Our Take: Senate’s push to reform PBM practices, increase generic drug competition moves forward as HELP Committee passes new bills
Following a hearing on Wednesday centered on insulin prices, the Senate Health, Education, Labor, and Pensions (HELP) Committee passed four bills on Thursday — one aimed at enhancing oversight of pharmacy benefit managers (PBMs), and the other three focused on lowering prescription drug prices by giving manufacturers of generic drugs more muscle, thus increasing competition.
The markup session began a week earlier, but the committee paused it until after Wednesday’s hearing, where the CEOs of the top three insulin manufacturers (Eli Lilly, Novo Nordisk, and Sanofi) and senior executives from the three largest PBMs (CVS Caremark, Express Scripts, and OptumRx) provided testimony on drug prices and the roles PBMs play.
Most of the committee’s debate during markup was on the bill called the Pharmacy Benefit Manager Reform Act (S. 1339). Along with increasing transparency by requiring various types of PBM reporting, the bill would require PBMs to pass along all rebates they receive from drugmakers to the health plan sponsors they serve. It would also prohibit pharmacy clawbacks and the practice known as spread pricing, in which PBMs charge health plans more for a given drug than the amount they reimburse to pharmacies.
Some committee members said a total ban on spread pricing in PBM-insurer contracts could force smaller PBMs out of business, handing the top three PBMs an even larger percentage of the business they already dominate. Collectively, they control approximately 80% of the PBM market.
Sen. Mitt Romney, R-Utah, also noted that some plan sponsors, including smaller businesses and unions, find spread pricing models to be a less expensive option than alternative models and should continue to have them as a choice.
Still, the bipartisan committee, with Sen. Bernie Sanders, I-Vt., serving as chair and Sen. Bill Cassidy, R-La., as ranking member, voted 18-3 in favor of advancing the bill.
The remaining three bills focus on improving access to generic drugs.
The Ensuring Timely Access to Generics Act of 2023 (S. 1067) would curtail drug manufacturers’ use of the FDA’s citizen petition process to delay the approval of generic competitors and extend their patent protections. The bill would ensure the FDA could reject citizen petitions it believes are filed for the purpose of delaying the approval of a generic drug application. Such petitions also could be referred to the Federal Trade Commission for investigation. <
The Expanding Access to Low-Cost Generics Act of 2023 (S. 1114) targets a practice known as “parking,” in which the manufacturers of brand-name drugs agree not to sue the first company to submit an application for a generic version of their drug (aka a “first filer”) as long as the first filer agrees to delay bringing its generic to market. Other manufacturers of generic versions of the drug cannot bring their versions to market for a 180-day period following the first filer’s entry into the market.
According to a press release from the office of Sen. Tina Smith, D-Minn., at least 75% of first filer generic products have delayed their market entry as the result of parking arrangements with brand-name drug companies. Sen. Smith and Sen. Mike Braun, R-Ind., reintroduced the legislation in March. The bill would give first filers 75 days to begin commercializing their generic version or else they would lose their first filer status and the FDA could designate another manufacturer as the first filer.
The Retaining Access and Restoring Exclusivity (RARE) Act (S. 1214), introduced in response to an appellate court’s decision in 2021 in the Catalyst Pharms., Inc. v. Becerra case, seeks to preserve access to treatments for patients with rare diseases. Companies receive tax credits to be used for researching and clinically testing treatments the FDA has designated as orphan drugs, and the companies benefit from a seven-year exclusivity period when the drugs are approved.
The RARE Act would clarify the scope of orphan drug exclusivity — i.e., that it protects only the approved use of the drug (for instance, in a narrow patient population), and not the rare disease for which the drug was designated. The bill also would give the FDA authority to approve the same drug from different manufacturers if they intend to serve different patient populations.
The four bills will now advance to Senate Majority Leader Chuck Schumer, D-N.Y., to schedule for debate, and an eventual vote, by the entire Senate.
Our Take: PBMs have long blamed the pharmaceutical industry for high drug prices, while drugmakers have placed the blame on PBMs, pointing to the rebates and fees PBMs collect as a reason list prices stay so high.
The finger-pointing played out in public at the hearing on Wednesday as committee members fired questions at executives on both sides of the debate.
And sure enough, after the committee passed the bills on Thursday, the Pharmaceutical Care Management Association (PCMA), a lobbying group representing PBMs, released a statement that included the following:
“Just one day after examining the pricing power drug companies use to block competition, the HELP Committee took drug companies’ bait and wrongly blamed the one actor in the supply [chain] working to reduce drug costs. The committee advanced legislation, without allowing common sense amendments, that would increase prescription drug costs.”
Some of the senators asked about the relationships between the three PBMs represented at the hearing and the insurance companies that own them (Cigna owns Express Scripts, UnitedHealth Group owns OptumRx, and CVS Health owns CVS Caremark). Sen. Markwayne Mullin, R-Okla., suggested the arrangements between the PBMs and their health plan owners were like the “fox guarding the hen house.” We’re inclined to agree with him.
As chair of the HELP Committee, Sen. Sanders is in a position to escalate his years-long war against high drug prices.
“This committee is going to stay on this issue,” he said the day of the hearing. “We need profound change in the [pharmaceutical] industry and in PBMs.”
Changes are practically a certainty now that a light has been shined on the inner workings of PBMs. Whether they’ll be profound changes, well, we’ll just have to wait and see.
Meanwhile, these bills are a solid step in the right direction, as the consumer advocacy group Patients for Affordable Drugs Now noted in a statement:
“On behalf of patients across the U.S., we applaud Chairman Sanders, Ranking Member Cassidy, and the members of the Senate HELP Committee for passing bipartisan legislation to increase competition, incentivize innovation, require transparency, and crack down on opaque practices of pharmacy benefit managers. This package of bills represents a significant step towards restoring accountability to the U.S. drug price system so that it prioritizes patients, rather than the bottom line of the pharma and PBM industries.”
In large part, 2022 was a financially perilous year for health systems across the country. As provider organizations look to cut costs and maximize revenues, delivering care through value-based models becomes even more challenging and, potentially, rewarding. Today, Dr. John Neil speaks on the importance of leveraging physician engagement and clinical integration to align financial incentives and improve care outcomes. Dr. Neil is Executive Vice President, Chief Physician Executive and Network Strategy Officer for Scottsdale, Arizona-based HonorHealth.
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