Some stories about Washington, D.C., never quite make it to the evening news. It doesn’t have any scandals, dramatic hearings, or catchy soundbites. Just bills moving quietly through committee rooms while lobbyists with lots of money answer the phones. This is the exact reason why the House Education and Workforce Committee recently passed H.R. 7895, a bill that would stop pharmacy benefit managers from paying brokers and consultants to steer health plans their way. And it might be more important to regular Americans than most of the louder arguments going on in Congress.
Referral fees are what the bill, which was pushed by Georgia Subcommittee Chairman Rick Allen, is against. Most people have never heard of them. When a company hires a consultant to help them pick a PBM (the company that handles their employees’ prescription drug coverage), that consultant may already be getting paid by the PBMs they’re supposed to be evaluating. There is no hiding the conflict. It’s about structure. Allen said that employers should get advice that isn’t skewed by who is giving the advisor the biggest check.
In American healthcare, PBMs are in a weird spot. They negotiate prices, set formularies, and decide which drugs patients can actually get. They are in the middle of drug companies, insurance plans, and pharmacies. Optum Rx, CVS Caremark, and Cigna’s Express Scripts are the three biggest, and they cover most Americans’ prescription drug costs.
For years, critics said that this arrangement let PBMs make money off of things that weren’t clear, like spread pricing, manipulating rebates, and contracts that weren’t clear. Employers, mostly mid-sized businesses that didn’t have their own benefits experts, often hired consultants to help them find their way through this maze. In simple terms, no one was in a hurry to fix the problem that those consultants might be getting paid by the companies they were recommending.
Congress did act in the end. There were some big changes to PBMs in the Consolidated Appropriations Act that was passed last winter. These included new rules about transparency, a ban on spread pricing in commercial plans, and the much-debated “delinking” provision that separates PBM pay from a drug’s list price. That really was a change. But that law didn’t do anything about the problem of broker commissions. H.R. 7895 tries to close that gap.
As expected, the response from lobbyists has been quick. There is a clear difference between how the Pharmaceutical Care Management Association (the main trade group for the industry) works now and how it did a year ago. Its new CEO, David Marin, has been honest in a way that his predecessors weren’t. He has admitted that the industry was too quiet for too long, letting drug companies control the narrative, and giving Congress a reason to want reform. Marin said not long ago, “We do not want to be opaque.” That’s either a real change in culture or great crisis communication. Most likely, it’s a mix of the two.
The different pressures at this moment are what make it interesting. PBMs are fighting back against what they see as an unfair frame. They say that rules like “delinking” will help drug companies in the long run, but seniors and taxpayers will lose out. That argument is based on real economic research. Casey Mulligan, an economist who used to work in the White House, made a model that shows how delinking in Medicare could raise premiums and help big drug companies. That will depend on who is telling Congress the story and whether they believe it or think it is just industry spin.
It’s not as broad as the broker commission ban, but it’s hard to argue with the idea behind it. If the person giving your company advice on how to spend money on healthcare has a financial connection to the companies they’re suggesting, that’s not really independent advice. That alone might be enough for the bill to move forward. Affordability is seen as an issue that both parties need to address before the midterm elections in November in Washington, D.C. Banning hidden broker fees is an example of a clean, easy-to-explain reform that looks good in a press release.
Even so, clean reforms often become hard to carry out. There is a large, experienced, and patient lobbying infrastructure around PBMs, insurers, and drug companies. The bill made it through committee. It’s a whole different story if it makes it through the floor.
