Senate Debates New Disclosure Rules for PBMs

While the Bush administration is planning an expanded role for pharmacy benefit managers (PBMs) under the new Medicare drug benefit, Congress is considering legislation that would clamp down on the ability of PBMs to make ?backroom deals? with pharmacies and drug manufacturers.

The bill, introduced by Sen Maria Cantwell (D, Wash), reflects concern in Washington that, rather than holding down prescription costs, PBMs actually may be driving them up. Noting that a number of jurisdictions are moving to regulate PBMs, Cantwell said that ?suspicions are growing among state lawmakers and health department officials that the ?behind-closed-doors? practices of PBMs are responsible for some of the escalating costs of prescription drugs.?

At issue is whether the rebates, discounts, and other savings that PBMs negotiate with pharmaceutical manufacturers are passed on to health plans and consumers. Because ?PBMs are so secretive about their arrangements with manufacturers, it is difficult for PBM clients to know if a significant portion of the rebates are passed back to them as the PBM promises,? she told the Senate.

Cantwell also criticized PBMs for negotiating lower prices with community pharmacies but failing to pass those savings on to consumers??particularly on generic drugs.? Under her proposed legislation, cross-ownership arrangements between PBMs and pharmaceutical manufacturers would be outlawed, and PBMs that contract with Medicare would be required to pass on all savings negotiated with pharmacies.

PBMs would be allowed to pocket some of the rebates negotiated with drugmakers, but they would have to disclose the percentage that is not passed on. The bill also would require all US pharmacies to disclose the retail cost of a prescription when requested to do so by a consumer?a provision already on the books in several states including New York, Montana, Rhode Island, and Washington.