[Senate Report 118-122]
[From the U.S. Government Publishing Office]
Calendar No. 266
118th Congress } { Report
SENATE
1st Session } { 118-122
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THE MODERNIZING AND ENSURING PBM ACCOUNTABILITY ACT
_______
December 7, 2023.--Ordered to be printed
_______
Mr. Wyden, from the Committee on Finance, submitted the following
R E P O R T
[To accompany S. 2973]
The Committee on Finance, to which was referred the bill
(S. 2973) to amend titles XVIII and XIX of the Social Security
Act to establish requirements relating to pharmacy benefit
managers under Medicare and Medicaid programs, and for other
purposes, reports favorably thereon with an amendment, in the
nature of a substitute, and that the bill, as amended, do pass.
CONTENTS
Page
I. LEGISLATIVE BACKGROUND............................................ 1
II. EXPLANATION OF THE BILL........................................... 6
III.BUDGET EFFECTS OF THE BILL....................................... 20
IV. VOTES OF THE COMMITTEE........................................... 21
V. REGULATORY IMPACT AND OTHER MATTERS.............................. 21
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............ 21
I. LEGISLATIVE BACKGROUND
The Committee on Finance, having considered S. 2973, a bill
to amend titles XI, XVIII, and XIX of the Social Security Act
to lower prescription drug prices and strengthen safeguards
related to prescription drugs, and for other purposes, reported
favorably thereon that the bill as modified by the Committee do
pass.
General Background on Pharmacy Benefit Managers
Pharmacy benefit managers (PBMs) manage prescription drug
benefits and pharmacy networks on behalf of health plans,
employers, and other payers. PBMs may perform a variety of
functions for their clients, including processing prescription
drug claims, negotiating discounts with pharmaceutical
manufacturers, developing formularies (covered drug lists),
establishing pharmacy networks, and reimbursing pharmacies that
dispense prescription drugs to patients.
PBMs emerged in the late 1960s and early 1970s as claims
processors, as more and more health insurers began to offer
prescription drug benefits. Up until the 1990s, PBMs primarily
filled this limited administrative role. As the scope and cost
of prescription drugs grew, claims processing became digitized,
and programs like Medicare Part D expanded drug coverage in the
U.S., plan sponsors began delegating additional functions to
PBMs.\1\
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\1\Motheral, Brenda. et al. ``Changes in PBM Business Practices in
2019: True Innovation or More of the Same?'' Journal of Managed Care
and Specialty Pharmacy. October 2020. https://www.jmcp.org/doi/
10.18553/jmcp.2020.20213?url_ver=Z39.88-
2003&rfr_id=ori%3Arid%3Acrossref
.org&rfr_dat=cr_pub++0pubmed&.
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Today, the PBM market is concentrated in three companies--
CVS Caremark, Express Scripts, and OptumRx--which control
approximately 80 percent of the U.S. prescription drug
claims.\2\\3\ This degree of concentration gives the dominant
PBMs market power over data, drug coverage, and contracting.
Many PBMs are also vertically integrated with other components
of the prescription drug supply chain, such as health plans,
pharmacies (retail, specialty, and mail-order), wholesalers,
distributors, and provider services.\4\\5\ While the extent and
types of mergers vary, each of the three largest PBMs is
integrated with a health plan and at least one pharmacy
channel.\6\
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\2\Mader, Josh. ``Pharmacy Benefit Mangers: Market Landscape and
Strategic Imperatives.'' Health Industries Research. https://
www.hirc.com/PBM-market-landscape-and-imperatives.
\3\Myshko, Denise and Peter Wehrwein. ``Beyond the Big Three
PBMs.'' Managed Healthcare Executive. December 2022. https://
www.managedhealthcareexecutive.com/view/beyond-the-big-three-pbms.
\4\Fein, Adam. ``Drug Channels News Roundup, December 2022:
Vertical Integration Updated, Walgreens vs. Pharmacy, Cash-Pay Rx,
Curing 340B, and Deductible Season.'' Drug Channels. December 2022.
https://www.drugchannels.net/2022/12/drug-channels-news-roundup-
december
.html.
\5\Dresser, Jesse. ``Considerations for Maintaining Payer Network
Access in the World of Vertical Integration--Part 1: The Pharmacy
Benefits Landscape.'' Pharmacy Times. August 2022. https://
www.pharmacytimes.com/view/considerations-for-maintaining-payer-
network-access
-in-the-world-of-vertical-integration-part-1-the-pharmacy-benefits-
landscape.
\6\Fein, Adam. ``Mapping the Vertical Integration of Insurers,
PBMs, Specialty Pharmacies, and Providers: A 2022 Update.'' Drug
Channels. October 2022. https://www.drugchannels.net/2022/10/mapping-
vertical-integration-of.html.
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PBM Compensation
PBMs operate in a multi-sided market--meaning they may earn
revenue on both sides of a single transaction, from both their
traditional clients (e.g. health plans, employers, and payers)
and the vendors or contractors with whom they negotiate (e.g.
pharmaceutical manufacturers, pharmacies). Any multi-sided
market introduces the potential for conflicts of interest and
perverse incentives.
PBMs often receive compensation from health plans in the
form of fees per prescription dispensed (flat fees or
percentage of drug price), flat per member per month (PMPM)
fees, and retention of a portion of manufacturer rebates. PBMs
also often guarantee health plans a certain level of rebates.
Client fees account for a substantial portion of PBM revenue,
including in Part D.\7\\8\
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\7\``Medicare Part D: Use of Pharmacy Benefit Managers and Efforts
to Manage Drug Expenditures and Utilization.'' U.S. Government
Accountability Office. July 2019. https://www.gao.gov/assets/gao-19-
498.pdf.
\8\``Understanding the Evolving Business Models and Revenue of
Pharmacy Benefit Managers.'' PBM Accountability Project. December 2021.
https://b11210f4-9a71-4e4c-a08f-cf43a83bc1df.usr
files.com/ugd/b11210_264612f6b98e47b3a8502054f66bb2a1.pdf.
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PBMs also receive revenue from the pharmaceutical
manufacturers. PBMs leverage the volume of covered lives they
serve across all of their health plan clients to negotiate
lower prices and secure larger discounts, rebates, and fees
from manufacturers. PBMs may retain a portion of these
discounts. Manufacturers also pay PBMs administrative fees for
access to services and data.
Historically, a significant portion of PBM compensation
came from retaining a percentage of the rebates they negotiate
with drug manufacturers. In recent years, as critiques about
the lack of transparency around rebate retention have grown,
PBMs appear to be passing more rebates through to their
clients. Between 2017 and 2019, PBM-retained rebates decreased
from $4 billion to $1.6 billion in gross profits.\9\ In 2016
the Government Accountability Office (GAO) found that PBMs
passed through all or most rebates to plan sponsors within Part
D.\10\
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\9\3 Axis Advisors. ``Understanding the Evolving Business Models
and Revenue of Pharmacy Benefit Managers.'' PBM Accountability Project.
December 2021. https://b11210f4-9a71-4e4c-a08f-
cf43a83bc1df.usrfiles.com/ugd/
b11210_264612f6b98e47b3a8502054f66bb2a1.pdf.
\10\ ``Medicare Part D: Use of Pharmacy Benefit Managers and
Efforts to Manage Drug Expenditures and Utilization.'' U.S. Government
Accountability Office. July 2019. https://www.gao.gov/assets/gao-19-
498.pdf.
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PBM compensation structures have evolved over the years.
Administrative fees paid by manufacturers are a growing revenue
source for PBMs. They appear to be replacing rebate retention
as a key source of PBM revenue. These fees may be less likely
than rebates to be passed through, or shared, by PBMs to health
plans.11}12 A PEW survey found that administrative
fees paid by manufacturers to PBMs have increased as rebate
retention has declined, offsetting potentially over $2 billion
in lost rebates to PBMs between 2014 and 2016.\13\ Another
report found that, from 2017 to 2019, PBM gross profits from
administrative fees increased by 51 percent, from $3.8 billion
to $5.7 billion.\14\ In Part D, GAO found that non-rebate
revenue paid to PBMs by manufacturers, including administrative
fees, accounted for $516.5 million in 2016.\15\
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\11\Feldman, Robin. ``Perverse Incentives: Why Everyone Prefers
High Drug Prices--Except for Those Who Pay the Bills.'' Harvard Journal
on Legislation. 2020. https://repository
.uchastings.edu/cgi/
viewcontent.cgi?article=2773&context=faculty_scholarship.
\12\Part D plans are required to report bona fide service fees in
excess of fair market value paid to PBMs as Direct and Indirect
Remuneration (DIR), regardless of whether such amounts as passed onto
the Part D plan.
\13\``The Prescription Drug Landscape Explored.'' Pew. March 2019.
https://www.pewtrusts.org/en/research-and-analysis/reports/2019/03/08/
the-prescription-drug-landscape-explored.
\14\3 Axis Advisors. ``Understanding the Evolving Business Models
and Revenue of Pharmacy Benefit Managers.'' PBM Accountability Project.
December 2021. https://b11210f4-9a71-4e4c-a08f-
cf43a83bc1df.usrfiles.com/ugd/
b11210_264612f6b98e47b3a8502054f66bb2a1.pdf.
\15\``Medicare Part D: Use of Pharmacy Benefit Managers and Efforts
to Manage Drug Expenditures and Utilization.'' U.S. Government
Accountability Office. July 2019. https://www.gao.gov/assets/gao-19-
498.pdf.
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Administrative fees paid to PBMs are often based on a
percentage of Wholesale Acquisition Cost (WAC), or a drug's
list price, and volume of utilization, mirroring the structure
of post-sale rebates.16}17 For example, the Senate
Finance Committee's landmark insulin investigation identified
contracts between PBMs and manufacturers that required the
manufacturer to pay the PBM an administrative fee of up to five
percent of the drug's WAC per claim dispensed. The report also
uncovered internal manufacturer correspondence suggesting that
decreasing WAC prices would create business disadvantages with
PBM partners as it would lead to reduced PBM fee revenue.\18\
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\16\Feldman, Robin. ``Perverse Incentives: Why Everyone Prefers
High Drug Prices--Except for Those Who Pay the Bills.'' Harvard Journal
on Legislation. 2020. https://repository
.uchastings.edu/cgi/
viewcontent.cgi?article=2773&context=faculty_scholarship.
\17\3 Axis Advisors. ``Understanding the Evolving Business Models
and Revenue of Pharmacy Benefit Managers.'' PBM Accountability Project.
December 2021. https://b11210f4-9a71-4e4c-a08f-
cf43a83bc1df.usrfiles.com/ugd/
b11210_264612f6b98e47b3a8502054f66bb2a1.pdf.
\18\Senate Finance Committee. ``Insulin: Examining the Factors
Driving the Rising Cost of a Century Old Drug.'' U.S. Senate. January
2021. https://www.finance.senate.gov/imo/media/doc/Grassley-
Wyden%20Insulin%20Report%20(FINAL%201).pdf.
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Experts have noted that payments from manufacturers to PBMs
may create conflicts of interest between PBMs and their health
plan clients. Furthermore, linking PBM payment to a drug's list
price could create incentives for PBMs to drive utilization of
higher-priced drugs, rather than lower-priced, clinically
equivalent alternatives, to achieve higher rebates and higher
administrative fees.19}20}21
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\19\Feldman, Robin. ``Perverse Incentives: Why Everyone Prefers
High Drug Prices--Except for Those Who Pay the Bills.'' Harvard Journal
on Legislation. 2020. https://repository
.uchastings.edu/cgi/
viewcontent.cgi?article=2773&context=faculty_scholarship.
\20\Shepherd, Joanna. ``Pharmacy Benefit Managers, Rebates, and
Drug Prices: Conflicts of Interest in the Market for Prescription
Drugs.'' The Yale Law and Policy Review. January 2019. https://
papers.ssrn.com/sol3/papers.cfm?abstract_id=3313828.
\21\Purchaser Business Group on Health. ``Pharmacy Benefit Tactics
Drive Up Drug Prices, Limit Access, Contribute to Health Risks.''
December 2022. https://www.pbgh.org/wp-content/upl
oads/2022/12/Pharmacy-Benefit-Tactics-Drive-Up-Drug-Prices-Limit-
Access-Contribute-to-Health
-Risks.pdf.
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PBM Contracting with Pharmacies
PBMs create pharmacy networks and reimburse pharmacies on
behalf of their health plan clients. Pharmacy networks may
comprise retail, mail-order, and specialty pharmacies.
Pharmacies contract with PBMs to determine drug dispensing
reimbursement rates. In Medicare, the contractually set
pharmacy reimbursement rate is known as the ``negotiated
price.'' This generally covers a drug's ``ingredient cost'' and
a dispensing fee, as well as other costs, such as sales
tax.\22\ In Part D, beneficiary cost sharing for drugs
dispensed by network pharmacies is based on a percentage of
each plan sponsor's negotiated price, unless a flat copay
applies.
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\22\42 C.F.R. Sec. 423.100.
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Part D plan sponsors are required to establish pharmacy
networks sufficient to ensure access to Medicare covered drugs
for all enrollees. As part of the ``Any Willing Pharmacy''
requirements established by Congress, Part D plan sponsors must
permit any pharmacy that is willing to accept the Part D
sponsor's standard contracting terms and conditions to
participate in the sponsor's network.23}24}25
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\23\42 U.S.C. Sec. 1395w-104(b)(1)(A).
\24\42 C.F.R. Sec. 423.505(b)(18).
\25\CMS, ``Medicare Program: Contract Year 2019 Policy and
Technical Changes to Medicare Advantage, Medicare Cost Plan, Medicare
Fee-for-Service, Medicare Prescription Drug Benefit Programs, and PACE
Program,'' 83 Federal Register, April 16, 2018, p. 16589, https://
www.govinfo.gov/content/pkg/FR-2018-04-16/pdf/2018-07179.pdf.
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PBMs recently began imposing retrospective, post-sale fees
on pharmacies for not meeting contractually specified quality
metrics or as a condition of preferred network participation.
These fees tend to substantially increase PBM revenue, ranging
from 1.5 percent to 11 percent of a manufacturer list price,
and are generally levied on pharmacies three to six months
after dispensing.\26\ These fees must be disclosed to the
Centers for Medicare and Medicaid Services (CMS) as part of
Direct and Indirect Remuneration (DIR) reporting. According to
CMS, pharmacy DIR fees grew by 107,400 percent between 2010 and
2020.\27\ In April 2022, CMS finalized rulemaking that requires
Part D plan sponsors (and PBM contractors) to include such fees
from network pharmacies in the negotiated price, with the goals
of making PBM reimbursement to pharmacies more transparent, and
lowering cost sharing for beneficiaries. This rule takes effect
on January 1, 2024.\28\
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\26\``Pharmacy Benefit Manager Expose: How PBMs Adversely Impact
Cancer Care While Profiting at the Expense of Patients, Providers,
Employers, and Taxpayers.'' Frier Levitt, LLC. February 2022. https://
www.frierlevitt.com/articles/pharmacy-benefit-manager-expose-how-pbms-
adversely-impact-cancer-care-while-profiting-at-the-expense-of-
patients-providers-employers-and-taxpayers/.
\27\``Medicare Program; Contract Year 2023 Policy and Technical
Changes to the Medicare Advantage and Medicare Prescription Drug
Benefit Programs; Policy and Regulatory Revisions in Response to the
COVID-19 Public Health Emergency; Additional Policy and Regulatory
Revisions in Response to the COVID-19 Public Health Emergency.''
Centers for Medicare and Medicaid Services. https://public-
inspection.federalregister.gov/2022-09375.pdf.
\28\``CY 2023 Medicare Advantage and Part D Final Rule (CMS-4192-
F).'' Centers for Medicare and Medicaid Services. April 2022. https://
www.cms.gov/newsroom/fact-sheets/cy-2023-medicare-advantage-and-part-d-
final-rule-cms-4192-f.
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Evidence suggests that some PBMs engage in a practice known
as ``spread pricing,'' which occurs when PBMs charge their
health plan clients a higher amount than what the PBM actually
reimburses the pharmacy for the same dispensed drug--with the
PBM retaining the difference.\29\ Across markets, PBM clients
often lack line of sight into the extent of such spreads.
Spread pricing has been widely documented in Medicaid. For
example, a 2018 audit of Ohio's Medicaid program found that
PBMs were charging the state an average nine percent spread
across all drugs, with some spreads in excess of 30 percent for
certain generics.\30\ Similar behavior has been documented in
other state Medicaid programs, prompting many state lawmakers
and regulators to intervene.\31\ Spread pricing is less common
in Medicare Part D.\32\
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\29\Garfield, Rachel, Rachel Dolan, and Elizabeth Williams. ``Costs
and Savings under Federal Policy Approaches to Address Medicaid
Prescription Drug Spending.'' June 2021. KFF. https://www.kff.org/
medicaid/issue-brief/costs-and-savings-under-federal-policy-approaches-
to-address-medicaid-prescription-drug-spending/.
\30\Meltzer, Rose. ``Ohio Cracks Down on PBM Contracts After Audit
Shows Egregious Spread Pricing in Medicaid.'' Fierce Healthcare. August
2018. https://www.fiercehealthcare.com/regul
atory/ohio-takes-action-after-finding-pbms-engaged-egregious-spread-
pricing-medicaid.
\31\Arkansas, Delaware, Georgia, Kentucky, Louisiana, Maine,
Michigan, Minnesota, New York, Oklahoma, and Virginia have all passed
laws seeking to curb spread pricing.
\32\``Medicare Part D: Use of Pharmacy Benefit Managers and Efforts
to Manage Drug Expenditures and Utilization.'' GAO. July 2019. https://
www.gao.gov/assets/gao-19-498.pdf.
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Senate Finance Committee Engagement on PBM Issues
In 2015, then-Ranking Member Ron Wyden and senior Finance
Committee member (and then-Chairman of the Judiciary Committee)
Chuck Grassley conducted an 18-month investigation into the
pricing of Sovaldi and Harvoni, Gilead's breakthrough hepatitis
C drugs. The Senate Finance Committee has worked for many years
to increase transparency throughout prescription drug pricing
and hold actors across the supply chain accountable for
predatory pricing practices. They uncovered that Gilead had set
a high list price for the drug treatments to maximize revenue
and profit, even though Gilead's internal analysis showed a
lower price would enable more patients to access the treatment.
In 2018, Finance Committee Ranking Member Ron Wyden released
``A Tangled Web: Examination of the Drug Supply and Payment
Chains,'' a report which examined how financial arrangements
between different entities in the pharmaceutical delivery
system have continually pushed drug prices higher. In 2021,
then-Chairman Grassley and Ranking Member Wyden released
``Insulin: Examining the Factors Behind the Rising Cost of a
Century Old Drug,'' a report based on an investigation into how
contracts and financial transactions between insulin
manufacturers and PBMs influence prescription drug prices and
drug spending.
In addition to producing written work products on drug
pricing issues, the Finance Committee has held a series of
hearing on these matters. In 2019, the Finance Committee held
three hearings on drug pricing, including a hearing in which
executives from the nation's five largest PBMs testified.
Building on the Finance Committee's long-standing consideration
of practices across the prescription drug supply chain that may
raise drug prices, patient out-of-pocket costs, and total drug
spending across Finance Committee jurisdiction programs,
including in Medicare Part D and Medicaid, on March 30, 2023,
Finance Committee Chairman Ron Wyden and Ranking Member Mike
Crapo convened a hearing entitled ``Pharmacy Benefit Managers
and the Prescription Drug Supply Chain: Impact on Patients and
Taxpayers.''
On April 20, 2023, Chairman Wyden and Ranking Member Crapo
released the ``Bipartisan Framework for Reducing Prescription
Drug Costs by Modernizing the Supply Chain and Ensuring
Meaningful Relief at the Pharmacy Counter.'' The framework
outlined four key challenges facing federal prescription drug
programs, including: (1) misaligned incentives that drive up
drug prices and costs; (2) insufficient transparency that
distorts the market; (3) hurdles to pharmacy access; and (4)
behind-the-scenes practices that impede market competition and
increase costs throughout the pharmaceutical supply chain. The
framework also identified potential legislative solutions to
modernize and enhance federal prescription drug programs and to
help address these concerns.
On July 24, 2023, Chairman Wyden released a Chairman's Mark
entitled the ``Modernizing and Ensuring PBM Accountability
Act'' that contained bipartisan Finance Committee member
policies. These policies, in addition to further proposals and
modifications contained in the July 26, 2023, Modification to
the Chairman's Mark, comprise the reported bill described
below.
II. EXPLANATION OF THE BILL
SECTION 1. SHORT TITLE; TABLE OF CONTENTS
This section sets out the name of the bill--the
``Modernizing and Ensuring PBM Accountability Act''--and lists
the Table of Contents of the legislation.
SECTION 2. ARRANGEMENTS WITH PHARMACY BENEFIT MANAGERS WITH RESPECT TO
PRESCRIPTION DRUG PLANS AND MA-PD PLANS
Current Law
Medicare Part D is a voluntary outpatient prescription drug
benefit, enacted in the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA; Pub. L. 108-
173), effective January 1, 2006. Congress designed Part D as a
market-based program. Private insurers submit annual contract
bids to CMS to provide outpatient prescription coverage to
Medicare beneficiaries. Medicare beneficiaries can choose a
stand-alone Part D plan (PDP) or obtain drug coverage through a
Medicare Advantage (Part C) plan with a Part D component (MA-PD
plan). All Part D plans must provide coverage that meets or
exceeds the minimum standard benefit that defines the range of
drugs covered by Medicare Part D and maximum enrollee cost
sharing, including deductibles and prescription co-insurance or
copayments. Enrollee premiums are based on each plan's annual
cost for offering Part D benefits. Part D plan sponsors may
augment plan benefits as long as their plans meet the standard
benefit specified at SSA 1860D-2(b).
Part D plan sponsors often contract with PBMs to design and
administer Part D benefits. Since the program inception,
Congress expected that PBMs, already in use in the commercial
insurance market, would play a role in Part D to help control
prices and costs. PBMs also perform a variety of other core
functions for Part D plan sponsors, including developing
formularies (covered drug lists), contracting with pharmacies
to establish networks, negotiating price concessions from
pharmaceutical manufacturers, operating mail order and
specialty drug pharmacies, and administering electronic payment
for prescription drug claims. Initially, most plans contracted
with independent PBMs, however, recently, many insurers that
offer Part D plans have merged or affiliated with PBMs.
Federal statutes and regulations govern annual CMS
contracting with Part D plan sponsors.\33\ PBM contract terms
and service agreements with Part D plan sponsors vary from
sponsor to sponsor, including with regard to the level and type
of compensation (i.e., flat fees or retention of volume-based
rebates), whether a contract includes PBM performance
incentives, whether a contract includes Part D plan drug price
guarantees and the specifications of such guarantees, and
definitional terms. Neither statute or regulation govern the
forms of compensation PBMs can generate from plan sponsors and
entities in the supply chain related to prescription drugs
dispensed under Part D. Further, PBM revenue streams have
evolved considerably since 2003, when the MMA was enacted.
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\33\Part D contract regulations are at 42 CFR Sec. 423.505.
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Under current law, Part D plans and their PBMs must report
all price concessions that affect the price of Part D drugs to
CMS via two main mechanisms:
(i) Prescription Drug Event (PDE): A PDE report is
generated each time a beneficiary fills a prescription
at a network pharmacy. The PDE includes information on
the negotiated price, including the amount paid to the
pharmacy for the drug, the quantity dispensed, the out-
of-pocket spending by the beneficiary, and any coverage
by qualified third parties, such as other insurers.
(ii) Direct and Indirect Remuneration (DIR): DIR
reporting applies to price concessions that are not
passed on to enrollees at the point of sale. DIR
includes discounts, rebates, pharmacy fees, and other
price concessions or similar benefits from
manufacturers, pharmacies, or similar entities that are
obtained by an intermediary organization, such as a
PBM, with which the Part D plan sponsor has
contracted.\34\
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\34\42 CFR Sec. 423.308.
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Provisions
These provisions would require that, beginning in plan year
2026, each Part D plan sponsor must have a written agreement
with any PBM acting on its behalf under which the PBM agrees to
meet the requirements outlined below. All of these requirements
would apply to MA-PD plans, as well as PDPs.
These provisions also would define ``pharmacy benefit
manager'' as any entity that acts as a price negotiator or
group purchaser, manages prescription drug benefits, processes
and pays prescription drug claims, performs drug utilization
reviews, processes prior authorization requests, adjudicates
drug plan appeals or grievances, contracts with network
pharmacies, controls the cost of covered Part D drugs, or
provides related services on behalf of a Part D plan. These
provisions would define an ``affiliate'' as any entity owned
by, controlled by, or related under a common ownership
structure with a PBM.
I. Bona Fide Service Fees
This provision would require that a PBM and any affiliate
of a PBM may not derive remuneration for services provided in
connection with the use of Part D covered drugs, except in the
form of bona fide service fees. The provision would define a
``bona fide service fee'' as a fee that reflects the fair
market value for a bona fide, itemized service. A bona fide
service fee would be required to be a flat dollar amount not
based on the drug's price or other related drug price
benchmarks and factors. Remuneration would be subject to audit,
including by the Department of Health and Human Services (HHS)
Office of the Inspector General (OIG), to ensure compliance
with these requirements.
Part D plan sponsors could continue to collect rebates,
discounts, or price concessions that lower net costs for
covered part D drugs. Nothing in this provision would be
construed as prohibiting a PBM from reimbursing entities that
acquire prescription drugs for the ingredient cost of the
products.\35\
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\35\In general, the ingredient cost is the amount paid by the
pharmacy or wholesaler for the drug. It does not include pharmacy
dispensing fees.
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II. Transparency Regarding Guarantees and Cost Performance
Evaluations
This provision would institute transparency standards for
written agreements between Part D plan sponsors and PBMs.
Specifically, the provision would require PBMs to define and
apply drug and drug pricing terms in written agreements with
plan sponsors in a transparent and consistent manner for the
purposes of calculating or evaluating PBM performance against
pricing guarantees or similar cost performance measurements.
PBMs would also have to identify any exceptions to such
guarantees and provide a calculation of such guarantees using
either the WAC or an equivalent, in addition to any other
benchmarks used.
III. PBM Data Reporting Requirements
This provision would set out new requirements for PBMs to
annually report drug price and other information to Part D
plans and to HHS. PBMs would be required to include several
categories of information in their reports, including the
following:
Lists of all drugs covered;
Information about dispensing of such drugs;
Information about enrollee cost sharing and
access to generics and biosimilars, including the
relative formulary tier placement of such generics and
biosimilars, if a plan covers the brand-name drugs or
biologic reference products;
Information on financial relationships
between the PBM and other entities in the drug pricing
supply chain;
Information related to net and gross prices
and total drug spending; and
Information about the PBM's affiliates.
PBMs that are affiliated with a pharmacy must also report
the following categories of information:
Information related to dispensing and drug
costs by affiliate pharmacies;
Information related to drug acquisition
costs; and
Information related to drugs subject to 340B
arrangements.
This provision would also require PBMs or their affiliates
to provide Part D plans with a written explanation of contracts
or arrangements with a drug manufacturer (or affiliate) that
makes rebates, discounts, payments, or other financial
incentives related the drug manufacturer's drug(s) contingent
upon coverage, formulary placement, or utilization management
conditions on other prescription drugs. The PBM would be
required to provide this information shortly after the contract
or arrangement with the drug manufacturer is finalized. The
written agreement must be certified and would include
information about the manufacturers and drugs subject to such
arrangement.
IV. Confidentiality
This provision would bar the HHS Secretary from publicly
disclosing information obtained from a Part D sponsor or PBM
under the required agreements and reports that is not otherwise
publicly available, except in limited circumstances, including:
By the HHS Secretary to carry out this part;
To the GAO, the Congressional Budget Office
(CBO), the HHS OIG, and the Medicare Payment Advisory
Commission (MedPAC); and
To permit oversight and enforcement by
government agencies.
These agencies would not be permitted to report on or
disclose the information in a way that would identify a
specific supply chain stakeholder or prices for specific drugs.
V. Audit Rights
This provision would permit audits, by an auditor of the
Part D plan sponsor's choice, of a PBM, no less than once a
year, if requested by a Part D sponsor, including to ensure the
accuracy of drug price information reported under these
provisions. The PBM would be required to provide information to
the auditor necessary to perform the audit and confirm the
accuracy of PBM reporting, including information owned or held
by a PBM's affiliate, in a timely manner. The HHS Secretary
would be allowed to include reasonable restrictions on how the
information is reported to prevent redisclosure.
VI. Enforcement
This provision would require a PBM to:
Disgorge remuneration received by the PBM,
or an affiliate of such PBM, in violation of the bona
fide service fee requirements;
Reimburse the Part D sponsor for any civil
money penalty imposed on the sponsor due to the failure
of the PBM to meet the requirements of these
provisions; and
Be subject to punitive remedies for breach
of contract for failing to comply with the requirements
of these provisions.
This provision would also require each Part D sponsor to
provide the HHS Secretary an annual certification of compliance
with the provisions outlined above, as well as such additional
information as the Secretary determines necessary to carry out
this subsection.
VII. Funding
This provision would provide $20 million to CMS for FY 2026
and $5 million to the HHS OIG to carry out the provision. The
funds would remain available until expended.
VIII. GAO Report on Certain Pricing Requirements
This provision would require GAO to conduct a study of
federal and state reporting requirements for health plans and
PBMs regarding the transparency of prescription drug costs and
prices. Study results would be required to include
recommendations for legislation and administrative actions to
streamline and reduce burden with respect to the reporting
requirements for health plans and PBMs.
IX. MedPAC Reports on PBM Reported Information
This provision would require MedPAC to issue two reports
and related recommendations to Congress on the information
being reported by PBMs under this section, including: (1) an
initial analysis of information reported by PBMs during the
early years of implementation; and (2) a second analysis
several years later analyzing changes in trends revealed in the
information reported over time.
SECTION 3. ENSURING FAIR ASSESSMENT OF PHARMACY PERFORMANCE AND QUALITY
UNDER MEDICARE PART D
Current Law
Part D plan sponsors and PBMs create contracted networks of
retail pharmacies that dispense covered drugs at negotiated
reimbursement rates. Part D regulations\36\ require plan
sponsors to have standard pharmacy contracts with reasonable
and relevant terms and conditions of participation, and to
allow any willing pharmacy to participate in their basic
pharmacy network. Actual contract terms vary across Part D
plans, however, meaning that retail pharmacies, which often
contract with multiple Part D plans, may have to navigate
differing plan contracts, payment rates, and other terms.
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\36\42 CFR Sec. 423.505.
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Many plans and PBMs use quality measures to evaluate
pharmacy performance in various areas, such as medication
adherence and generic dispensing. In recent years, however,
pharmacies have reported that the quality measures imposed by
plans and PBMs are unpredictable, assessing items outside the
scope of the pharmacy practice, and/or measuring outcomes over
which pharmacies have limited control.\37\
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\37\Frier Levitt and the National Association of Specialty
Pharmacy. ```Performance' Based DIR Fees: A Rigged System with
Disparate Effect on Specialty Pharmacies, Medicare Part D Beneficiaries
and the U.S. Healthcare System.'' March 20, 2017. https://
communityoncology.org/re
search-publications/studies/performance-based-dir-fees-a-rigged-system-
with-disparate-effect-on-specialty-pharmacies-medicare-part-d-
beneficiaries-and-the-us-healthcare-system/.
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Provision
This provision would require the HHS Secretary to institute
standard Part D measures for assessing network pharmacy
performance, beginning in 2025. Under the provision, a Part D
sponsor that wanted to institute fees, price concessions, or
incentive payments based on network pharmacy performance would
only be able to do so if the plan sponsor/PBM used performance
measures that were: (1) established or adopted by the HHS
Secretary; and (2) relevant to the pharmacy, as determined by
pharmacy type.
The HHS Secretary would be required to establish or adopt
standardized pharmacy performance measures that were: (1)
evidence-based and reasonable; and (2) focused on pharmacy
performance related to patient health outcomes and other areas
that pharmacies can reasonably impact, as determined by the
Secretary. The Secretary's determination may be based on data
and information from relevant stakeholders.
Rather than establishing some or all of the required
performance measures, the Secretary may adopt measures endorsed
by a multi-stakeholder consensus organization (such as the
Pharmacy Quality Alliance), that has participation from
pharmacies, health plans, PBMs, and CMS. The performance
measure list would be subject to periodic evaluation and
revision by the Secretary.
This provision would provide $4 million to CMS in FY 2025
to carry out the provision. The funds would remain available
until expended.
SECTION 4. PROMOTING TRANSPARENCY FOR PHARMACIES UNDER MEDICARE PART D
Current Law
Just as drug pricing and formulary coverage vary among Part
D plans, Part D plan reimbursements to pharmacies also differ
according to formulary requirements, plan specifications, and a
plan's negotiated price for a covered drug. Pharmacies dispense
billions of Part D drugs each year, and payments from Part D
plan sponsors are processed in real time at the point of sale
through electronic systems that aggregate plan-specific data,
including the drug ingredient cost, dispensing fees, cost-
sharing requirements, and other third-party sources of payment.
In recent years, CMS has noted a sharp rise in pharmacy
fees and other price concessions that plan sponsors and PBMs
extracted from retail pharmacies after the point of sale and
reported as DIR. Part D pharmacy DIR includes administrative
fees, network access fees, and fees for not meeting plan
quality metrics. Part D plan sponsors may provide incentive
payments to pharmacies for meeting specified goals, but CMS
data indicate that extracted fees, or penalties, far outpace
additional compensation to pharmacies. According to CMS,
pharmacy fees are the fastest-growing category of DIR,
accounting for nearly 5 percent of gross Part D drug costs
($9.5 billion) in 2020, compared to 0.01 percent ($8.9 million)
in 2010. The increase in fees, as well as their post-point of
sale nature, have made it difficult for pharmacies to
accurately predict their total reimbursement for dispensing a
covered drug.\38\ Differences in reporting of negotiated prices
among Part D plans can also affect beneficiary cost sharing,
CMS payments to plans, and, according to CMS, can even diminish
competition between Part D plans.
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\38\CMS, ``Medicare Program: Contract Year 2023 Policy and
Technical Changes to the Medicare Advantage and Medicare Prescription
Drug Benefit Programs,'' 87 Federal Register, May 2022, p. 1413,
https://www.federalregister.gov/d/2022-09375/p-1413.
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In May 2022, CMS issued a final rule, effective in 2024, to
help address the uncertainties in pharmacy reimbursement caused
by PBM fees. The rule changes the definition of ``negotiated
price'' to include the lowest possible reimbursement that a
network pharmacy will receive in total for dispensing a
drug.\39\ Part D plan sponsors are required to take the rule
change into account when submitting 2024 contract bids.
---------------------------------------------------------------------------
\39\CMS, ``Medicare Program: Contract Year 2023 Policy and
Technical Changes to the Medicare Advantage and Medicare Prescription
Drug Benefit Programs,'' 87 Federal Register, May 2022.
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Provision
This provision would establish a process by which Part D
plan sponsors provide their network pharmacies with
comprehensive information about the pricing of prescription
drug claims. The new system would be required to take effect in
2025.
This provision would provide $2 million for FY 2025 to CMS
to carry out the provision. The funds would remain available
until expended.
SECTION 5. PREVENTING THE USE OF ABUSIVE SPREAD PRICING IN MEDICAID
Current Law
State Medicaid programs reimburse statutorily defined
retail community pharmacies for covered outpatient drugs (CODs)
dispensed to Medicaid beneficiaries. The payment to retail
community pharmacies has two components: (1) an amount to cover
the cost of acquiring the drug (ingredient cost); and (2) an
amount for the pharmacist's professional services in filling a
prescription (dispensing fee).
The Patient Protection and Affordable Care Act (ACA, Pub.
L. 111-148) required drug manufacturers that participate in the
Medicaid Drug Rebate Program to provide rebates on CODs that
are dispensed to beneficiaries covered under a managed care
organization (MCO) that contracts with the state Medicaid
program. Most MCOs and other entities that provide Medicaid
prescription drug benefits contract with PBMs to manage and
administer their drug benefits. Generally, MCOs pay PBMs for
drugs supplied to Medicaid beneficiaries based on a published
price, such as a percentage of the average wholesale price
(AWP), while PBMs separately determine pharmacy reimbursement.
Although the difference (spread) between the MCO payments to
PBMs and the PBM payments to pharmacies may be small for each
individual drug, it can be substantial when aggregated across
all drugs dispensed by an MCO.
Contracts between Medicaid MCOs and PBMs are sometimes
based on the margin (spread) between the amount charged to the
MCO for a COD and the amount paid by a PBM to the pharmacy
provider.\40\ Effective April 2017, the Centers for Medicare
and Medicaid Services required prescription drug benefits under
fee-for-service (FFS) Medicaid programs to use a drug pass-
through pricing model, but this requirement does not apply to
Medicaid MCOs. Under pass-through pricing PBMs charge their MCO
clients the actual amount it reimburses the pharmacy for CODs,
then passes back all the rebates from manufacturers, and only
collects explicit administrative fees as income. Although CMS
has issued spread pricing guidance,\41\ federal statute does
not prohibit the use of spread pricing in contracts between
Medicaid MCOs and PBM or other entities.\42\
---------------------------------------------------------------------------
\40\Centers for Medicare and Medicaid Services (CMS), Medicaid
Program; Misclassification of Drugs, Program Administration and Program
Integrity Updates Under the Medicaid Drug Rebate Program, 88 Federal
Register 34249, May 26, 2023.
\41\CMS, Center for Medicaid and CHIP Services Informational
Bulletin, Medical Loss Ratio (MLR) Requirements Related to Third-Party
Vendors, May 19, 2019.
\42\CMS, Medicaid Program; Misclassification of Drugs, Program
Administration and Program Integrity Updates Under the Medicaid Drug
Rebate Program, 88 Federal Register 34250, May 26, 2023.
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Provision
The provision requires a pass-through pricing model for
CODs reimbursed under Medicaid, including when services are
provided under contract with MCOs. This section would require
payment for PBM services to be limited to the ingredient cost
and a professional dispensing fee equivalent to no less than
the professional dispensing fee paid under FFS through a state
plan or waiver and passed through in its entirety to the
dispensing pharmacy. The provision would allow an exception to
the pass-through payment requirement for drugs purchased by
340B covered entities.
Payments to PBMs for administrative services would be
limited to the fair market value of those services. PBMs and
other entities would be required to make available to state
Medicaid programs, and the Secretary upon request, all
specified costs and payments related to CODs and accompanying
administrative services.
This provision would also prohibit any form of spread
pricing that exceeds the amount paid to pharmacies or providers
on behalf of the state for purpose of claiming federal Medicaid
matching payments. State Medicaid programs would be prohibited
from making payments to certain specified health plans unless
the contract between the state and the entity met the Medicaid
Drug Rebate Program and other prescription drug requirements.
This provision would apply to state Medicaid program
contracts between MCOs, other specified entities, and PBMs with
an effective date that begins 18 months after this law's
enactment date.
SECTION 6. ENSURING ACCURATE PAYMENTS TO PHARMACIES UNDER MEDICAID
Current Law
State Medicaid programs reimburse statutorily defined
retail community pharmacies for CODs dispensed to Medicaid
beneficiaries based on two components: (1) the cost of the
medicine, the ingredient cost; and (2) a payment for the cost
to the pharmacy of administering and filling a prescription
(i.e., the professional dispensing fee). State Medicaid
programs, subject to CMS approval, determine pharmacy
ingredient payment rates, as well as professional dispensing
fees.
For multiple source drugs with generic equivalent products,
state Medicaid programs are subject to annual aggregate upper
limits on payments. Prices available for multiple source drugs
can vary widely, so upper payment limits ensure states pay
competitive prices. State Medicaid programs are required to
have a CMS-approved methodology to determine multiple source
drug payments, including addressing the ingredient costs and
pharmacy dispensing fees. Medicaid regulations require states
to base the ingredient cost component for multiple source drugs
on each product's actual acquisition cost (AAC). State Medicaid
programs have discretion in determining AAC, such as using a
state administered pharmacy survey to determine a drug's
average cost or using the results of a national drug
acquisition cost survey of retail community pharmacies
authorized in Medicaid statute.
The Deficit Reduction Act of 2005 (DRA, Pub. L. 109-171)
amended SSA Section 1927 by adding a new subsection (f) that
required the Department of Health and Human Services Secretary
(the Secretary) to retain a contractor to survey retail
community pharmacies. To implement the survey, CMS contracted
for the National Average Drug Acquisition Cost (NADAC) survey.
NADAC is a monthly survey of acquisition costs paid for most
CODs, including multiple source and single source (brand name)
drugs and biological products. CMS, through a contractor,
surveys a national random sample of retail community pharmacies
monthly and has been publishing NADAC data since November 2013.
Pharmacy participation in NADAC is voluntary, but to provide a
national estimate of average acquisition costs, it is important
that the sample is representative of all geographic areas and
different pharmacy types such as independent and chain
pharmacies.
Provision
This provision would require the Secretary to survey retail
community pharmacies drug prices in the 50 states and the
District of Columbia to determine national average drug
acquisition costs. Retail community pharmacies that receive
payment related to the dispensing of CODs to individuals
receiving benefits under Medicaid would be required to respond
to the survey. The Secretary would be authorized to use a
vendor to conduct the NADAC survey of Medicaid CODs.
Information on national drug acquisition prices obtained
through the NADAC survey would be publicly available, as would
other specified information on the NADAC survey. The NADAC
survey also would identify information on price concessions to
the pharmacy.
The HHS Secretary may enforce noncompliance with the NADAC
survey through monetary penalties or by fully or partially
suspending Medicaid payments until the pharmacy complies. State
Medicaid programs would be required to report additional
information including the basis for setting drug dispensing
fees as well as payment rates under Medicaid managed care
plans.
This provision would be effective 18 months after this
law's enactment date. The Secretary would receive a $5 million
appropriation in FY 2024 and each fiscal year thereafter to
conduct the NADAC survey.
SECTION 7. HHS OIG STUDY AND REPORT ON DRUG PRICE MARK-UPS IN MEDICARE
PART D
Current Law
The past several decades have seen rapid consolidation in
the health care sector, including among PBMs. The early 2000s
saw horizontal integration as freestanding PBMs merged. More
recently, there has been vertical integration, with major PBMs
now owned by, or affiliated with, retail pharmacy chains,
insurers, and health care providers such as hospitals. As a
result of the consolidation, the three largest PBMs were
expected to account for nearly 80 percent of prescription
claims processed in 2022.\43\ In addition, some PBMs have
entered into strategic agreements with insurers and retail
pharmacies to provide certain services to insurers and retail
pharmacies.
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\43\Adam J. Fein, ``The Top Pharmacy Benefit Managers of 2022:
Market Share and Trends for the Biggest Companies,'' Drug Channels, May
23, 2023, https://www.drugchannels.net/2023/05/the-top-pharmacy-
benefit-managers-of.html.
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It can be difficult to determine the pricing structure and
flow of funds within these vertically integrated entities.
MedPAC's June 2023 report, however, included an analysis that
suggested vertically integrated organizations, such as pharmacy
benefit managers affiliated with a health plan and at least one
pharmacy channel, appear to be paying their affiliate
pharmacies more than other pharmacies. Specifically, in
comparing Part D payments between plan-sponsor-affiliated
(vertically integrated) pharmacies and non-affiliated (non-
vertically integrated) pharmacies, MedPAC found that in 71
percent of cases, plans incurred the highest average net drug
costs for transactions with their pharmacy affiliates.\44\
Other recent studies have found that Part D may be overpaying
for certain medicines relative to purchases made by entities
such as Costco or the Mark Cuban Cost Plus Drug Company,
potentially by billions of dollars.\45\
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\44\MedPAC June 2023 Report: https://www.medpac.gov/wp-content/
uploads/2023/06/Jun23_ MedPAC_Report_To_Congress_SEC.pdf.
\45\Lalani, H. et al. (July 2022). ``Potential Medicare Part D
Savings on Generic Drugs From the Mark Cuban Cost Plus Drug Company.''
Annals of Internal Medicine. Available at: https://
pubmed.ncbi.nlm.nih.gov/35724381/; Trish, E. et al. (July 2021),
``Comparison of Spending on Common Generic Drugs by Medicare vs Costco
Members.'' JAMA. Available at: https://jamanetwork.com/journals/
jamainternalmedicine/article-abstract/2781810?guestAccessKey=89d9
de51-fc11-4451-97aa-90b352b7867b.
---------------------------------------------------------------------------
Provision
This provision would require the HHS OIG to study how
vertical integration between Part D plans, PBMs, and pharmacies
affects Part D plan negotiated prices (i.e., the prices Part D
plans charge the Medicare program for drugs dispensed to Part D
enrollees). The study would include an analysis of the
following:
Affiliate acquisition costs within
vertically integrated entities;
Transfer pricing and margin created between
affiliates;
The impact of such transactions on Part D;
and
Other issues determined to be relevant and
appropriate by the Inspector General.
The Inspector General would submit the study under a
specified timeframe to the Senate Finance and House Energy and
Commerce and Ways and Means Committees. The provision would
provide $5.2 million to the HHS OIG for FY 2024 to carry out
the provision, to remain available until expended.
SECTION 8. MEDICARE IMPROVEMENT FUND
Current Law
The Medicare Improvements for Patient and Providers Act
(MIPPA) established the Medicare Improvement Fund (MIF),
available to the Secretary to make improvements under the
original fee-for-service program under Parts A and B for
Medicare beneficiaries. Under current law, $180 million is
available for services furnished during and after FY 2022.
Provision
This provision would direct $1.726 billion in savings to
the MIF.
SECTION 9. P&T COMMITTEE CONFLICTS OF INTEREST
Current Law
Under the Part D statute, pharmacy and therapeutic (P&T)
committees must develop and review formularies of covered drugs
for prescription drug plans. The statute stipulates that at
least one practicing pharmacist and at least one practicing
physician on every such P&T committee must be free of conflicts
of interest with respect to the PDP sponsor, but neither
statute nor regulations and guidance extend these limitations
to PBMs explicitly, and a number of oversight reports have
indicated inconsistent or unclear enforcement and compliance
with respect to conflict of interest provisions under Part D.
Provision
This provision would amend Section 1860D-4 of the Social
Security Act (SSA) to require that at least one practicing
physician and one practicing pharmacist is independent and free
of conflict with respect to any pharmacy benefit manager.
SECTION 10. ENHANCING PBM TRANSPARENCY REQUIREMENTS
Current Law
The Social Security Act (SSA) includes a set of reporting
requirements for pharmacy benefit managers, including with
respect to generic dispensing rates (including by pharmacy
dispensing channel), rebates and price concessions received
from drug manufacturers (and the amount of such concessions
passed along), and prescription volume, among other data
elements. These reporting requirements currently exclude
transparency regarding service fees collected and retained by
PBMs. Additionally, the codification of these requirements
largely predated the establishment and, in some cases,
acquisition of certain downstream PBM affiliates that serve as
rebate negotiators and aggregators for a growing share of the
PBM market.
Provision
This provision would amend Section 1150A of the SSA to
expand the type of entities that must report data to the HHS
Secretary to include certain PBM affiliates, to add data
elements that would be required to be reported (to include fees
received from manufacturers), and to add a requirement for CMS
to produce an annual report with confidentiality protections.
SECTION 11. FACILITATING MIDYEAR FORMULARY CHANGES FOR BIOSIMILARS
Current Law
In the case of small-molecule drugs, a Part D plan may
generally make a negative formulary change (i.e., placement on
a higher or otherwise less favorable tier) with respect to the
reference product for a generic drug if said plan
simultaneously (or prior to doing so) places the generic drug
on the formulary, subject to a number of guidelines and
beneficiary safeguards. With respect to biologics, however, CMS
has not established regulatory or subregulatory guidelines
along these lines. A number of reports from HHS OIG, MedPAC,
and other entities suggest that greater biosimilar uptake and
adoption under Part D would produce both gross and net savings
for beneficiaries and the Medicare program.
Provision
This provision would allow PDP sponsors to change the
preferred or tiered cost-sharing status of a reference
biological product if such sponsor adds a biosimilar for such
reference product to the formulary. The PDP sponsor would need
to submit a request to the Secretary in order to make such a
change. This provision would take effect beginning in plan year
2025.
SECTION 12. STRENGTHENING PHARMACY ACCESS FOR SENIORS
Current Law
Current Part D statute, regulations, and guidance bar PDP
sponsors from inappropriately steering beneficiaries towards
affiliated pharmacies, including specialty pharmacies. Through
guidance, for instance, CMS has established criteria for the
limited circumstances under which a sponsor may subject the
dispensing a covered part D drug to a subset of network
pharmacies.
Provision
This provision would mitigate PBMs from steering patients
to PBM-owned pharmacies for medicines that do not qualify as
``limited access drugs'' by codifying a portion of the Part D
manual. The provision would also increase transparency of PBM
practices in the prescription drug supply chain related to the
dispensing of limited access drugs.
SECTION 13. INITIATING MEANINGFUL PATIENT REVIEW OF VARIOUS EXISTING
PART D REGULATIONS
Current Law
The Part D statute includes a number of beneficiary
protections with respect, for instance, to prescription drug
plan disclosures, utilization management requirements, and
appeals processes. Beneficiary experience, however, varies on
these fronts, as well as on navigation of comparison tools and
other resources provided by CMS or by PDP sponsors.
Provision
This provision would direct CMS to conduct beneficiary-
focused listening sessions open to the public on potential
Medicare Part D improvements.
SECTION 14. REPORTING ON ENFORCEMENT AND OVERSIGHT OF PHARMACY ACCESS
REQUIREMENTS
Current Law
The Part D statute includes a number of requirements
related to ensuring pharmacy access for beneficiaries. The
``any willing pharmacy'' provision, for instance, specifies
that a PDP sponsor must permit any pharmacy willing to meet its
terms and conditions into its network, and regulations further
stipulate that these terms must be reasonable and relevant,
including with respect to reasonable reimbursement.
Provision
This provision would require the HHS Secretary to publish
biennial reports on enforcement actions and oversight
activities undertaken by the Department with respect to the
pharmacy access requirements under section 1860D 4(b)(1) of the
Social Security Act.
SECTION 15. STUDY ON PRICE LINKED COMPENSATION ACROSS THE SUPPLY CHAIN
Current Law
As numerous government oversight reports in the past have
illustrated, a wide range of stakeholders included in the
outpatient prescription drug supply chain engage in
compensation arrangements tied to drug prices or other related
benchmarks.
Provision
This provision would require GAO to complete a study of
compensation and payment structures related to drug prices in
the retail prescription drug supply chain.
SECTION 16. REPORTS ON INAPPROPRIATE PHARMACY REJECTIONS
Current Law
PDP sponsors employ a number of cost-containment measures,
including utilization management tools (i.e., prior
authorization, step therapy, quantity limits). Under current
law, CMS must approve the use of these mechanisms. In practice,
however, oversight agencies, including HHS OIG, have found that
inappropriate pharmacy rejections and coverage denials
sometimes prevent beneficiaries from accessing covered part D
drugs, sometimes as a result of the use of unapproved
utilization management tools, as well as other factors.
Moreover, a number of data collection efforts and other
initiatives intended to identify such practices have lapsed in
recent years.
Provision
This provision would require the Secretary to publicly post
a biennial report related to preventing, identifying, or
addressing inappropriate pharmacy rejections and inappropriate
coverage denials under Part D.
SECTION 17. STUDY ON DRUG SHORTAGES
Current Law According to the American Society of Health-
System Pharmacists (ASHP), active drug shortages had risen to
301 at the end of the first quarter of 2023, up from 271 at the
close of Q1 2021.\46\\47\ ASHP reports that ``[o]ngoing and
active shortages are the highest since 2014.''\48\ A March 2023
majority staff report from the Senate Homeland Security and
Government Affairs Committee (HSGAC) found that new medication
shortages increased by close to 30 percent between 2021 and
2022.\49\ While some shortages conclude fairly quickly, others
persist for years. With some exceptions, federal health care
programs generally do not include comprehensive provisions
explicitly related to drug shortages, although a range of
agencies and experts have cited economic dynamics and factors
as playing a role in such shortages.
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\46\https://www.ashp.org/drug-shortages/shortage-resources/drug-
shortages-statistics.
\47\Note: FDA also maintains a list of drug shortages, although the
agency's criteria differ. https://www.accessdata.fda.gov/scripts/
drugshortages/default.cfm.
\48\https://www.ashp.org/drug-shortages/shortage-resources/drug-
shortages-statistics.
\49\https://www.hsgac.senate.gov/wp-content/uploads/Drug-Shortages-
HSGAC-Majority-Staff-Re
port-2023-03-22.pdf.
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Provision
This provision would require GAO to complete a study of
factors across the outpatient prescription drug supply chain
that influence prescription drug shortages.
SECTION 18. REPORT ON BIOSIMILAR AND GENERIC ACCESS UNDER PART D
Current Law
Part D has generally offered high generic dispensing rates,
while the retail outpatient biosimilar market has only begun to
emerge in recent years. A number of agencies, including HHS
OIG, have found that biosimilar uptake and adoption in Part D
plans has remained relatively low, particularly with respect to
low-wholesale acquisition cost (WAC) options that would
translate into lower cost sharing for beneficiaries.
Provision
This provision would direct HHS OIG to conduct a study and
generate a report on biosimilar and generic drug access under
Part D, including with respect to Part D plan features that
discourage or encourage low-priced biosimilar and generic drug
adoption and utilization under the program, along with trends
in such adoption and utilization.
III. BUDGET EFFECTS OF THE BILL
A. COMMITTEE ESTIMATES
In compliance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 308(a)(1) of the
Congressional Budget and Impoundment Control Act of 1974, as
amended (the ``Budget Act''), the following statement is made
concerning the estimated budget effects of the revenue
provisions of the Modernizing and Ensuring PBM Accountability
Act, as reported. The spending effects of the bill will be
included in the statement from the Congressional Budget Office
that will be provided separately, as described in Part C below.
B. BUDGET AUTHORITY
In compliance with section 308(a)(1) of the Budget Act, the
Committee states that the extent to which the provisions of the
bill as reported involve new or increased budget authority or
affect levels of tax expenditures will be included in the
statement from the Congressional Budget Office that will be
provided separately, as described in Part C below.
C. CONSULTATION WITH CONGRESSIONAL BUDGET OFFICE
In accordance with section 403 of the Budget Act, the
Committee advises that the Congressional Budget Office has not
submitted a statement on the bill. The statement from the
Congressional Budget Office will be provided separately.
IV. VOTES OF THE COMMITTEE
In compliance with paragraph 7(b) of rule XXVI of the
Standing Rules of the Senate, the Committee states that, with a
majority present, the Modernizing and Ensuring PBM
Accountability Act was ordered favorably reported by a roll
call vote of 26 ayes and 1 nay on July 26, 2023.
V. REGULATORY IMPACT AND OTHER MATTERS
A. REGULATORY IMPACT
Pursuant to paragraph 11(b) of rule XXVI of the Standing
Rules of the Senate, the Committee makes the following
statement concerning the regulatory impact that might be
incurred in carrying out the provisions of the bill.
Impact on individuals and businesses, personal privacy and paperwork
In carrying out the provisions of the bill, individuals and
businesses across the drug supply chain including drug
manufacturers, PBMs, health plans, and pharmacies that provide
prescription drugs to individuals with Medicare or Medicaid
coverage will be subject to new reporting requirements. The
requirements range from PBMs reporting drug cost and dispensing
information to pharmacies reporting acquisition cost
information. The new information will be reported to Part D
plan sponsors and the HHS Secretary. In some cases, the
Secretary will share certain reported information with other
entities and the public.
The provisions of the bill do not impact personal privacy.
B. UNFUNDED MANDATES STATEMENT
The Committee adopts as its own the estimate of federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act of 1995 (Pub. L. 104-4), which will be provided separately.
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In the opinion of the Committee, it is necessary in order
to expedite the business of the Senate, to dispense with the
requirements of paragraph 12 of rule XXVI of the Standing Rules
of the Senate (relating to the showing of changes in existing
law made by the bill as reported by the Committee).
[all]