A key Senate committee advanced legislation to ban pharmacy benefit manager tactics, such as spread pricing and clawback fees, and heighten transparency of the industry.
The Senate Commerce Committee passed the PBM Transparency Act of 2023 by a vote of 18 to 9 on Wednesday, advancing the reform legislation to the full Senate. Lawmakers said the legislation is meant to address a source of unfair and deceptive practices that increase drug prices.
“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,” said Sen. Chuck Grassley, R-Iowa, one of the original co-sponsors, in a statement. “It’s a win-win and warrants swift approval in Congress.”
The legislation would ban the tactic PBMs use called “spread pricing,” where the manager charges payers more for a drug than what they reimburse a pharmacy, thus pocketing the difference, a summary of the bill said.
“This practice can result in pharmacies being reimbursed less than their acquisition cost for a drug,” the summary said.
It would also ban clawback fees where a PBM attempts to get back part of a payment made to pharmacies or increase fees to offset any changes to reimbursement from federally funded health plans, the committee summary added.
The legislation also seeks to boost transparency for PBMs, including requiring each manager to file an annual report with the Federal Trade Commission (FTC) on how much each plan paid the PBM for prescription drugs and in turn how much the PBM paid the pharmacy.
The report would also have to detail why a copay or deductible for a consumer increased or the reason pharmacy reimbursement declined. Any PBM that doesn’t follow the law could face fines from the FTC and state attorneys general of up to $1 million.
The FTC has already launched a comprehensive study of the PBM industry and has sent subpoenas to six of the industry’s major players.
The PBM industry slammed the vote by the Commerce Committee as giving the FTC far too much power.
“The bill would grant the FTC unprecedented power to pick industry winners and losers, rather than maintaining the agency’s focus on the consumer welfare standard, and would set a precedent for allowing the FTC to regulate prices,” according to a statement from the Pharmaceutical Care Management Association, = a PBM lobbying group.
The bill’s margin of victory and reliance on the FTC could be major headwinds for getting it through Congress.
Sen. Ted Cruz, R-Texas, was reluctant to grant more power to the FTC.
“I am also concerned that additional FTC enforcement actions under this bill could reduce the ability of smaller PBMs to compete and compete effectively,” Cruz said during the markup hearing.
Several other senators were concerned about granting the FTC more powers when there will not be any Republican members on the commission in the near future.
Cruz sought to amend the bill to only apply the FTC scrutiny to the largest PBMs, but the amendment was not accepted. Cantwell said that limiting the scrutiny would not work as PBMs are “masters at creating new entities just to escape accountability.”
He added that the bill would be a major departure from current law and give the FTC authority to regulate beyond its expertise.
Cruz’s reticence could signal apprehension among some Republicans despite the bill’s bipartisan support. Similar legislation passed out of the Senate Commerce Committee in the last congressional session but never came to a vote by the full Senate.