Chink In PBM Armor? ‘Delinking’ Policy In Spending Bill But Passage Unclear

Pharmaceutical industry lobbyists thought they were a step closer to achieving a pharmacy benefit manager reform priority that involves “delinking” PBM compensation from the list price of drugs in Medicare Part D early on 18 December.

Compensation tied to list prices would be replaced by flat fees for “bona fide” services in proposed US government funding legislation. But the deal seemed to fall apart late in the day after some Republicans blasted the package and President-elect Donald Trump indicated his opposition, leaving the prospects for enactment unclear.

Since its release, the bill has drawn criticism from some Republican policy experts who are aligned with the Trump camp.

“How much does this monstrosity cost?” former White House Domestic Policy Council director Joe Grogan demanded on X. “Trump was elected overwhelmingly to stop DC’s insane business as usual swamp crapola which has bankrupted this country and screwed up healthcare enough to make a kremlin basement bureaucrat blush.”

The PBM reform provisions in the bill would allow rebates to continue to be linked to list prices in Part D as long as they are entirely passed back to plan sponsors.

The policy would disrupt an important aspect of the PBM business model and take some pressure off list prices for manufacturers, but may not directly lower patient costs or reduce government spending to a significant extent. The Congressional Budget Office has estimated that the delinking policy, when combined with transparency initiatives, would lower Medicare spending $700m over 10 years.

The policy’s impact would be blunted by the reality that the major PBMs are vertically integrated with the leading Part D plan sponsors. Compensation between a PBM and its plan sponsor client circulates in the same overall corporate entity.

“An underappreciated aspect about the Part D market is that most plan offerings are by a handful of plan sponsors that are under [the] same corporate umbrella as a PBM,” said ATI Advisory Principal Anna Kaltenboeck. “My hope is that these measures will help unaffiliated plan sponsors, who often rely on those same PBMs, remain competitive in this market.”

The policy was included in a sprawling continuing resolution to fund the US government through 14 March 2025. The bill must be enacted by 20 December to avoid a government shutdown.

Medicaid Pricing Reforms, Transparency Requirements

Other PBM reforms in the package include a ban on spread pricing in Medicaid, pharmacy requirements to improve the consistency of generic pricing in Medicaid. PBM transparency and reporting requirements also were added, covering, somewhat unexpectedly, transactions in the commercial market as well as in Medicare.

The delinking policy made the funding package despite fierce opposition from the Pharmaceutical Care Management Association, which advocates on behalf of PBMs.

PCMA said the policy “would hike premiums for seniors by $13bn and hand Big Pharma a financial windfall of $10bn” by reducing incentives for PBMs to engage in tough negotiations for lower prices.

The association also opposes the transparency requirements in the private insurance market, calling them an “unprecedented government intrusion into … commercial market contracting.”

Manufacturers argue the delinking policy will eliminate the incentive for PBMs to offer better coverage to products just because they have higher prices than competitors. They also have said that PBM rebate demands have driven list prices higher to accommodate bigger rebates.

CBO’s finding that the policy would decrease, and not raise, government spending was a key factor in building bipartisan Congressional support for the policy. As the deadline for releasing the package approached, lawmakers also may have been influenced by Trump’s recent public comments supporting PBM reforms.

Senate Finance Committee Chairman Ron Wyden, D-OR, praised the PBM reforms as a good first step in a statement on the legislation.

“I’m particularly pleased that Ranking Member Crapo and I successfully fought to include much of the Finance Committee’s pharmacy benefit manager reforms into this bill,” he said. “For too long, PBMs have operated with little scrutiny or accountability, and the result has been disastrous for seniors and families trying to afford their medicine. These policies are an important start to bringing more common sense to the way Medicare and Medicaid pay for prescription drugs.”

Policy Directly Targeting Part D Cost Sharing Never In The Running?

Another policy that would reduce Medicare beneficiary cost sharing for some Part D drugs by requiring coinsurance to be based on the net price of product after rebates instead of the list price was not included in the package, likely because it was expected to increase government costs.

CBO projected the policy would increase federal spending by $1.16bn over 10 years.

Lawmakers also may have determined that a policy targeting coinsurance may not be needed, in part because Part D cost sharing will be limited to $2,000 a year starting in 2025 thanks to the Inflation Reduction Act, Kaltenboeck suggested.

“To the extent that Congress revisits cost-sharing on net prices, it might put that off until the current set of changes have been fully implemented,” she said.