Congress needs to crack down on PBMs, state attorneys general say

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Pharmacy benefit managers (PBMs) and their business practices need additional oversight by federal lawmakers, according to state attorneys general.

The National Association of Attorneys General (NAAG) this month demanded congressional leadership “take decisive action to reform the way PBMs conduct business and bring more transparency to their work.” The association also endorsed three pending bills as crucial for necessary reforms.

PBMs started with the goal of protecting employers and consumers by negotiating drug prices with pharmaceutical manufacturers accused of overpricing medications, the NAAG letter said. But in recent years, the PBMs have clouded the market while causing price increases.

“A small number of PBMs hold significant market power and are reaping abundant profits at the expense of the patients, employers, and government payors the PBMs are supposed to help,” the attorneys general letter said. “Pharmaceutical buyers and sellers have little choice but to employ PBMs, allowing them to extract both monopoly profits from individuals and monopsony profits from the market. Moreover, PBMs often dictate reimbursement rates and rules to independent pharmacies, making it difficult for many to survive.”

States have attempted to regulate PBMs. For example, Ohio and Arkansas lawmakers have approved legislation barring “spread pricing,” by which PBMs charge payers more than the PBMs pay pharmacies for drugs, and pocket the difference, the NAAG letter said.

Federal action is needed because PBMs counter that federal jurisdiction and preemption limit states’ power to regulate PBMs. The pharmacy benefit managers also refuse to disclose data to state leaders and their own clients, the attorneys general said.

NAAG endorsed three bills:

• The “DRUG Act,” also known as S1542 and HR6283
• The “Protecting Patients Against PBM Abuses Act,” HR2880
• The “Lower Costs, More Transparency Act,” HR5378

The letter was sent to House Speaker Mike Johnson (R-Louisiana), House Minority Leader Hakeem Jeffries (D-New York), Senate Majority Leader Chuck Schumer (D-New York) and Senate Minority Leader Mitch McConnell (R-Kentucky).

The attorneys general noted their effort was bipartisan. The letter was drafted by Attorneys General Tim Griffin of Arkansas, Josh Stein of North Carolina, Dave Yost of Ohio, and Michelle Henry of Pennsylvania. Other states signing on were Alaska, Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New Hampshire, New Mexico, New York, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, the U.S. Virgin Islands, Utah, Vermont, Virginia, Wisconsin, and Wyoming.

Big Pharma to blame?

The Pharmaceutical Care Management Association (PCMA) did not publish a response to the attorneys general letter.

However, earlier this month, PCMA published a statement before the U.S. Senate Health, Education, Labor & Pensions Committee hearing titled: “Why Does the United States Pay, by Far, the Highest Prices in the World for Prescription Drugs?” That hearing featured testimony from pharmaceutical executives – and PCMA has been quick to blame the drugmakers themselves for skyrocketing costs of prescription medicine.

“Make no mistake, drug companies’ constant blaming of pharmacy benefit companies is designed to avoid accountability and further boost profits and pricing power,” the PCMA statement said. “Congress should reject drug companies’ self-serving blame game, and instead focus on solutions to encourage greater competition in the prescription drug market that would lower costs for patients.”

PCMA also cited a November 2023 commentary by Matrix Global Advisors about “delinking” PBM compensation and manufacturers’ drug prices involving Medicare Part D. It said that regulatory move would boost drug company profits by $32 billion a year while increasing patient premiums by almost $40 billion.

PCMA also supports the bill S3583, legislation introduced this year to make it easier for companies to market generic and biosimilar drugs by reducing pharmaceutical companies’ patent thickets. Those multiple patents on one drug lead to anticompetitive practices and market exclusivity for drugmakers, according to the summary by sponsor Sen. Peter Welch (D-Vermont.)