New Senate Bill Focuses on PBM Compensation in Medicare Plans

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If passed, PBMs would not be able to charge fees that are connected to the price of a drug, discounts, or rebates.

A bipartisan effort in the Senate aims to change the way pharmacy benefit managers (PBMs) are compensation. A bill — called Patients Before Middlemen Act — was introduced by Senate Finance Chairman Ron Wyden (D-Ore.), Senate Finance Ranking Member Mike Crapo (R-Idaho). Also supporting the legislation are: Bob Menendez (D-N.J.), Marsha Blackburn (R-Tenn.), Jon Tester (D-Mont.), and Roger Marshall (R-Kan.).

The bill would separate PBM compensation from price and utilization in Medicare Part D plans. Service fees would not be able to be connected to the price of a drug, discounts, or rebates. It would also create an enforcement mechanism requiring PBMs to pay to the Secretary any amount in excess of the designated service fees.

Mike Crapo (R-Idaho)

Mike Crapo (R-Idaho)

“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,” Crapo said in a press release. “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.”

In a statement, the Pharmaceutical Care Management Association (PCMA) said the proposed legislation “fails to address the root cause of high prices and appears to buy into the false rhetoric and self-serving agenda of big drug companies. Drug companies, not pharmacy benefit companies, profit immensely from high list prices they alone set and raise.” The lobbying group maintains that PBMs are a check against drug companies’ unlimited pricing power.

Separating PBM compensation from drug prices was part of the framework released by Wyden and Crapo in April to address PBMs practices. The framework follows a Finance Committee hearing on PBM practices and the impact on costs to patients and taxpayers. At the hearing in March, senators and witnesses took aim at PBMs for their role in what they say keeps drug prices high for consumers and for the Medicare program.

Related: Second Senate Committee Heaps Criticism on PBMs

Other policy solutions included in the framework include

  • enhancing PBM accountability to health plan client,
  • mitigating practices that unfairly inflate the prices patients and government programs pay for prescription drugs,
  • ensuring discounts negotiated by PBMs produce meaningful savings for seniors,
  • modernizing Medicare’s “Any Willing Pharmacy” requirements to improve options and access for seniors, and
  • Increasing transparency to foster a better understanding of how financial flows across the prescription drug supply chain impact government health care programs

This framework, the Senators said, aims to address misaligned incentives that drive up costs, insufficient transparency, hurdles to access, and practices that impede competition.

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