Health policy experts appear to largely agree that regardless of the party controlling Congress and the White House next year, PBM reform will remain a key priority. However, opinions are mixed on whether Democrats or Republicans would be more likely to take the hardest line against a highly scrutinized industry.
Key Takeaways
- PBMs likely will face continued reform efforts no matter who wins the US presidential election and control of Congress, experts said.
- David Balto said former President Trump could be tougher on PBMs than VP Kamala Harris.
- Party control of Congress may matter less than the committee leadership, said Joe Shields.
During a recent webinar hosted by Faegre Drinker Consulting, Nick Manetto, a principal at the firm, said Democrats are “maybe a hair” more likely to embrace PBM reforms that go beyond enacting new transparency requirements. PBM critics have said that while they support transparency, more data-reporting requirements alone will not drive meaningful change in the industry.
Manetto said Republicans have varying views on PBM reform and suggested that spread pricing, the practice in which PBMs bill payers for more than they reimburse pharmacies for medications, offers one litmus test for the extent policymakers may be willing to go.
“You have some Republicans who are as aggressive as they come on PBM reforms, including limitations on spread pricing like we see in [S.]1339, the Senate HELP Committee bill,” Manetto said in response to a question from AIS Health. “You also have some Republicans who are more cautious and don’t want to go that far, and are more comfortable staying with eliminating spread pricing in government programs.”
The Lower Costs, More Transparency Act that passed the House in December 2023 would ban spread pricing only in Medicaid.
Despite disagreements about the details, the need for PBM reform is an “issue where you see some bipartisan agreement,” Manetto said.
David Balto, an antitrust attorney and former Federal Trade Commission official, said he believes former President Donald Trump will be tougher on PBMs than his Democratic opponent, Vice President Kamala Harris.
Balto said Trump “hates PBMs more than the Democrats,” likely because during the start of his administration, advisers told the newly elected Republican president that he should scrutinize all aspects of the pharmaceutical distribution system when tackling high drug prices, not just drugmakers.
Indeed, the Trump Administration finalized a regulation that would have revamped the prescription drug rebate system in Medicare Part D, but it was never implemented.
Balto said “if you’re a businessman” like Trump, it is easy to understand why pharmaceutical companies have to make money in order to incentivize innovation. But “PBMs don’t create things, all they do is move information and money,” Balto added.
Some Democrats seem to take the view that because PBMs’ stated role is to negotiate lower drug prices, “whatever they do is fine, which was a mistake,” Balto said. Ultimately, “the PBMs don’t like either of these candidates, but probably they like Harris more,” he said.
Committee Makeup May Matter Most
Joe Shields, managing director of Transparency-Rx, said Democrats and Republicans largely agree when it comes to PBM reform.
“Who’s in control [of Congress] is less important than leadership of committees and the composite makeup” of the House and Senate, Shields told AIS Health.
For example, the Pharmacy Benefit Manager Reform Act (S.1339) likely would not see “wholesale changes” if Republicans gain control of the Senate, said Shields, whose organization represents smaller PBMs that are pushing for industry reforms.
“I think there’ll be nuanced differences, but they’ve worked hard, and the votes reflect this, to act in a bipartisan manner,” Shields said.
He also suggested the outcome of the presidential election will not be particularly consequential for the PBM reform effort.
“Candidly, both President Biden and President Trump, based on their own track records, haven’t been that far apart on these issues,” Shields said.
Shields added that Harris “has been arguably more vocal around PBMs,” given that she mentioned “taking on drug middlemen” in her official campaign platform. But he said it’s an open question whether Harris will follow up on that promise.
“That’s a little bit of an X factor, because I think there’s an argument to make [that] Medicare negotiation really is a legacy item of what President Biden completed,” Shields said, referring to the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, which Harris has vowed to expand.
Some policy watchers have suggested that pursuing PBM reform, rather than simply building on Biden’s signature policy, would allow Harris “to make her mark on health care,” he said. “It would give her a certain stamp and a signature around these kitchen-table issues, in a way that hasn’t been addressed yet … and nobody has done it successfully.”
‘Delinking’ Remains the Biggest Goal
In Shields’ view, “delinking” PBM compensation from drug list prices and utilization is the gold standard in PBM reform, because it would fundamentally shift the industry incentives. The Patients Before Middlemen (PBM) Act, introduced by bipartisan leaders in the Senate Finance Committee in mid-2023, would mandate delinking in Medicare Part D.
Shields said delinking “gets at the core of where the profiteering has been most prolific and profound,” especially given the vertical integration that major PBMs have achieved. He also argued that multiple states have already banned spread pricing, but the enforcement of the bans and impact on the PBM market have been less meaningful than expected.
Indeed, in a recent blog post the Pharmaceutical Care Management Association (PCMA) highlighted why the PBM trade group believes pharmaceutical companies are eager to see a delinking policy enacted.
“Big Pharma continues to push for ‘delinking’ policies that would remove market-based incentives for PBMs to negotiate with drug companies to lower drug costs because it boosts their own profits,” PCMA wrote. “In fact, ‘delinking’ would hand Big Pharma a $32 billion financial windfall and increase health care premiums by $39 billion for employers, patients, families and taxpayers.”
This article originally appeared in AIS Health’s Radar on Drug Benefits. AIS Health and the Pink Sheet are part of the same parent company, Norstella.
Editor’s note: This article has been updated to clarify that the Part D rebate rule was finalized by the Trump administration, but it was never implemented.
