparency Act aims to ban the practice of “spread pricing,” where PBMs negotiate substantial rebates from drug manufacturers and then charge pharmacies the full price. Additionally, the act mandates transparency regarding the rebates PBMs receive from manufacturers, as well as the fees they charge insurers and pay pharmacies.
Sens. Maria Cantwell (D-Wash.), Chair of the Commerce Committee, and Chuck Grassley (R-Iowa), Ranking Member of the Budget Committee, introduced this bill with a broad bipartisan support but also support from BIO.
“This bipartisan bill would not only put a stop to deceptive and opaque pricing schemes that burden consumers with higher prices, it also saves taxpayers $740 million. It’s a win-win, and warrants swift approval in Congress,” Sen. Grassley said.
But there was some opposition to this bill. An amendment proposed by Sen. Ted Cruz (R-TX) aimed to undermine the entire legislation and instead called for an investigation into the operations of “big pharma companies” in the supply chain, which he claimed were inadequately addressed in the legislation. However, the amendment was ultimately unsuccessful.