Pharmacy Benefit Manager (PBM) Transparency | Position Paper

SUPPORT PRICING AND COST TRANSPARENCY IN THE PHARMACY SECTOR

BACKGROUND

Rising costs associated with prescription drugs represent the largest segment of healthcare spending, accounting for more than 21.5% of commercial insurance premiums and 12% of all Medicare costs from Part D alone. The specialty pharmacy market in particular is projected to continue growing by 8% per year through 2025. Growth will be largely driven by new-to-market drugs, which are anticipated to cost $62 billion.

THE ISSUE

The indirect impact of Medicare-negotiated drug prices on the commercial insurance market remains to be seen and rising drug costs currently remain unchecked for commercial plans. In addition, employer plan sponsors and patients have limited access to data and information on pharmacy delivery system arrangements, such as contracts negotiated between supply chain entities, like pharmacy benefit managers (PBMs) and insurers, as well drug pricing, including rebates and discounts. Access to this information is critical because it could allow stakeholders to make better-informed decisions about how to provide and participate in more innovative pharmacy benefit solutions. Without a clear understanding of how pharmacy benefits programs are managed, employers struggle to provide cost-effective pharmacy benefits tailored to the needs of their employees.

OUR POSITION

A set of transparency requirements was included in the Surprise Billing Act enacted in December 2020 as part of The Consolidated Appropriations Act, 2021 (“CAA Transparency Provisions”).1 Those requirements included a section (“Section 202”) amending ERISA to bar a group health plan fiduciary from contracting with service providers unless those service providers have fully disclosed any revenue they will receive that relates to the Plan. The language clearly included employee benefits agents and brokers, as well as PBMs and TPAs. The largest PBMs have taken the position that they are not subject to these requirements and are not complying with the provision.

Both the Pharmacy Benefit Manager Reform Act (S. 1339) and Lower Costs, More Transparency Act (H.R. 5378) solve this problem by explicitly clarifying that Section 202 of the CAA Transparency Provisions applies to PBMs and TPAs that service the Plan. The Council strongly urges members to act swiftly to pass these reforms.

OUR ASK

While supportive of both House and Senate versions of the transparency-focused bills, The Council recommends a technical correction to ensure that PBMs and TPAs are specifically included under ERISA’s definition of health plan consulting.

PBM/TPA Inclusion In The Amendments To ERISA Section 408(b)(2)(B) Technical Correction & Explanation

In Section 402(a)(1), Delete Line 19, Page 209 after “(1)” through Line 5, Page 2102 and replace with the following:

Clause (ii)(I)(bb) of section 408(b)(2)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1108(b)(2)(B) is amended by adding at the end the following:

‘‘(CC) Pharmacy benefit management services provided by pharmacy benefit managers or other service providers and related services provided by third party administrators (or other entities providing such services) for which the covered service provider, an affiliate, or a subcontractor reasonably expects to receive indirect compensation or direct compensation described in item (dd).’’

EXPLANATION

This change would substitute the suggested revisions to the current “Consulting” definition with the Senate bill approach, which just adds PBMs and TPAs as additional covered service providers to the overall provision.

Without this change, there is a risk that PBMs and TPAs will argue that they are directly providing services and they are not covered by the “develop or implement” activities. If read to apply to them in any event, it will create issues for stop loss insurance and other insurance contracts which are products and not services and the construction of the overall revised “Consulting” provision thus could create unintended confusion and uncertainty.

Adding a new (CC) that directly sweeps in PBMs and TPAs more cleanly advances the clear intent here and will create no such confusion or uncertainty either with respect to the application of the disclosure requirements to PBMs and TPAs or with respect to the application of the provisions to product providers.

SOURCES

ABOUT US

The Council of Insurance Agents & Brokers is the premier association for the top regional, national and international commercial insurance and employee benefits brokerage firms worldwide. Council members are market leaders who annually place 90 percent of U.S. commercial property/casualty premiums, and 70 percent of all employee benefits business in the U.S.

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