State Attorneys General Urge PBM Reform

An article from

Dive Brief:

• A bipartisan group of 39 state attorneys general sent a letter to Congress on Wednesday urging lawmakers to take “decisive action” to reform pharmacy benefit managers.
• The letter, sent by nonprofit National Association of Attorneys General to minority and majority leaders of the Senate and House of Representatives, accuses PBMs of raising the cost of drug prices and contributing to opaque pharmaceutical pricing.
• Federal lawmakers have targeted PBM practices and health pricing transparency in recent legislation, which the attorneys general called “crucial” to drug pricing reform.

Dive Insight:

PBMs — drug middlemen that administer prescription benefits for health insurers and negotiate drug prices with manufacturers — have been targeted by regulators and lawmakers for their role in rising drug prices.

Although PBMs say they help lower drug costs, the middlemen have been scrutinized for hidden fees, opaque business contracts and rebate arrangements.

Drugmakers and PBMs have traded blame over rising drug prices in the U.S. Drugmakers accuse PBMs of hiking prices to profit off of rebate arrangements — where drugmakers pay PBMs to have their drugs placed on a favorable formulary tier — while the middlemen say drugmakers retain most of the drug dollar.

In light of concerns, the Federal Trade Commission and several Congressional committees have launched investigations into PBMs’ practices.

Lawmakers have expressed concern about consolidation. The largest three PBMs are owned by insurers — Caremark by CVS; Express Scripts by Cigna; and OptumRx by UnitedHealth — and control approximately 80% of the market.

In the letter, the attorneys general supported recent legislation targeting PBM practices, saying the bills would allow state and federal regulators to work together to regulate the middlemen.

The three bills —The DRUG Act, Protecting Patients Against PBM Abuses Act and the Lower Costs, More Transparency Act — have been introduced in Congress within the last year.

The Lower Costs, More Transparency Act, which passed the House in December, would ban PBMs from spread pricing — or when the middlemen charge insurers more for a drug than they reimburse pharmacies for dispensing it — in Medicaid. They would also be required to disclose rebates, fees or other types of compensation to brokers.

“Together, the legislation is intended to limit PBMs from unjustifiably increasing drug prices and to mandate steps that increase transparency of their practices,” the letter said. “Such measures will empower health plans to negotiate more advantageous agreements with PBMs and enable regulators to more effectively hold PBMs accountable for their actions.”

In addition to Congress, the attorneys general also called on the Federal Trade Commission stop PBMs’ ability to “unreasonably raise the price of drugs and to require greater transparency.”