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Federal Reform Is Imminent for Pharmacy Benefit Managers

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As we noted in our last roundup of PBM regulations, there has been a wave of state regulations focused on PBM practices as a result of Rutledge and Webhi. However, PBMs also face federal reform efforts. The Pharmacy Benefit Managers (PBM) Transparency Act of 2022 (the Act) was recently proposed in the U.S. Senate and is intended to encourage “fair and transparent” PBM practices, prohibit tiered pricing and clawback of payments to pharmacies, and to empower the Federal Trade Commission (FTC) and state attorneys general in enforcement actions to stop PBM’s “unfair and deceptive” business practices.

At the same time, government watchdogs are also taking action: On June 7, 2022, the FTC announced it would launch an investigation into vertically integrated PBMs, and the Department’s Office of Inspector General (OIG) Health and Human Services expects to release a report in 2022 after completing its analysis of Medicaid Managed Care Organization (MCO) PBM pricing.

Pharmacy Benefit Managers Transparency Act 2022

The legislation was introduced by Senators Maria Cantwell Chuck Grassley on May 24, 2022 and was approved by the Commerce Committee with bipartisan support (19-9) on June 22, 2022. This summary provides a high-level overview of key measures of the law. .

Prohibition of Unfair or Deceptive Prescription Drug Pricing Practices

The law would make it illegal for PBMs:

  • Engage in “spread pricing,” which is described as charging a health plan or payer a different amount for the ingredient cost or dispensing fee of a prescription drug than the amount that the PBM reimburses a pharmacy for the cost of ingredients or the cost of dispensing the prescription drug where the PBM retains the amount of such difference;

  • Arbitrarily, unfairly, or deceptively reduce or waive (i.e., “claw back”) any portion of the reimbursement payment to a pharmacist or pharmacy for the cost of ingredients of a prescription drug dispensing fee ; Where

  • Arbitrarily, unfairly, or deceptively increase or decrease a pharmacy’s fees and reimbursements to compensate for reimbursement changes under any federally funded health care plan.

The law would encourage transparency by stating that a PBM must not violate the law if the PBM passes through 100% price concessions to a health plan or payer and provides full disclosure of:

  • The cost, price, and reimbursement of prescription drugs at each health plan, payer, and pharmacy;

  • All fees, markups, and discounts that PBM charges or imposes to each health plan, payer, and pharmacy; and

  • The aggregate compensation PBM receives from drug manufacturers, including rebates, rebates, administration fees, and any other payments or credits obtained or retained by PBM.

Reporting requirements

The law would require PBMs to report the following information to the FTC annually:

  • The total amount of any spread price retained by the PBM;

  • The total amount of any (a) effective generic fee charged to each pharmacy; (b) direct and indirect compensation fees charged or other price concessions to each pharmacy; and, (c) a canceled or otherwise recovered payment of a refund made to each pharmacy;

  • An explanation of why a drug was moved or reassigned from one tier to another, including (i) whether the move or reassignment was determined or requested by a prescription drug manufacturer or other entity; and (ii) if, during the reporting year, PBM has moved or reassigned a prescription drug to a formulary level that has a higher cost share for a patient or lower reimbursement for a pharmacy; and

  • With respect to any PBM that owns, controls, or is affiliated with a pharmacy, a report regarding any differences in reimbursement rates or practices, charges for direct and indirect compensation or other price concessions, and recoveries between the linked pharmacy and any other pharmacy.

The FTC would in turn submit two reports to Congress. The first report would be an annual report focusing primarily on the number and results of enforcement actions and policy recommendations to strengthen future enforcement efforts. The second report would address the policies, practices, and role of PBMs with respect to form design and placement, including assessing whether PBMs are using form design and placement to increase gross revenue without simultaneously increasing revenue. patient access and reduce patient costs, as well as whether PBM practices violate the Federal Trade Commission Act.

Enforcement and Penalties

The FTC has broad authority to enforce the provisions of the law. Anyone who violates the law will also be subject to a civil penalty of up to $1,000,000. The law also empowers state attorneys general to bring a civil action on behalf of state residents if they believe the interests of residents are threatened or harmed by a practice that violates the law. The law also provides protection for whistleblowers.

FTC investigation

On June 7, 2022, the FTC announced an investigation into how large, vertically integrated PBMs affect affordability and access to medicines. The investigation will require CVS Caremark, ESI, OptumRx, Humana, Prime and MedImpact (the six largest PBMs) to provide information and records regarding their business practices.

The FTC said that because the largest PBMs are now vertically integrated with the largest health insurance companies and wholly-owned mail-order and specialty pharmacies, PBMs often have a huge influence on prescription drugs. to patients, which pharmacies patients can use and the number of patients. finally pay at the pharmacy counter.

The survey targets several PBM practices that have recently come under scrutiny, including:

  • Fees and recoveries billed to non-affiliated pharmacies;

  • Methods for referring patients to pharmacies owned by Pharmacy Benefit Managers;

  • Potentially unfair audits of independent pharmacies;

  • Complicated and opaque methods for determining pharmacy reimbursement;

  • The prevalence of prior authorizations and other administrative restrictions;

  • The use of specialty drug lists and related specialty drug policies; and

  • The impact of drug manufacturer rebates and fees on formulary design and prescription drug costs for payers and patients.

OIG Medicaid MCO PBM Pricing Report – Expected 2022

The OIG intends to release a report in 2022 determining whether “states provide adequate oversight of Medicaid MCOs to ensure accountability for amounts paid for prescription drug benefits to its PBMs.”

It will be interesting to see how the FTC investigation progresses and if it has any impact on pending legislation, as well as the OIG’s final report. In the meantime, we will continue to monitor federal and state initiatives to regulate PBMs.

Sergey Smirnov and Jewel Duberry-Douglas contributed authors to this article.

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC All rights reserved.National Law Review, Volume XII, Number 181