Bipartisan bill introduced to target drug pricing transparency

June 1, 2022

Sens. Chuck Grassley (R-Iowa), ranking member of the Judiciary Committee, and Maria Cantwell (D-Wash.), chair of the Committee on Commerce, Science and Transportation, have introduced legislation that would empower the Federal Trade Commission (FTC) to increase drug pricing transparency and hold pharmacy benefit managers (PBMs) accountable for unfair and deceptive practices that drive up the costs of prescription drugs at the expense of consumers.

The Pharmacy Benefit Manager Transparency Act of 2022 would ban deceptive unfair pricing schemes; prohibit arbitrary claw backs of payments made to pharmacies; and require PBMs to report to the FTC how much money they make through spread pricing and pharmacy fees.

“I hear stories about rising drug costs all the time at my 99 county meetings, and middlemen pocketing consumer and taxpayer money is a big reason for those high costs,” Grassley said. “Pharmacy benefit managers and other intermediaries in the pharmaceutical supply chain must be held accountable for increasing the cost of healthcare in the United States. It is critical for Congress to direct the Federal Trade Commission to go after these arbitrary, unfair and deceptive practices while also establishing more transparency and accountability.”

 “The increasing cost of prescription drugs has a devastating effect on the pocketbooks of American consumers,” Cantwell said. “PBMs are the middlemen in the prescription drug supply chain and it’s time for Congress to give the FTC the ability to shine a brighter light on any deceptive and abusive practices.”

PBMs were initially formed in the 1960s to process claims and negotiate lower drug prices with drug makers. Now, PBMs administer prescription drug plans for hundreds of millions of Americans.

Three PBMs control nearly 80 percent of the prescription drug market. They serve as middlemen, managing every aspect of the prescription drug benefits process for health insurance companies, self-insured employers, unions and government programs. They operate out of the view of regulators and consumers — setting prescription costs, deciding what drugs are covered by insurance plans and how they are dispensed – pocketing unknown sums that might otherwise be passed along as savings to consumers and undercutting local independent pharmacies. This lack of transparency makes it impossible to fully understand if and how PBMs might be manipulating the prescription drug market to increase profits and drive-up drug costs for consumers.

 Some PBMs have been known to engage in “spread pricing” in which a PBM charges a health insurance plan more to process a prescription than it reimburses the pharmacy, keeping the difference – the spread.  For example, when a pharmacist fills a prescription, a PBM handles the process, informing the pharmacy it will be reimbursed $90. The PBM then charges the health insurance plan $100 for processing the same prescription. The spread of $10 is pocketed by the PBMs.

 In some cases, the pharmacy is reimbursed below its cost, driving independent pharmacies out of business, creating pharmacy deserts and increasing costs for health plans that can result in higher premiums. PBMs can also practice unfair claw backs, retroactively rescinding reimbursement payments made to pharmacies based on arbitrary guidelines and evaluations.

 Specifically, the legislation:

•             Prohibits arbitrary, unfair or deceptive practices: Prohibits PBMs from engaging in spread pricing; arbitrarily, unfairly or deceptively reducing or clawing back drug reimbursement payments to pharmacies; and unfairly charging pharmacies more to offset federal reimbursement changes;

•             Incentivizes fair and transparent PBM practices: Provides exceptions to liability for PBMs that pass along 100 percent of rebates to health plans or payers and fully disclose prescription drug rebates, costs, prices, reimbursements, fees and other information to health plans, payers, pharmacies and federal agencies;

•             Improves transparency and competition: Requires PBMs to report the amount of money they obtain from spread pricing, pharmacy fees and claw backs; report any differences in the PBMs’ reimbursement rates or fees PBMs charge affiliated pharmacies and non-affiliated pharmacies; report whether and why they move drugs in formulary tiers to increase costs; and it directs the FTC to report to Congress its enforcement activities and whether PBMs engage in unfair or deceptive formulary design or placement; and

•             Enhances enforcement: Authorizes the FTC and state attorneys general to enforce the legislation and hold bad actors accountable.

 Grassley and Cantwell’s bipartisan proposal is supported by the National Community Pharmacists Association, Community Oncology Alliance, Biotechnology Innovation Organization and American Pharmacy Cooperative.

“PBM-insurers have manipulated our complex healthcare system so they can set their competitors’ prices, dictate their competitors’ reimbursements, use competitors’ data to steer patients to PBM-affiliated retail, specialty and mail-order pharmacies, and limit where and what consumers can buy,” said National Community Pharmacists Association CEO B. Douglas Hoey, pharmacist, MBA. “There are plenty of PBM actions for policymakers and regulators to address in order to ease the havoc they have wreaked on patients and small business independent pharmacies. NCPA is grateful to Sens. Cantwell and Grassley for their ongoing support of PBM reform. We’re proud to endorse their latest effort, the Pharmacy Benefit Manager Transparency Act, and will work to help it advance.”

 “Senator Cantwell and Senator Grassley’s critical legislation will help stop PBM abuses and bring much-need transparency to the shroud of secrecy they operate in,” said Ted Okon, executive director of the Community Oncology Alliance. “The top PBMs use their inordinate market leverage to delay and even deny patients their cancer medications, lowball payments to pharmacists resulting in pharmacy closures, and fuel drug healthcare costs for all Americans. The Senators’ leadership is so critical and appreciated.”

“The Biotechnology Innovation Organization (BIO) applauds Senators Maria Cantwell (D-WA), Chair of the Committee on Commerce, Science and Transportation and Chuck Grassley (R-IA), Ranking Member of the Judiciary Committee, for introducing the Pharmacy Benefit Manager Transparency Act of 2022 that would increase transparency and authorize the Federal Trade Commission (FTC) to hold pharmacy benefit managers (PBMs) accountable for unfair practices that harm patients." -- Biotechnology Innovation Organization

“Unfair and deceptive PBM practices drive up drug costs, reduce access to care, and harm patients, taxpayers, community pharmacies, and other providers. APCI, our member pharmacists, and their patients are grateful to Senators Cantwell and Grassley for their leadership and commitment to fighting abusive PBM practices. This legislation is a critical first step in taking back our healthcare system from the grasp of PBMs and will increase transparency and accountability in the marketplace while at the same time protecting state PBM laws throughout the nation,” said Tim Hamrick, CEO of American Pharmacy Cooperative. 

Chuck Grassley release