Senators back bill to combat skyrocketing Big Pharma prescription drug prices

Built-in structures that incentivize raising drug prices in pharmacies and taking advantage of seniors may soon be dismantled.

Sens. Maggie Hassan (D-NH) and Bob Menendez (DN.J.) were among those Wednesday who voted to move forward with a bipartisan bill she personally helped develop to bring down skyrocketing prescription drug costs and to lower the way pharmacy managers benefit from rising drug prices.

The Modernizing and Ensuring PBM Accountability (MEPA) Act, passed by the bipartisan Finance Committee on July 26, reduces the cost incentive for pharmacy benefit managers (PBMs) to prioritize more expensive drugs, as they receive larger payouts for higher-priced drugs.

Drug makers say the increasing rebates they have to pay PBMs are forcing them to ratchet up prescription drug prices. According to a recent analysis, drugmaker rebates on PBMs increased from $39.7 billion in 2012 to $89.5 billion in 2016, partially offsetting price increases for prescription drugs on the list. However, PBMs say they have passed a bigger chunk of the money to insurers.

“Last year we took on Big Pharma by giving Medicare the ability to negotiate drug prices, and we must continue to stand up to the healthcare industry and help people afford the medicines they need,” Senator Hassan said . “This bipartisan legislation will ensure that pharmacy benefits managers don’t push people toward more expensive medications just to receive a higher payout, thereby saving seniors their hard-earned money while saving taxpayers’ money.”

HIV drugmaker Gilead Sciences has been criticized for its PBM Express Scripts for raising the prices of its life-saving hepatitis C cures Sovaldi and Harvoni. But Gilead later changed its mind and joined a chorus of drugmakers choosing PBMs. “I have never met a PBM or non-Medicaid payer in this entire experience who preferred a price of $50,000 to $75,000 and a discount for it,” said Jim Meyers, executive vice president, worldwide commercial activity at Gilead, told Bloomberg in 2017. “We have a system that incentivizes rebate earnings.”

What would change under the PBM Accountability Modernization and Ensuring Act?

The bill would reduce prescription drug costs and save an estimated $1.7 billion in taxpayer dollars. It will make some adjustments to common PBM practices and Medicare Part D transparency requirements, which the Senator outlined as follows:

• PBMs often prioritize coverage for more expensive drugs, as part of their compensation is calculated based on the drugs’ list prices. This legislation breaks the link between drug prices and the level of remuneration paid to pharmacy managers, removing the financial incentive for these companies to push patients to buy more expensive drugs.
• This legislation will prohibit Medicaid’s practice of “spread pricing,” in which pharmacy benefit managers negotiate a lower price with a pharmacy but charge the health insurer a higher price and collect the difference.
• The legislation also includes a bipartisan measure Senator Hassan introduced to ensure pharmacy benefit managers report transparently on how they price low-cost generic and biosimilar drugs, providing more transparency into whether people are easily accessing those generics can access.

Senator Menendez (DN.J.), a senior member of the US Senate Finance Committee, said the Modernizing and Ensuring PBM Accountability (MEPA) Act includes its own incorporation, the Patients Before Middlemen (PBM) Act, which Marsha Blackburn joined (R-TN), alongside Senate Treasury Chairman Ron Wyden (D-OR), Senate Treasury Leader Mike Crapo (R-ID), Sen. Jon Tester (D-MN) and Sen. Roger Marshall (R-KS) . .

“For too long, PBMs have gripped the prescription drug supply chain — and turned price-gougers on hard-working families and seniors alike. With the current incentive structure, where they earn a profit as a percentage of a prescription’s list price, PBMs are exerting their leverage to ensure health insurers cover increasingly expensive drugs — even when cheaper options are available,” Senator Menendez said. “My ‘Patients Before Middlemen Act’, which I introduced with Senators Blackburn, Wyden, Crapo, Marshall and Tester, would replace the complicated system of opaque rebates and administration fees with a flat fee – a fee negotiated before the contract is signed. By decoupling PBM reimbursement from drug prices, we help reduce prescription drug costs for Medicare Part D beneficiaries and better align incentives in the marketplace. Our bipartisan Patients Before Middlemen (“PBM”) law would stem the biggest abuses in the PBM industry today.”

Multiple factors drive skyrocketing drug prices — and when it’s a life-saving drug, people pay for it all. According to a 2022 study published in The Lancet, the cost of some insulin products increased by over 200% between 2007 and 2018. Most famously, Pharma Bro Martin Shkreli increased the price of the life-saving antiparasitic Daraprim for people living with HIV by 4,000% in 2015. He’s also said to have devised an elaborate plan to prevent generic competitors from getting a piece of the pie.