Pharmacy Benefit Manager Transparency Act

January 24, 2023

Pharmacy Benefit Manager Transparency Act

“The increasing cost of prescription drugs has a devastating effect on the pocketbooks of American consumers. PBMs are the middlemen in the prescription drug supply chain and it’s time for Congress to give the FTC the ability to shine a brighter light on any deceptive and abusive practices.” – Sen. Cantwell

Most people aren’t aware that three Pharmacy Benefit Managers (PBMs) control nearly 80% of the prescription drug market.
They serve as “middlemen,” managing every aspect of the prescription drug benefits process for insurers. And they operate out of view of regulators and consumers—setting prescription costs, deciding what drugs are covered by insurance plans, and how they’re dispensed—pocketing unknown sums that might otherwise be passed along as savings to consumers.

This lack of transparency makes it impossible to fully understand how PBMs might be manipulating the prescription drug market to increase their profits and drive up drug costs for consumers.

For example, some PBMs have been known to engage in “spread pricing” where a PBM charges a health insurance plan more to process a prescription than it reimburses the pharmacy, keeping the difference— i.e., the spread. Such a practice lines PBMs’ pockets while harming consumers and the pharmacies they trust to deliver crucial medication.

Americans pay more per person for prescription drugs than
in any other country, and prices keep going up. More insight into how these prices are determined will help protect consumers against unfair or deceptive practices by PBMs.

Sen. Cantwell introduced the bipartisan Pharmacy Benefit Manager Transparency Act with Sen. Grassley to shine a brighter light on the drug pricing market and hold PBMs accountable for unfair and deceptive pricing schemes that drive up prescription drug costs at the expense of consumers.  The legislation passed the Commerce Committee in June 2022. The Committee will continue to work on this issue in the new Congress.

“PBM-insurers have manipulated our complex health care system so they can set their competitors’ prices, dictate their competitors’ reimbursements, use competitors’ data to steer patients to PBM-affiliated retail, specialty and mail-order pharmacies, and limit where and what consumers can buy…NCPA is grateful to Sens. Cantwell and Grassley for their ongoing support of PBM reform.” - National Community Pharmacists Association CEO B. Douglas Hoey, pharmacist, MBA

“Senator Cantwell and Senator Grassley’s critical legislation will help stop PBM abuses and bring much-needed transparency to the shroud of secrecy they operate in. The top PBMs use their inordinate market leverage to delay and even deny patients their cancer medications, lowball payments to pharmacists resulting in pharmacy closures, and fuel drug health care costs for all Americans. The Senators’ leadership is so critical and appreciated.” - Ted Okon, Executive Director of the Community Oncology Alliance

Sen. Cantwell talks with local pharmacists about legislation to lower drug costs in Seattle, Washington, in July 2022

Pharmacy Benefit Manager Transparency Act of 2022: 

  • Prohibits Arbitrary, Unfair, or Deceptive Practices. The bill would prohibit PBMs from engaging in spread pricing; arbitrarily, unfairly, or deceptively reducing or clawing back drug reimbursement payments to pharmacies; and arbitrarily, unfairly, or deceptively charging pharmacies more to offset federal reimbursement changes. 
  • Incentivizes Fair and Clear PBM Practices. PBMs that pass along 100% of rebates to payers or plans and fully disclose prescription drug rebates, costs, prices, reimbursements, fees and other information to health plans, payers, pharmacies and federal agencies would not be liable under the Act. 
  • Improves Transparency and Competition. The bill would require PBMs to report how much money they make from spread pricing, pharmacy fees and clawbacks; differences in the PBMs’ reimbursement rates or fees they charge affiliated pharmacies and non-affiliated pharmacies; and whether and why they move drugs in formulary tiers to increase costs. It also directs the Federal Trade Commission to report to Congress its enforcement activities and whether PBMs engage in unfair or deceptive formulary design or placement. 
  • Protects Whistleblowers. The legislation protects whistleblowers from being fired or facing other retaliation for exposing violations.  

Read More About the Pharmacy Benefit Manager Transparency Act