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Bipartisan lawmakers on Tuesday introduced a new bill that aims to crack down on the business practices of drug supply chain middlemen, who are widely accused of inflating prescription drug prices and harming American patients and pharmacies.
The legislation aims to ensure that community pharmacies can provide care to patients enrolled in federal health care programs and are reimbursed in a “fair and transparent” manner by so-called pharmacy benefit managers (PBMs). According to a fact sheet for the bill, under the “Pharmacists Fight Back Act,” seniors covered by Medicare and Medicaid, government employees and active-duty service members, among other patients, would see lower health care costs and have more freedom to choose which pharmacy to fill their prescriptions at.
Reps. Jake Auchincloss, D-Mass., and Diana Harshbarger, R-Tenn., unveiled the bill ahead of a House Oversight and Accountability Committee hearing on drug middleman tactics Tuesday. Executives from three of the largest PBMs: UnitedHealth GroupThe Optum Rx of CVS HealthCaremark by and CignaThe New York Times – Express Scripts will testify about allegations that it plays a role in driving up health care costs, as federal scrutiny of its practices increases.
The new bill joins dozens of other bipartisan initiatives at the federal and state level to reform PBMs, which negotiate rebates with drugmakers on behalf of insurers, large employers and federal health plans. Those middlemen also create lists of drugs, also known as formularies, that are covered by insurance and reimburse pharmacies for prescriptions.
But both lawmakers and drugmakers say PBMs overcharge for the plans for which they negotiate discounts, underpay pharmacies and fail to pass savings from those discounts on to patients. Auchincloss said those practices have allowed PBMs to snag $300 billion in revenue amid the drug supply chain between manufacturers and patients.
PBMs, meanwhile, maintain that drugmakers are responsible for setting high drug prices and argue that their tactics protect patients from high health care costs.
Last year, legislation targeting PBMs advanced through House and Senate committees with bipartisan support, and a proposal overwhelmingly passed the House in December. But that legislative push has stalled since Congress excluded PBM reform from a massive government spending package earlier this year.
Meanwhile, the Biden administration has increased pressure on PBMs as Americans struggle to afford prescription drugs. The Federal Trade Commission plans to sue Caremark, Express Scripts and OptumRx, CNBC previously reported.
Pedestrians walk past a CVS store in November in San Francisco, California.
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The new bill would do some of the same things as the previous legislation, such as increasing transparency around certain PBM business practices and prohibiting differential pricing, or charging plans more than they pay pharmacies for a drug.
But Auchincloss, who co-led another PBM bill that passed the House last year, said his new legislation is “broader and tougher” and focuses on pharmacies. A Tuesday statement about the bill also described it as the “most comprehensive PBM reform ever introduced at the federal level.”
“The bill seeks to take the point of view of pharmacists and say, 'What is it that prevents pharmacists from thriving as small business owners and providing clinical and pharmacological advice to the patients they serve?'” Auchincloss told CNBC. “We are systematically addressing the impediments to that mission… This bill is about pharmacists fighting corporate greed.”
Auchincloss highlighted a new pharmacy reimbursement model under the bill, which would largely focus on the so-called national average drug acquisition cost (NADAC). This measures the average price pharmacies pay to buy a drug from manufacturers or wholesalers based on a study of invoices.
“That will ensure that the actual cost of goods is what is price-based,” Auchincloss said. He added that the bill's reimbursement model is more relevant to generic drugs than brand-name ones.
Pharmacies are typically paid through a complicated system that isn’t directly based on how much they spend on drug purchases. That model, which involves a multi-tiered network of insurers, manufacturers, PBMs and pharmacies, creates ambiguity around fees and surcharges that add to a drug’s original cost.
Among other measures in the bill, PBMs are required to share 80% of rebates with patients and other practices are prohibited. Requiring patients to purchase brand-name drugs when a cheaper generic version is available, directing patients to pharmacies affiliated with PBMs and excluding any pharmacy in the network from filling a prescription, among other tactics, would be prohibited.
The bill “would put in place much-needed reforms to stop the rip-off of independent pharmacies, make life-saving medications more affordable for patients, and implement solutions that will generate savings for taxpayers,” Harshbarger said in a statement.
