By: Giavanna Carr, PharmD Candidate c/o 2025

In March of 2023, Senators Maria Cantwell and Charles E. Grassley successfully passed the Pharmacy Benefit Managers (PBM) Transparency Act through the Senate Commerce Committee.¹ The PBM Transparency Act is projected to save taxpayers a total of $740 million dollars over a 10-year period, making this act a “win-win”.¹

Overview of Pharmacy Benefit Managers

PBMs act as a conciliator between insurance companies and the pharmaceutical manufacturer, behaving as a third-party entity.² Originally, PBMs were developed in the 1960s to process claims for insurance companies, but more recently their roles and responsibilities have expanded. PBMs are now responsible for developing and managing pharmacy networks, establishing formularies, designating copays, determining necessities of a prior authorization, and deciding which pharmacy patients should be utilizing based on their plan.³ The current leading PBMs are CVS Caremark, Express Scripts, and OptumRx, which make up 80% of the United States’ prescription benefit market.³ PBMs are allowed to be affiliated with large chain pharmacies such as CVS or Walgreens, or they may be their own separate pharmacy.

PBM Exclusion List

These organizations are able to establish their own formulary and more importantly, they have the say over which drugs get included or excluded from their formulary. When analyzing the PBMs exclusion list over the years, you can see a drastic change from when they first acquired the ability to exclude medications from the formulary in 2012 to the present. The number of products on the exclusion list reached an estimate of 598 products by CVS Caremark, 623 products by Express Scripts, and 615 products by OptumRx.⁴

The PBMs follow particular exclusion criteria when they determine which medications will not be covered for the year. The categories commonly consist of brand-name products, which have generic equivalents; biosimilars with alternatives; non-preferred (tier 3) drugs, which are rarely utilized; heavily promoted drugs that contain generic alternatives; and medications for chronic conditions.⁴

PBMS as “Invisible Middlemen”

Activities of PBMs are not regulated by any particular entity, and thus, they operate completely outside of the view to consumers and regulators.¹ It was discovered that PBMs were engaging in “spread pricing”, an activity where they charge the health plan or payer more for a prescription drug than the amount they reimburse to the pharmacy.⁵ In the midst, PBMs are likely pocketing this unknown amount of money rather than distributing it to consumers.⁵ Due to the conspiracies of PBMs manipulating the drug market in their favor to increase their profit while negating consumers and pharmacies, increased transparency in the true role and actions of PBMs in the prescription drug market is needed.

PBM Transparency Act of 2023

The PBM Transparency Act was introduced by Senator Cantwell and Senator Grassley to prohibit unfair or deceptive pricing practices by PBMs, incentivize fair and transparent PBM practices, and mandate transparency.⁵ To prohibit deceptive pricing practices, the PBM Transparency Act would make “spread pricing” illegal and prohibit PBMs from purposefully or deceptively withholding full payments from the pharmacy and lowering reimbursements to federally funded health plans. The legislation would incentivize fair practice by encouraging PBMs to distribute 100% of rebates to the health plan or payer and disclose costs and reimbursements of prescription drugs to health plans and pharmacies. PBMs should also include all fees, markups, and discounts imposed on health plans and pharmacies as well as any fees they receive from drug manufacturers. The legislation mandates transparency by requiring PBMs to file an annual report regarding how they decide prices of prescription drugs for health plans and pharmacies. Based on this bill, PBMs would be required to disclose how much they paid for the medication compared with how much they charged the pharmacy for that same drug. They would also be required to explain to consumers why the cost, copay, coinsurance, or deductible increased, and explain to the pharmacy why the reimbursement rate decreased.⁵ As previously mentioned, PBMs may work out of their own pharmacy, so they would be required to disclose the difference in charges and reimbursements between what they charge their affiliated and non-affiliated pharmacies. The Federal Trade Commission (FTC) and state attorney generals would be responsible for the enforcement of the act and PBMs would receive a penalty for each violation reported, as well as a penalty of up to 1 million dollars.⁵

References

1. AARP endorses Cantwell-Grassley PBM transparency act. Press release. U.S. Senate Committee on Commerce, Science, & Transportation. Published August 18, 2023. Accessed November 20, 2023. https://www.commerce.senate.gov/2023/8/aarp-endorses-cantwell-grassley-pbm-transparency-act
2. Pharmacy benefit managers. National Association of Insurance Commissioners. Published April 11, 2022. https://content.naic.org/cipr-topics/pharmacy-benefit-managers
3. PBM Basics. Pharmacists Society of the State of New York. Accessed November 20, 2023. https://www.pssny.org/page/PBMBasics
4. Fein AJ. The Big Three PBMs’ 2023 Formulary Exclusions: Observations on Insulin, Humira, and Biosimilars. Published January 10, 2023. https://www.drugchannels.net/2023/01/the-big-three-pbms-2023-formulary.html
5. ‌Grassley, Cantwell continue campaign to hold PBMs accountable. U.S. Senator Chuck Grassley of Iowa. Published January 26, 2023. Accessed November 20, 2023. https://www.grassley.senate.gov/news/news-releases/grassley-cantwell-continue-campaign-to-hold-pbms-accountable

Published by Rho Chi Post