A new Senate bill would require PBMs to disclose some rebate info

DATE: March 15, 2017

Published by STAT News

In a bid to pull the curtain back on drug pricing, Senator Ron Wyden (D-Ore.) introduced a bill Wednesday that would require pharmacy benefit managers to disclose information about the controversial rebates paid by drug makers to win coveted spots on health plan formularies.

The legislation would force pharmacy benefit managers, which are the middlemen that negotiate prices between drug makers and health plans, to publicly post aggregated data about rebates and discounts that are obtained on behalf of Medicare Part D and Medicare Advantage plans.

The bill, which is called the Creating Transparency to Have Drug Rebates Unlocked Act, or C-THRU, comes amid growing turmoil over the prescription drug costs and, in particular, the largely hidden role played by pharmacy benefit managers, or PBMs.

“It’s time to lift the veil of secrecy on a powerful industry that claims it is bringing down the prices of medicines that Americans pick up at their pharmacy,” Wyden said. “Today, the public knows virtually nothing about whether PBMs are saving money for the consumer or pocketing it for themselves.”

Wyden, who also called the current pricing system “dysfunctional,” added that he plans to attach the bill to “every possible” legislation that addresses health care. There is currently no companion bill in the House.

Facing mounting criticism over the pricing practices, the pharmaceutical industry has begun foisting much of the blame on PBMs by contending the middlemen — a group that includes Express Scripts and CVS Caremark — have been seeking increasingly higher rebates, which forces drug makers to raise prices.

This is the point that Mylan Pharmaceuticals chief executive Heather Bresch tried to make at a congressional hearing last fall. She maintained that, despite the rising price of EpiPen, which rose more than 500 percent to $608 over the past decade, Mylan kept just $274 after paying higher rebates.

Critics also maintain that PBMs make it difficult to track the money flow since contracts are proprietary. Pharmacists, for instance, say a PBM may favor more expensive drugs on a formulary to increase rebates or classify a rebate as a type of fee, which can be retained rather than passed on to their clients.

The bottom line, critics say, is that health plans cannot so easily lower premiums and co-payments.

For their part, PBMs argue that rebates and discounts, minus fees, are properly disclosed to the health plans and that their bargaining saves insurers money. The Pharmaceutical Care Management Association, the trade group for PBMs, argues the middlemen typically reduce drug costs by 30 percent.

In newly released data, CVS Caremark contended its health plan clients saw their drug spending fall an average of 3.2 percent last year, compared with 5 percent in 2015. And 38 percent of commercial plans spent less, overall, in 2016 than the year before. And out-of-pocket costs for members fell 3 percent.

The PCMA, which last month circulated a memo to the Trump administration that pushed back against drug makers, blasted the bill, arguing it “will increase premiums by undermining the tools employers, unions, and public programs use to reduce prescription drug costs.

“The C-THRU Act would grant the kind of transparency that the Federal Trade Commission and economists say will raise costs by giving drug companies and drugstores unprecedented access to a health plan’s negotiations with their competitors. This mandate would give drug companies and drugstores inside information that could help them tacitly collude with their competitors.”

One health industry consultant, who advises health plans and employers on PBM contract negotiations, said the bill, which would update existing law, is meant well, but misses the mark.

“The problem today is that PBMs are entering into secret deals with manufacturers, extracting rebates that they partially pass through to plans, extracting other secret payments that PBMs retain for themselves, and driving up the prices of drugs as manufacturers try to make up for all the money that PBMs have extracted,” said Linda Cahn.

“The government currently requires manufacturers and PBMs to provide information about all these payments, but the government keeps all the information totally secret.

“What’s needed is for the federal government to require CMS to disclose the net price of every drug — inclusive of all rebates and other price reductions — to enable everyone to compare each drug’s net cost with the net costs of other drugs in the same therapeutic category. That will enable everyone to favor the drugs with the lowest net costs, which will in turn create price competition.

“Instead, the C-THRU statute explicitly bars CMS from disclosing rebate and price reduction information by drug. And the statute requires that CMS disclose the aggregate rebates collected by each PBM. This is totally counterproductive, since it will incentivize PBMs to extract more rebates from manufacturers, leading manufacturers to increase their prices even more.”

Wyden acknowledged the need to provide more specific data and indicated there are plans to pursue this, but for now, said he wants to avoid any scenarios that could lead to collusion.

The bill would require disclosure of “spread pricing,” which is the difference in payments made to pharmacies by PBMs compared to payments received by PBMs made by health plans. It would also require the disclosure of information about the so-called negotiated price. Under current law, Part D beneficiaries pay co-insurance based on the $100 price, not the lower price, say, $80, that a PBM negotiates with a drug maker.