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Understanding “Delinking” in the PBM Legislation | AMCP 2024


Ross Margulies, J.D., M.P.H., a partner at the Foley Hoag law firm, discusses proposals to “delink” what pharmacy benefit managers are paid from the price of drugs.

Many of the new rules Congress is considering in the still-fluid pharmacy benefit management (PBM) legislation would add reporting requirements to meet transparency goals but wouldn’t fundamentally disrupt the industry’s business practices.

Not so the “delinking” provisions in some of the PBM bills that have been introduced

Ross Margulies, J.D., M.P.H., a partner in the Foley Hoag law firm, spoke about the PBMs and the PBM legislation today at the 2024 annual meeting of the Academy of Managed Care Pharmacy (AMCP), which is being held at the Ernest N. Morial Convention Center in New Orleans.

In an interview with Managed Healthcare Executive prior to the meeting, Margulies discussed the proposals to “delink” PBM compensation from drug prices. Currently, rebates that are tied to a prescription drug’s list price are a major source of revenues of PBMs and a target of the criticism directed at the industry.

It is far from certain that delinking will be included in a unified bill that the Senate and House would consider and possibly pass (passage is also far from certain). But there are delinking provisions in some of the bills that have been introduced in the Senate, and some critics of the industry see delinking as critical to meaningful reform.

Delinking would mean a dramatic change to how PBMs conduct business, Margulies told MHE. “I also think it's, frankly, a dramatic change to how any drug supply chain actor conducts business. Most transactions in the drug supply chain typically correlate to some degree with the price of the drug,” he added.

Margulies explained that delinking would limit compensation to flat, fair market fees. In some scenarios, PBMs could still negotiate rebates with manufacturers but those rebates would be passed through, in full, to plan sponsors, he said. PBMs might also be allowed to charge incentive fees, but they would also be flat fees not tied to drug prices.

Whether delinking gets included in PBM legislation will hinge, at least, in part on the assessment of the Congressional Budget Office (CBO) of a bill’s budget impact.

“There is at least a hypothetical argument that if PBMs are no longer compensated based on the amount of rebate, the motivation for a PBM to negotiate as large of a rebate is removed, and you could actually see some cost increases. I've seen analysis on both sides,” Margulies said.

Foley Hoag, which is headquartered in Boston, has many client involved in healthcare and life sciences. “Over the course of our firm's history, we have done work for every single different supply chain actor,” said Margulies, including, he said, the “big three” PBMs — CVS Caremark, Optum Rx and Express Scripts.

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