The Cantwell-Grassley PBM Bill is a Wolf in Sheep’s Clothing | Citizens Against Government Waste

The Cantwell-Grassley PBM Bill is a Wolf in Sheep’s Clothing

The WasteWatcher

Congress is taking all the wrong steps to lower prescription drug prices in America.  The latest example is the Pharmacy Benefit Manager Transparency Act, S.127, introduced by Sens. Chuck Grassley (R-Iowa) and Maria Cantwell (D-Wash).  This legislation would expand the Federal Trade Commission’s (FTC) regulatory authority over pharmaceutical benefit managers (PBMs) and their privately agreed upon contracts.  This would not only fail to reduce the cost of pharmaceuticals but also set a precedent to allow the FTC to set prices and regulate business practices for any industry. 

PBMs administer drug plans for more than 275 million Americans who obtain their health insurance from employers, unions, state governments, insurers, and other entities.  The number of people PBMs serve year over year is consistently growing due to the popularity of PBMs and the lower priced drugs they provide.  PBMs save an average of $1,040 per payer and patient per year.  They provide their customers with 40 to 50 percent savings on prescription drugs and related medical costs.  PBMs utilize a variety of tools to lower prices like rebates, pharmacy networks, drug utilization review, formularies, specialty pharmacies, mail-order, and audits to drive down drug costs, improve quality, increase patient medication adherence, and prevent fraud.  PBMs are able to lower costs for patients by negotiating on behalf of large groups they serve; the savings are then passed onto health plan sponsors and patients.            

Increasing the government’s involvement in the healthcare system, particularly through the FTC, will adversely impact both patients and taxpayers.  As Citizens Against Government Waste President Tom Schatz noted in his May 25, 2022, comments to the FTC on its study of the impact of PBMs’ business practices, “CAGW has for many years been involved in the debate over the regulation of pharmacy benefit managers (PBMs) as part of the effort to lower drug costs.  The organization has consistently argued that government meddling in this area does the exact opposite and raises costs.   Since PBMs provide benefits for multitudes of employers and millions of patients, they are able to bring to bear increased negotiating power and get substantial price discounts from pharmaceutical companies based on volume.  The savings are passed on to health plan sponsors, like employers, and consumers.  Processing huge volumes of prescription drug programs is complicated and overwhelming, so in the 1960s, health insurers hired PBMs to fill that role.  In the 1980s, when insurance and pharmaceutical markets grew exponentially due to medical advances, PBMs expanded their roles to negotiating lower drug prices with pharmaceutical manufacturers and pharmacies.  In 2005, before Medicare Part D was implemented, the Congressional Budget Office estimated it would cost taxpayers $174 billion by 2015, but it cost only $75 billion thanks to private-sector negotiations that included PBMs.”

The federal government’s solution to a problem is to either create a new program or regulation, rather than determining whether there is a problem or if there is a solution to a problem in an existing law or regulation.  As President Ronald Regan said during a press conference in 1986 while questioning the effectiveness of government, “The nine most terrifying words in the English language are, I’m from the government and I’m here to help.”  S.127 is nothing more than a wolf in sheep’s clothing that aims to improve drug prices but will only undermine a successful, cost-effective component of the private sector healthcare ecosystem.  Instead, Congress should encourage competition in the marketplace to drive down costs, similar to how PBMs negotiate lower prices on behalf of their customers.

If members of Congress want to help lower drug prices, they could start with holding the Food and Drug Administration's feet to the fire to expedite the approval of generic drugs.  Congress should also reform the abused 340B drug discount program and address Medicare insolvency.  More federal government meddling in private sector healthcare business will further distort the marketplace and drive the country further toward socialized medicine.

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