Recent Legislative Developments Impacting Pharmacy Benefit Managers, Health Plans & More

At a Glance

• There are currently four bills under consideration that would have a direct or indirect impact on PBMs, as well as health plans, prescription drug manufacturers, wholesalers and pharmacies.
• The pending legislation has bipartisan support in the House and Senate, indicating a strong desire to further regulate PBMs at the federal level. Notably, the proposed legislation mirrors similar developments at the state level to increase transparency and reduce prescription drug costs. 
• Stakeholders should stay tuned for the FTC’s release of the final report.

As prescription drug costs remains a significant, and largely bipartisan, issue for state and federal legislators, we continue to see activity focused on pharmacy benefit managers (PBMs) as we approach the last quarter of 2024. Congress continues to consider multiple bills that will impact PBMs, and the Federal Trade Commission (FTC) released an interim report underscoring the FTC’s concerns around the impact of PBMs on the accessibility and affordability of prescription drugs. Overall, the federal developments are poised to address common themes, including rising prescription drug costs and increasing transparency in drug pricing.

Federal Legislative Developments

There are currently four bills under consideration that would have a direct or indirect impact on PBMs, as well as health plans, prescription drug manufacturers, wholesalers and pharmacies:

1. The Prescription Drug Supply Chain Pricing Transparency Act (H.R. 7535) requires the United States Comptroller General to study price-related compensation and payment structures in the retail prescription drug supply chain and submit a report to Congress within two years. Of note, the report would include an analysis of the structures between intermediaries in the prescription drug supply chain, variations in price-related compensation structures between affiliated and unaffiliated entities, and potential conflicts of interest among contracting entities related to the use of prescription drug price-related compensation structures.
2. The Amendment to Title XI of the Social Security Act to Enhance PBM Transparency Requirements (H.R. 7717) applies transparency-related reporting requirements to PBMs, and any affiliate of such PBMs, under a contract with (i) a prescription drug plan sponsor or a Medicare Advantage organization offering a Part D plan or (ii) a qualified health benefits plan. Such reports would be publicly available on the Centers for Medicare and Medicaid Services website and would include the amount of utilization-related fees the PBM receives from manufacturers, as well as the amount and percentage of fees passed through to the plan sponsor or issuer.
3. The Preserving Telehealth, Hospital, and Ambulance Act (H.R. 8261) amends the Social Security Act to add new provisions related to PBMs contracting with a Part D prescription drug plan, including: (i) prohibiting PBMs from receiving remuneration for services other than bona fide service fees (incentive payments and rebates passed through to the plan sponsor do not violate this requirement); (ii) beginning in 2027, requiring PBMs to submit a yearly report to the plan sponsor and the secretary of Health and Human Services providing information on the drugs provided under the plan and any affiliate arrangements related to the dispensing of drugs, among other information; (iii) requiring PBMs to provide plan sponsors with a written explanation of agreements with drug manufacturers; and (iv) establishing audit rights for plan sponsors. Additionally, the bill calls for the comptroller general of the United States and the Medicare Payment Advisory Committee to submit a report to Congress regarding prescription drug cost transparency and agreements with PBMs, respectively.
4. The Delinking Revenue From Unfair Gouging (DRUG) Act (H.R. 6283) requires, with respect to the Federal Employee Health Benefits program (FEHBP), that PBM’s service fees be set at a flat dollar amount and prohibits PBMs from charging fees based on (i) drug prices or benchmark prices (such as wholesale acquisition cost or average wholesale price) and (ii) discounts, rebates, fees, or other direct or indirect remuneration. It also prohibits PBMs from steering patients to affiliated pharmacies. 

The pending legislation has bipartisan support in the House and Senate, indicating a strong desire to further regulate PBMs at the federal level. Notably, the proposed legislation mirrors similar developments at the state level to increase transparency and reduce prescription drug costs.

FTC Interim Report on Prescription Drug Middlemen

More than two years after the announcement of its inquiry into the PBM industry, on July 9, 2024, the FTC published its interim report, underscoring the perceived impact of PBMs on the affordability and accessibility of prescription drugs. The report highlights the following areas related to PBMs and their roles in the prescription drug marketplace: (i) concentration and vertical integration; (ii) significant power and influence over patient access to and affordability of prescription drugs; (iii) self-preferencing; (iv) unfair contract terms; and (v) efforts to limit access to low-cost competitors. The Pharmaceutical Care Management Association, which represents PBMs, has publicly criticized the report for overlooking evidence that PBMs reduce prescription drug costs and increase patient access to medications. Stakeholders should stay tuned for the FTC’s release of the final report.