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PBM Reform: Tackling Transparency, Pricing, and Patient Access
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Policymakers and health care providers call for reforms to improve transparency, pricing, and patient access.
Pharmacy benefit manager (PBM) reform has become a substantial topic of debate for the past decades as patients and health care providers advocate for improved transparency, fair pricing, and better access to critical therapies. At the ACCC 51st Annual Meeting & Cancer Center Business Summit in Washington, DC, Sucharu Chris Prakash, MD, director of Quality Services, chair of Medical Oncology Quality at Texas Oncology, president of the Texas Society of Clinical Oncology, shared insights into challenges posed by PBMs and the legal efforts intended to create equity for every party involved in patient care.1
Stethoscope sitting on US dollars in front of the capital | Image Credit: © ila Patel - stock.adobe.com
PBMs occupy a central role in the drug price supply chain, acting as intermediaries between drug companies, insurers, and pharmacies to determine which drugs will be most available and what they will cost. The top 3 PBMs control 80% of the national market, giving them significant power to negotiate drug prices and rebates, create formularies, determine which pharmacies patients can use, process prescription drug claims, and set reimbursement rates for pharmacies. However, there is a significant lack of transparency around how these costs are negotiated between health plans and pharmaceutical manufacturers, leading to calls for policy reform.1,2
The United States Federal Trade Commission has filed multiple lawsuits against Caremark Rx, LLC; Express Scripts, Inc.; and OptumRx, Inc., finding that the PBMs were responsible for significant price markups, dispensing the most profitable drugs, and spread pricing, which is the practice of billing sponsor clients more than they reimburse pharmacies for drugs. These practices have significant consequences for patients and pharmacies, such as overcharging for copays, underpaying pharmacies, and increasing drug prices. Additionally, patients may be required to use specific mail-order or affiliated pharmacies, restricting their access to local pharmacies and potentially pushing independent community pharmacies out of the market.1
“FTC staff have found that the Big 3 PBMs are charging enormous markups on dozens of lifesaving drugs,” Hannah Garden-Monheit, director of the FTC’s Office of Policy Planning, said in an official press release. “We also found that this problem is growing at an alarming rate, which means there is an urgent need for policymakers to address it.”3
Prakash discussed multiple legislative actions aimed at increasing transparency and regulating PBMs that were passed in Texas, as well as the implications of the Employee Retirement Income Security Act (ERISA) on state PBM regulations. He began with Senate Bill 680 (SB) and Bill 1076, passed in 2017, and set the foundation for more patient-centered pharmacy practices. SB 680 mandates that health plans and PBMs grant exceptions to step therapy protocols when a prescribed drug is contraindicated or expected to be ineffective. Meanwhile, Bill 1076 ensures that health plans cannot arbitrarily increase drug prices at the point of sale, prevents excessive administration fees, and mandates that charges align with standard pharmacy pricing.1
Legislation in 2019 and 2021 continued to focus on PBM transparency and accountability, passing bills that require PBMs to report annual drug rebate detail and prohibit post-paid clawbacks; unequal reimbursements between affiliated and independent pharmacies; and using patient records for commercial purposes, steering patients to affiliated pharmacies or transferring prescriptions without consent. Continuing in 2023, the Copay Accumulator Bill and the White Bagging Prohibition Bills were passed, which focused on patient protection to ensure that manufacturer coupon reductions are applied to patient costs, as well as ban certain drug shipping practices in oncology settings.1
CVS Caremark application on smartphone | Image Credit: © Tada Images - stock.adobe.com
“It's about rebate transparency, right? That's a big deal, right? All we want PBMs to do is to be transparent,” said Prakash. “We know they play an important role in the health care delivery system, but just be transparent. Tell us exactly where the money is going; require them to file annual reports detailing their total drug rebate collections, how much they retained, how much was reverted back to the health plans and the sponsors, and how much was reverted back to the patients.”1
Prakash also cites ERISA, which provides uniform national standards for employee benefit plans, ensuring minimum protections for retirement and health benefits, and offering consistent reporting and disclosure requirements. However, it limits state-level regulatory power, preventing them from fully implementing local healthcare regulations. ERISA also allows large employers to create self-funded health plans, reducing state control over insurance pricing and complicating efforts to regulate PBMs and promote healthcare transparency. Although ERISA has led to increased federal protections, there is a need and growing conversation around modernizing the legislation to address evolving health care challenges.1
Continued reform of PBMs requires sustained advocacy and legislative action to ensure transparency and fairness in the healthcare system. For example, eliminating the ability of managed care organizations to contract with their own PBMs, which can lead to conflicts of interest and anti-competitive practices; or strengthening audit requirements will help hold PBMs accountable, while prohibiting non-medical drug switching ensures that treatment decisions remain patient-centered. Ongoing oversight is critical not only to enforce existing regulations but also to close loopholes that allow PBMs to prioritize profits over patient care.
“What does utopia look like?” Prakash posed. “If you were to solve all the problems, it would be to lower prescription drug costs for the patient, right? So, the prescriptions cost less; they can afford it. Increase transparency—that's what we want.”1
