Cantwell Protects Consumers From Paying Artificially High Rx Drug Prices Due To Industry Manipulation

Cantwell Amendment Included in Finance Committee Health Care Bill to Require Pharmacy Benefit Managers to Report Pricing, Other Information to Government

Washington, DC – The Senate Finance Committee today approved an amendment authored by U.S. Senator Maria Cantwell (D-WA) to require reporting by pharmacy benefit managers (PBMs) to ensure that savings from drug price negotiations are being passed on to consumers and not contributing more to pharmaceuticals’ bottom lines. Serving as the middlemen between health insurance plans (including both private health insurance plans and Medicare Part D), pharmaceutical manufacturers and pharmacies, PBMs manage most of the prescriptions filled in the United States but are the only unregulated area of the health insurance industry.

"What we’re after here is transparency of drug pricing,"

Cantwell told Finance Committee members during today’s mark-up of health care reform legislation. "This kind of transparency will help drive down drug prices in a significant fashion."

PBMs negotiate price discounts from retail pharmacies and wholesalers and gain rebates from manufacturers to lower drug prices, but the current market incentives and a lack of transparency create an environment where PBMs are likely to profit from closed-door deals that undermine cost-control measures and in fact limit consumer choice.

Because of the lack of transparency, the government has no way to protect consumers against practices such as switching prescriptions from one drug brand to another to increase profit, pocketing the savings from negotiated drug prices instead of passing that savings to customers, and manipulating the market to steer business to PBM-owned retail pharmacies and mail-order pharmacies. Cantwell’s amendment requires PBMs to report to the government information on pricing, competition, and on how much savings are passed on to consumers.

PBMs are intended to negotiate the best possible deal on drug pricing for large customers, such as Medicare or large private insurers with the lower cost eventually benefiting consumers. But real-world practice has shown it doesn’t always work that way because some PBMs have merged with large pharmacy and mail-order chains creating conflicts of interest.

"We want the consumer to benefit as greatly as possible from the discounts that PBMs are helping to negotiate,"

Cantwell said.

Senator Max Baucus (D-MT), the committee chairman, told colleagues, "It’s a very good amendment. I strongly approve of it."

The amendment requires PBMs to share basic information with appropriate government agencies on:

  • The aggregate difference between the price the PBM charges the health plan and the price it pays to the retail and mail order pharmacy;
  • The amount of savings PBMs negotiate with drug manufacturers and the amount of these savings which are passed on to consumers;
  • The percent of prescriptions which are switched from low-cost drugs to high-cost drugs; and,
  • The percent of all prescriptions that are provided through retail pharmacies compared to mail order pharmacies, to ensure fair market competition.

The reported information would remain confidential.