WASHINGTON, D.C. – U.S. Senators Bob Menendez (D-N.J.) and Marsha Blackburn (R-Tenn.), alongside Senate Finance Chairman Ron Wyden (D-Ore.), Senate Finance Ranking Member Mike Crapo (R-Idaho), Senator Jon Tester (D-Mont.), and Senator Roger Marshall (R-Kan.), Wednesday introduced the Patients Before Middlemen (PBM) Act to delink the compensation of pharmacy benefit managers (PBMs) from drug price and utilization in order to better align incentives that will help lower prescription drugs costs for Medicare Part D beneficiaries.
“Currently, pharmacy benefit managers have rigged the system to maximize profits, while doing little to drive down the cost of prescription drugs for patients at the pharmacy counter,” Menendez said. “This bipartisan legislation would help lower prescription drug prices for Medicare Part D beneficiaries by delinking PBM compensation from list prices and utilization levels – eliminating a perverse incentive structure that has done nothing but disadvantage patients. Together with my colleagues, I look forward to working to ensure we create a more equitable system that prioritizes patients and puts more money back into people’s pockets.”
“For too long, middlemen have taken advantage of misaligned incentives in the pharmaceutical supply chain at the expense of taxpayers and seniors. We need to put patients before the profits of Pharmacy Benefit Managers,” Blackburn said. “The Patients Before Middlemen Act is a major step toward increasing transparency and reducing prescription drug costs for seniors at the pharmacy counter.”
PBMs are third-party intermediaries that manage prescription drug benefits and pharmacy networks on behalf of health plans, including Medicare Part D plans. PBMs perform multiple functions including determining which medications will be covered by health insurance plans and how much patients will pay.
The PBM industry was created to assist employers with managing overall prescription drug costs and benefits; however, the current system incentivizes PBMs to steer health plans and seniors towards more expensive prescription drugs. Currently, PBMs’ income is often linked to the price of a drug. By tying administrative fees, rebate-based compensation, and other payments to a percentage of the list price, current arrangements incentivize increases in sticker prices, harming patients at the pharmacy counter.
“This legislation will put a stop to one of the most egregious practices driving up the price of prescription drugs in Medicare: pharmacy benefit managers getting paid based on the price of a drug,” Wyden said. “Instead of fighting for lower prices, this practice has encouraged drug middlemen to favor higher-priced drugs in their negotiations, which means seniors are forced to pay more for their prescriptions. I’m pleased to introduce this bill on a bipartisan basis, and I look forward to working with Ranking Member Crapo and other members of the Finance Committee to include this policy in the committee’s forthcoming effort to address pharmacy benefit manager practices that are driving up prices for seniors and taxpayers.”
“As we work to find solutions that reduce prescription drug costs for patients at the pharmacy counter, this commonsense proposal will help mitigate misaligned incentives that currently steer some Medicare Part D plans, pharmacy benefit managers and seniors toward higher-priced medications, even when more affordable alternatives like biosimilars are on the market,” said Ranking Member Crapo. “Delinking PBM compensation from sticker prices would take a critical first step in ensuring that all supply chain participants seek out the best deals available, driving down out-of-pocket spending and promoting cost-cutting competition. I look forward to continuing our committee’s bipartisan efforts to advance comprehensive, patient-focused policies moving forward.”
“Montanans on Medicare rely on Medicare Part D to help cover the cost of life-saving prescriptions, but too often folks still struggle to afford their medication,” Tester said. “That’s because massive PBM corporations are incentivized to jack up prices for consumers and put a squeeze on the pharmacies they rely on. That’s why I’m working with my colleagues on both sides of the aisle to get rid of bad incentives, lower drug costs, and hold these massive corporations accountable for price gouging our seniors.”
“At a time of economic uncertainty and inflation costing Kansans $824 more per month, our seniors should not have to decide between paying for their bills or lifesaving medicine,” Marshall said. “For too long, industry middlemen have abused the Medicare program to maximize their bottom line at the expense of seniors by favoring more expensive drugs. Our bipartisan legislation takes an important step to improve access to affordable prescription drugs by reforming middlemen reimbursement so they make formulary decisions that puts seniors first. This empowering move will help Kansan seniors save more at the pharmacy counter and promote better health outcomes.”
The Senate Finance Committee’s 2021 report on insulin arrangements between PBMs and manufacturers uncovered evidence suggesting that insulin manufacturers raised list prices in tandem with competitors to maintain formulary placements with PBMs. Evidence also showed that some manufacturers debated decreasing their insulin list prices, but appeared to conclude that doing so would put them at a competitive disadvantage because lowering price would also lower amounts paid to PBMs.
The PBM Act would:
- Prohibit PBM compensation based on the price of a drug as a condition of entering into a contract with a Medicare Part D plan. Service fees will not be connected to the price of a drug, discounts, rebates, or other fees.
- Create an enforcement mechanism requiring PBMs to pay to the Secretary any amount in excess of the designated service fees.
This April, Sens. Wyden and Crapo released a legislative framework to address PBMs and issues with the prescription drug supply chain. This framework aims to modernize and enhance federal prescription drug programs, with the goal of reducing drug costs for patients and taxpayers. Sens. Menendez and Blackburn, along with Sens. Wyden, Crapo, Tester, and Marshall, will work diligently to include the PBM Act in the Senate Finance Committee’s effort to address prescription drug costs and the supply chain issues for prescription drugs.