Pharmacy Benefit Managers Face Potential Split Legislation - WSJ
Shares of CVS Health, Cigna, and UnitedHealth Group fell 5% following reports from the Wall Street Journal about a bipartisan group of lawmakers preparing a bill aimed at breaking up pharmacy benefit managers (PBMs). The proposed Senate bill, supported by Senators Elizabeth Warren and Josh Hawley, would compel companies that own health insurers or PBMs to divest their pharmacy operations within a three-year period.
This legislation, which will also be introduced in the House of Representatives, represents the most significant effort to reform the activities of PBMs and their parent companies to date. This move could cut off a major revenue source for these companies and address patient dissatisfaction. The bill is inspired by historic governmental actions banning common ownership across various sectors.
Senator Elizabeth Warren criticized PBMs for market manipulation, claiming it leads to rising drug prices, harms employers, and contributes to the closure of small pharmacies. Warren stated that the new bipartisan bill would tackle these issues by limiting the influence of these middlemen.
Senator Josh Hawley expressed support for the bill, stating that it would prevent insurance companies and PBMs from further monopolizing American healthcare and increasing costs for families.
However, with the session nearing its end, the likelihood of the bill becoming law during this Congress is low. Proponents of the bill are laying the groundwork for its passage next year.
The momentum for this legislation increased following the murder of UnitedHealth Group executive Brian Thompson and subsequent bipartisan support. This came after extensive hearings and investigations into industry practices that critics claim contribute to rising drug prices.
The Pharmaceutical Care Management Association, representing PBMs, opposed the bill, asserting that the focus should be on holding drug companies accountable for high list prices to reduce prescription drug costs.
PBMs play a crucial role in the prescription drug market by determining coverage and pricing for drugs on insurance plans. The three largest PBMs—CVS Health's Caremark, Cigna's Express Scripts, and UnitedHealthGroup's OptumRx—are part of companies that also own some of the largest health insurers in the country and operate mail-order pharmacies. CVS additionally has over 9,000 retail pharmacy locations.
These firms claim that their bargaining power with drug manufacturers helps control costs and lower premiums for Americans. However, critics argue that their practices result in higher costs due to fees and payments that boost their revenues. PBMs have been accused of favoring their own pharmacies over independent retailers and sometimes charging higher prices.
Investigations have revealed that PBMs may cause patients to pay more at local pharmacies compared to PBM-affiliated mail-order pharmacies, and they may sometimes steer patients away from cheaper medications.
Other legal efforts targeting PBMs have focused on demanding transparency in business practices or banning certain pricing strategies. Some provisions nearly passed last year but ultimately were not included in the final legislative package.
The House bill, titled "Patients Before Profits Act," is backed by Representatives Jake Auchincloss and Diana Harshbarger, who had previously collaborated on legislation addressing PBM pharmacy referral practices. Senators referenced the Dodd-Frank financial law's Volcker rule as a historical example of the government banning common ownership within sectors.