On Senate Floor, Cantwell Calls on Colleagues to Regulate Prescription Drug Middlemen

June 20, 2024

Cantwell: “We're trying to stop those unfair and manipulative practices”

NYT reports today how opaque PBM industry is secretly inflating prescription drug prices

PBMs contribute to hostile environment that drives pharmacies out of business; in WA, 83 pharmacies closed in the last 18 months

Today, U.S. Senator Maria Cantwell (D-Wash.), Chair of the Senate Committee on Commerce, Science and Transportation, called on her colleagues to pass her bipartisan legislation with Sen. Chuck Grassley (R-Iowa), the Pharmacy Benefit Manager Transparency Act, which would hold middlemen in the prescription drug market accountable for deceptive and unfair practices that drive up drug costs for consumers and force pharmacies out of business. The Committee passed the bill 18-9 last year, and the legislation currently awaits a vote in the Senate.

Pharmacy benefit managers, or PBMs, were initially formed to process claims and negotiate lower drug prices with drug makers. Today, they administer prescription drug plans for hundreds of millions of Americans – and just three PBMs control nearly 80 percent of the entire prescription drug market. They serve as middlemen, managing every aspect of the prescription drug benefits process for health insurance companies, self-insured employers, unions and government programs.

“Can you imagine anybody controlling 80% of the market?” Sen. Cantwell said yesterday on the Senate floor. “Effectively, they have unchecked power on their ability to distort the market, and engage in unfair and abusive practices.”

“So, not surprising that independent pharmacies can't stay open with these kind of tactics,” Sen. Cantwell continued. “In just the last 18 months, 83 pharmacies in the state of Washington have closed. These practices have contributed to a creation of pharmacy deserts. In fact, Fortune Magazine just wrote a story about this particular problem in the State of Washington. There are now 86 towns in my state that are more than 10 miles from the nearest pharmacy. That means that roughly 450,000 people in my state live in an area where they have to drive ten miles just to go to a pharmacy. And we now rank sixth among all states for poor access to pharmacies. According to the Washington State Pharmacy Association, there are no more 24-hour pharmacies left in the city of Seattle.”

Currently, PBMs operate out of the view of regulators and consumers — setting prescription costs, deciding what drugs are covered by insurance plans and how they are dispensed – pocketing unknown sums that might otherwise be passed along as savings to consumers and undercutting local independent pharmacies. This lack of transparency makes it impossible to fully understand if and how PBMs might be manipulating the prescription drug market to increase their profits and drive up drug costs for consumers.

The bill has been endorsed by more than 200 organizations across the country, including AARP. The bill also has strong bipartisan support and is cosponsored by Sens. Jon Tester (D-Mont.), Peter Welch, (D-Vt.), Cindy Hyde-Smith (R-Miss.), Mike Braun (R-Ind.) Jerry Moran (R-Kan.), Thom Tillis (R-N.C.), Shelley Moore Capito (R-W.Va.), John Boozman (R-Ark.), Marshall Roger (R-Kan.), Martin Heinrich (D-N.M), Joni Ernst (R-Iowa) and Mike Rounds (R-S.D.) and Jeanne Shaheen (D-N.H.).

The Pharmacy Benefit Manager Transparency Act would:

  • Prohibit unfair or deceptive practices.
    • Block PBMs from engaging in spread pricing, unfairly reducing or clawing back drug reimbursement payments to pharmacies, and unfairly charging pharmacies more to offset federal reimbursement changes.
  • Incentivize fair and transparent PBM practices.
    • Provide exceptions to liability for PBMs that pass along 100% of rebates to health plans or payers and fully disclose prescription drug rebates, costs, prices, reimbursements, fees and other information to health plans, payers, pharmacies and federal agencies.
  • Improve transparency and competition by requiring PBMs to report:
    • The amount of money they obtain from spread pricing, pharmacy fees and clawbacks.
    • Any differences in the PBMs’ reimbursement rates or fees PBMs charge affiliated pharmacies and non-affiliated pharmacies.
    • Whether and why they move drugs in formulary tiers to increase costs.
  • Direct the Federal Trade Commission (FTC) to report to Congress its enforcement activities and whether PBMs engage in unfair or deceptive formulary design or placement.
    • Authorize the FTC and state attorneys general to enforce the bill.
    • Protect whistleblowers from being fired or reprimanded for bringing violations to light.

In Washington state and across the nation, PBMs are contributing to a hostile business ecosystem, especially for independent community pharmacies. In 2023, the state saw the closure of 60 pharmacies and in the last 18 months a record 83 pharmacies have closed in the state. These closures have a significant impact on Washington consumers.  A recent analysis by the Associated Press found that Washington state is the 6th worst in the nation pharmacy access. There are currently only three 24-hour pharmacies open in the entire western side of the state, none of which are in Seattle.