Legislation would require PBMs to publicly report rebate information
The C-THRU legislation, initiated Wednesday in the Senate Finance Committee, would require PBMs serving Medicare Part D plans to disclose the aggregate rebates they receive from drug manufacturers and the amount of those rebates passed on to health plan sponsors. That information would then have to be made publicly available on the Center for Medicare & Medicaid Services (CMS) website.
In addition, after two years of public reporting of rebate information, the legislation would mandate a minimum percentage of rebates and discounts to be passed from a PBM to a health plan to lower premiums or other cost-sharing amounts paid by patients. Cost sharing for Part D beneficiaries would be based off the manufacturer and PBM’s negotiated price of the drug, with the goal of enabling patients to fully benefit from discounts and rebates provided by drug makers.
The disclosures required by C-THRU would help consumers and employers determine if PBMs are delivering on their efforts to rein in the cost of prescription drugs, according to Wyden, ranking member of the Senate Finance Committee.
“Today is the first step of an effort to lift the veil of secrecy about prescription drug prices,” Wyden said in a statement. “More and more, Americans are beginning to wonder whether prescription medicine will be available and affordable for their families, and there is little information about why these drugs are so expensive. This bill will shine a light on this opaque industry and promote competition to bring down the cost of prescription drugs.”
C-THRU highlights the role of PBMs in reckoning a prescription drug’s ultimate price. Health insurance plans, employers and other payors contract with PBMs to negotiate rebates or discounts with drug manufacturers. However, Wyden explained, these financial arrangements are often unknown, and consumers have no way of knowing the amount of savings passed on.
He noted that Part D beneficiary cost sharing, such as co-insurance, is based off the pharmacy acquisition price — resulting in a higher price than what the Part D plan pays to buy the drug. For example, he said, if a manufacturer sets the price of a certain drug at $100, 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 the drug maker.
On the pharmacy side, C-THRU would bring more transparency to a practice known as “spread pricing,” according to Wyden. Spread pricing is the difference between PBM payments to pharmacies for a drug and the payments that PBMs receive from health plans for that medication.
The National Community Pharmacists Association applauded the introduction of the C-THRU legislation, which is co-sponsored by Sens. Sherrod Brown (D., Ohio) and Heidi Heitkamp (D., N.D.).
“NCPA agrees with Sen. Wyden’s goal for more transparency from pharmacy benefit managers,” stated NCPA chief executive officer B. Douglas Hoey. “There’s mounting evidence that PBM profits grow in lockstep with — and contribute to — rising prescription drug costs. A big part of that problem is the manufacturer rebate revenue retained by PBMs, which is this intended focus of this legislation.”
Wyden reported that pharmaceutical manufacturer rebates represented about 17.2%, or $23.6 billion, of gross drug costs in Part D in 2015, up from 11%, or $8.7 billion, in 2010.
“NCPA will continue to advocate for greater PBM transparency because it is vital to facilitating major changes to drug benefit management in the U.S. — namely, a better alignment of the interests of patients, plan sponsors and providers alike,” Hoey added.
The Pharmaceutical Care Management Association (PCMA), a PBM trade group, said Wednesday that C-THRU would hike drug costs and dilute competition.
Payors such as employers, unions and government health programs enlist PBMs to help control prescription drug costs, and PBMs typically are able to reduce drug costs 30% by using their scale and expertise to negotiate discounts, the association noted.
“PBMs support the right kind of transparency that offers consumers and plan sponsors the information they need to make the choices that are right for them. However, this bill will increase premiums by undermining the tools employers, unions and public programs, including Medicare, use to reduce prescription drug costs,” PCMA said in a statement. “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 drug stores unprecedented pricing power that could help them tacitly collude with their competitors.
“We look forward to working with Sen. Wyden on workable solutions that reduce, not increase, prescription drug costs,” PCMA added.