Reform efforts to consider how health care plans may capitalize on disclosures, balancing out-of-pocket spending access, and how pharmacists can help plan members with the increased transparency of pharmacy benefit managers.
Legislation that addresses potential changes in pharmacy benefit manager (PBM) compensation disclosure requirements, a review of business models and agreements before these disclosures, and changes in the assessment of PBM fees are currently stalled as Congress seeks to elect a new Speaker of the House. These reform efforts will also consider how health care plans may capitalize on disclosures, balancing out-of-pocket spending access, and how pharmacists can help plan members with the increased transparency of PBMs.
Melissa Andel, MPP, principal of CommonHealth Solutions LLC, provided updates on pending legislation, major policies that are under consideration, and impacts on government and commercial markets of PBM reform at the Academy of Managed Care Pharmacy’s Nexus 2023 conference.
“The 2 big questions that are really facing PBM reforms efforts are 1: when will they move, like what is actually happening in Congress now? Then 2: What is actually going to be in the final piece of legislation?” Andel said in the presentation.
Currently, there is general bipartisan support for PBM reforms, in both the House and Senate, but there are factors in Congress that are taking priorities. In the Senate, there are 3 committees that have advanced legislation on PBM reforms, with leadership supporting a floor vote before the end of 2023. In the House, a consolidated bill was released in September and although there are plans for a full House vote, they are stalled due to the current issues in Congress. The legislation will be active through the end of 2024.
There is general agreement that there needs to be increased transparency regarding plan sponsors and PBMs, spread pricing prohibition, which is present in all current legislation, according to Andel, and “de-linking” administrative fees.
“They’re noticing a lot of consolidation among different service line providers and PBMs,” Andel said.
“They're looking at just that market behavior. They're also thinking about prescription drug prices. They address prescription drug pricing in Medicare through the Inflation Reduction Act, now we're looking at the prescription drug prices in the commercial market as well. They're thinking about things like the relationship between list prices and administrative fees, the difference between what PBMs pay pharmacies and then what they charge planners to fill prescriptions.”
There are 3 key jurisdictions and proposed plans of the Senate that Andel focused on in the session: The Finance Committee, including Medicare and Medicaid; the Health, Education, Labor, and Pension (HELP) Committee, including plans that regulate under the Employee Retirement and Income Security Act and the Affordability Care Act; and the Commerce Committee, including interstate commerce and the Federal Trade Commission (FTC).
The Finance Committee Package includes the prohibition of spread pricing in Part D for Medicaid and Medicare managed care. The Part D rebates must also be passed through the prescription drug plan sponsors, used to lower the costs for prescription drugs with a 100% pass-through in Medicaid managed care, according to Andel.
There is also a limit to the bona fide service fees based on the fair market value of services that are not linked to drug list pricing. It also focuses on transparency, including the gross and net price for each drug, manufacturer rebates, direct and indirect remuneration (DIR) fees, average drug acquisition cost by community pharmacies, and the total revenue to the PBM, which must be reported to the plan sponsor and CMS. Further, PBMs must report plan sponsors and CMS drug dispensing costs and drug costs for generics and biosimilar formulary replacements, which will include mid-year changes to accommodate biosimilars, according to Andel.
Within the HELP Committee Package, spread pricing is also prohibited in group insurance plans, and PBMs must pass 100% of rebates, discounts, and fees on a quarterly basis, which can be audited by the government. Remuneration by the insurer for certain services can only be used for those specific services.
For transparency, Andel noted that when there are 3 or more drug options, the PBM must provide rebate and fee information to the plan sponsor as well as rebate and fee information for the top 50 drugs. PBMs also need to disclose compensation to benefit consultant brokers. For the top 50 drugs or for drugs costing more than $10,000, PBMs must disclose all other drugs in the same therapeutic class and rationale for formulary placement, according to Andel.
The Commerce Committee Package also includes the prohibition of spread pricing if the PBM does not pass 100% of the rebates, which exempts PBMs from spread pricing prohibition and pharmacy payment restrictions. They must also disclose cost, price, and reimbursement of each drug to both the pharmacy and health plan while aggregated information must be reported to the FTC. Biosimilar and generic products are not addressed.
Andel also discussed the prohibition of spread pricing in Medicare, Medicaid, and commercial plans, pass-through of 100% of rebates, and transparency of list prices, net costs, out-of-pocket spending, and utilization management of formulary drugs. The Part D plan sponsors must disclose information that relates to pharmacy ownership every 3 years, Andel noted.
She also acknowledged the alignment of spread pricing between the House and the Senate, including 100% of rebate pass-through to the plan sponsor, the consideration of legislation aimed at reducing barriers to generic products, and additional transparency and disclosure for PBM formulary decisions, reimbursements, and gross-to-net cost.
The provisions of the Finance Committee are planned for 2026 while the HELP Committee will take place 30 months after it is passed, and the Commerce Committee will start 1 year after enactment. For the House, the provisions generally take affect 2 years after the bill’s passage.
“It will be interesting to see if these bills have to be prepared, and we do have to get a conference committee and a final piece of legislation of what comes out of it. Are you able to get a majority in the House that is willing to support [what we’re] seeing on the Senate side?” Andel said in the session.
Andel M. PBM Reform Efforts: What you Need to Know. AMCP Nexus 2023. Orlando, Florida. October 17, 2023. Accessed October 17, 2023.