How Would the C-THRU Act Affect Federal Spending?

Lawmakers across the country are increasingly focused on improving transparency among pharmaceutical stakeholders. While some newly introduced legislation targets manufacturers, others are seeking to increase transparency among pharmacy benefit managers (PBMs).

Recently, Sen Ron Wyden (D-OR) introduced the Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act of 2017, which would require PBMs operating within Medicare to disclose rebates provided by pharmaceutical manufacturers and how much is actually being passed onto health plans.

While some lawmakers and advocacy organizations have praised the bill, a new report conducted by the Moran Company and commissioned by the Pharmaceutical Care Management Association (PCMA) suggests the C-THRU Act may dramatically increase federal spending.

In the report, the authors projected how the Congressional Budget Office (CBO) may score the legislation. The analysis focused on the potential impact of access to competitors’ prices.

The authors stated that the CBO would find pricing disclosures to increase overall prescription drug costs, since it would elicit a dampening effect on rebates available to plan sponsors.

Additionally, the authors created a model that projects the degree of compression the CBO may predict if pricing information is widely accessible. The model included achieved rebate percentages around a national mean of 25% of wholesale acquisition costs. Through the model, the authors wrote the CBO may conclude that the transparency would increase drug costs by 2%.

According to the study, the CBO has previously stated that increased transparency would lead to high costs. The authors point to the CBO’s estimates that the Cantwell Amendment to the Medicare Modernization Act in 2003 would increase costs by $40 billion over 10 years.

The CBO noted that pricing transparency would reduce rebates and discounts offered. This would drive up costs for Part D, since the program benefits from significant discounts, according to the study.

While a 2% increase seems relatively small, it would increase federal spending by more than $20 billion from 2018 to 2027, according to the study. The authors noted that the large estimate is due to subsidies for branded drugs under Medicare Part D and the Affordable Care Act.

“What consumers want is transparency of premiums, copays and other costs that help them make better choices,” said Mark Merritt, CEO and president of PCMA. “Unfortunately, this bill would grant drug companies inside information that would empower them to raise prices for consumers.”

In response to the report, the National Community Pharmacists Association (NCPA) — a supporter of the C-THRU Act – released a statement criticizing its findings.

"I've long ceased to be surprised by the extent to which they'll go to muddle and mislead in the interest of protecting their profits. That's certainly what they've done in this latest pronouncement, in which they tout a research study they commissioned as 'suggesting' that the PBM transparency provisions in S. 637 would increase federal spending by $20 billion over 10 years,” said B. Douglas Hoey, RPh, MBA, NCPA CEO. “This is just another in a long line of sketchy PBM theoretical models, more paper tiger than substantive research.”

The NCPA previously released a statement supporting the C-THRU Act saying the bill would shed a light on PBMs to determine how much they gain in profit and how much is being cycled back to consumers.

"The PCMA news release claims the sky is falling, but is really just a restatement of PBMs' long-recited argument against the disclosure of manufacturer rebate amounts,” Hoey said. “However, the other part of the Wyden bill focuses on a common-sense provision that would require that a drug's 'negotiated price,' with a pharmacy for purposes of Medicare Part D must include all price concessions at the point of sale.

The organization argues that as long as PBMs are not subject to transparency, overall healthcare costs and PBM profits will continue to increase, according to the release.

"I've said it before, and I'll say it again here: 'Sunlight is the best disinfectant.' If the PBMs are so righteous in their claims to reduce drug costs, don't tell us, show us. To make good and rational economic decisions—and as a matter of fairness—pharmacy patients and plan sponsors need to know that they are getting the deal they bargained for,” Hoey said. “Until we can see how much the PBMs are keeping for themselves—which is precisely the type of transparency needed—healthcare purchasers will continue to see higher costs, and the PBMs will continue to see record profits.”