The Senate Finance Committee on Friday approved an amendment to require pharmacy benefit managers (PBMs) to report drug pricing, competition and how much savings are being passed on to consumers.
The amendment will be added to a health reform package currently under consideration by the committee.
Sen. Maria Cantwell (D-Wash.), author of the amendment, said it would ensure that savings from drug price negotiations are being passed on to consumers and not contributing more to pharmaceuticals' bottom lines.
PBMs serve as the middlemen between health insurance plans (including both private health insurance plans and Medicare Part D), pharmaceutical manufacturers and pharmacies, Cantwell said. They manage most of the prescriptions filled in the United States, but are the only unregulated area of the health insurance industry.
"What we're after here is transparency of drug pricing," Cantwell told Finance Committee members during Friday's mark-up of healthcare reform legislation. "This kind of transparency will help drive down drug prices in a significant fashion."
According to Cantwell, PBMs negotiate price discounts from retail pharmacies and wholesalers and gain rebates from manufacturers to lower drug prices, but the current market incentives and a lack of transparency create an environment where PBMs are likely to profit from closed-door deals that undermine cost-control measures and in fact limit consumer choice.
Cantwell said the government currently has no way to protect consumers against the manipulation of the market to steer business to PBM-owned retail pharmacies and mail-order pharmacies.
PBMs are intended to negotiate the best possible deal on drug pricing for large customers, such as Medicare or large private insurers with the lower cost eventually benefiting consumers. But some PBMs have merged with large pharmacy and mail-order chains, creating conflicts of interest.
"We want the consumer to benefit as greatly as possible from the discounts that PBMs are helping to negotiate," Cantwell said.
Sen. Max Baucus (D-Mont.), the committee chairman, told colleagues, "It's a very good amendment. I strongly approve of it."
The amendment would require PBMs to share basic information with appropriate government agencies on:
* The aggregate difference between the price the PBM charges the health plan and the price it pays to the retail and mail order pharmacy;
* The amount of savings PBMs negotiate with drug manufacturers and the amount of these savings which are passed on to consumers
* The percent of prescriptions which are switched from low-cost drugs to high-cost drugs; and
* The percent of all prescriptions that are provided through retail pharmacies compared to mail order pharmacies, to ensure fair market competition.
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The reported information would remain confidential under the proposed amendment.
Mark Merritt, president of the Pharmaceutical Care Management Association, said the provision would increase drugmakers' power and threaten pricing for Americans hoping to rein in healthcare costs.
"America's pharmacy benefit managers believe strongly in the principle of transparency and empowering payers to make informed healthcare purchasing decisions resulting in lower prescription drug costs and higher quality," he said. The Cantwell amendment would force PBMs to disclose information that would give manufacturers and drugstores more leverage in drug-price negotiations, he said.
"PCMA categorically rejects the notion that PBM disclosure is budget neutral," Merritt said.
In 2003, the first Cantwell amendment was scored by the Congressional Budget Office as increasing the cost of the Medicare drug benefit by 10 percent, or $40 billion over 10 years.
In 2007, a revised CBO estimate found the measure could increase drug costs as much as $10 billion. For its part, the Federal Trade Commission has warned that PBM disclosure of such information would undermine the ability of consumers to find affordable coverage options.
Thirty states have considered and rejected legislation similar to the Cantwell amendment, according to Merritt.
"Many steps remain in this debate," Merritt said. "PCMA will continue to work with policymakers in both the House and Senate and any conference committee to make them aware of the unintended consequences associated with PBM disclosure."