Here in Washington and among investors, the big question is, will the lame-duck Congress take action on Pharmacy Benefit Manager (PBM) reform? The chances are better than some people think.
In the coming days and weeks, Congress has an opportunity to pass meaningful PBM reforms that directly benefit seniors and patients. If that happens, it will be an example of unexpected bipartisanship after a bitter campaign and will provide needed momentum that Team Trump and the GOP majorities can build on in 2025.
For the uninitiated, the topic of drug pricing can be mind-bending – a dark labyrinth that makes one wonder how such a significant part of the U.S. economy can be so lacking in transparency and drivers that keep prices high over time.
PBMs, or insurance middlemen, manage the drug benefits for virtually all U.S. health insurance plans. While they can play an important role in negotiating prices with drug manufacturers and negotiating benefits with health plans, the current system creates perverse incentives that allow PBMs to essentially dictate which drugs are approved based on how much money they can make on them.
One would expect the system to incentivize PBMs to approve the most effective drugs at the lowest cost, not the opposite. Unfortunately, PBMs and their insurance company owners benefit when patients and their employers pay more for drugs.
Don’t just take my word for it – look at the FTC’s own report: “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.”
The FTC pointedly said that it released the damning report in spite of the delaying tactics and non-responsiveness of PBMs themselves. One portion was especially notable: “Evidence suggests that increased concentration may give the leading PBMs the leverage to enter into complex and opaque contractual relationships that may disadvantage smaller, unaffiliated pharmacies and the patients they serve.”
Former Louisiana Gov. Bobby Jindal and Charlie Katebi of the America First Policy Institute recently explored this FTC report and put a spotlight on the consequences of these perverse incentives: “Regarding insulin, the agency alleged that PBMs chose to cover brand-name insulin drugs with higher list prices because they offer higher rebate payments in exchange for these rebate payments, these middlemen excluded less expensive insulin products from their coverage.”
In addition, Steve Anderson, CEO of the National Association of Chain Drug Stores, recently said that, “Congress already has done the hard work to develop and to forge bipartisan consensus on how to reform the tactics of market-dominant pharmaceutical middlemen—PBMs. More than two-thirds of voters agree—Congress should consider PBM reform to be ‘must-pass legislation’ before concluding work in 2024.”
There are two important Senate bills pending in Congress, S. 2973 and S. 3430, that would fix this problem. In short, these bills would demand full transparency in all PBM pricing and rebate practices, delink PBM compensation from drug prices to remove incentives for higher costs and mandate the sharing of negotiated savings directly with patients at the pharmacy counter.
I’m optimistic about the possibility of accomplishing meaningful reform for two reasons. First, a little-known and complicated area has become better understood by the American people, and second, this is a strongly bipartisan effort that links up with the core part of the previous Trump administration’s Blueprint to Lower Drug Prices.
When Washington Redskins legendary head coach George Allen came to D.C. in 1971, he famously said, “The future is now.” His philosophy was – let’s win now – we shouldn’t put off to the future what we can accomplish in the present.
That same philosophy should guide this Congress as it approaches the end of the year and seeks to lower drug prices, benefit patients, and help save community pharmacies. The future is now for meaningful PBM reform.
