AGs Urge Federal Action on PBM 'Abuses'

A bipartisan coalition of 39 AGs wants Congress and the FTC 'to ensure fulsome regulation of PBMs nationwide.'

The National Association of Attorneys General is urging Congress to pass legislation that cracks down on "deceptive practices" used by pharmacy benefits managers that allegedly drive up the costs of prescription drugs for consumers.

In a letter this month to House and Senate leaders, a bipartisan coalition of AGs from 37 states, the District of Columbia, and the U.S. Virgin Islands urged passage of three bills pending before Congress: DRUG Act (S1542/HR6283), Protecting Patients Against PBM Abuses Act (HR2880), and Lower Costs, More Transparency Act (HR5378).

"The PBMs' original purpose was to protect and negotiate on behalf of employers and consumers after pharmaceutical manufacturers were criticized for overpricing medications," the letter states. "Unfortunately, in recent years, the PBMs have only made the pharmaceutical market more opaque and have been a cause of rising drug prices."

The AGs claim that a "small number of PBMs hold significant market power and are reaping abundant profits at the expense of the patients, employers, and government payors the PBMs are supposed to help."

"Pharmaceutical buyers and sellers have little choice but to employ PBMs, allowing them to extract both monopoly profits from individuals and monopsony profits from the market. Moreover, PBMs often dictate reimbursement rates and rules to independent pharmacies, making it difficult for many to survive," the letter states.

States Take the Lead

The AGs noted that states have already taken actions to cut down on PBM abuses that are "often more stringent than federal law," and they urged Congress to follow their lead.

"For example, in 2018 and 2019, respectively, Ohio and Arkansas passed legislation prohibiting spread pricing, in which a PBM charges payors such as Medicare more than they pay the pharmacies supplying the medication, keeping the difference for the PBM," the letter states. "The U.S. House of Representatives also passed legislation barring spread pricing for Medicaid just this month, but it is still awaiting a vote in the Senate."

Without federal law supporting state action, the AGs say, "PBMs routinely try to evade state law and obstruct state regulatory efforts by refusing to disclose data to state regulators as well as their own clients (i.e., health plans operated by employers and the government)."

"Thus, the FTC and Congress must act to ensure fulsome regulation of PBMs nationwide," the letter states. "Such legislation should reform PBM practices to curtail their ability to unreasonably raise the price of drugs and to require greater transparency.

Such transparency should, among other things, require PBMs to produce pricing data to health plans and federal and state regulators in a standardized format. This will enable health plans to negotiate better deals with PBMs and will allow regulators to better hold PBMs accountable."

PBM Push Back

The Pharmacy Care Management Association, the lobbying arm for PBMs, has complained that it is being unfairly scapegoated for high drug costs that are set by drugmakers using anti-competitive tactics such as extending drug patent monopolies.    

"Make no mistake, drug companies' constant blaming of pharmacy benefit companies is designed to avoid accountability and further boost profits and pricing power," the PCMA says.

Instead, the PBMs want Congress to pass S. 3583, a bill that would crack down on drug company patent thickets, which PBMs have called "a common drug company anti-competitive tactic to stifle competition."

The PBMs also pointed to a proposed "delinking" effort by drug makers that would ban PBM compensation in Medicare Part D from being tied to a drug's list price, essentially restricting the proprietary terms between PBMs and payers.

A Matrix Global Advisors study cited by the PCMA estimates that delinking "would boost drug company profits by $32 billion annually in the Medicare and commercial health insurance markets, while increasing healthcare premiums for patients by nearly $40 billion."

PCMA also cited its own 2023 analysis that used Centers for Medicare & Medicaid Services data showing that the price increases for the top 250 brand-name drugs in Medicare Part D by total spending in 2020 were unrelated to rebates.

"Congress should reject drug companies' self-serving blame game, and instead focus on solutions to encourage greater competition in the prescription drug market that would lower costs for patients," PCMA says.