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Bi-partisan legislation could reduce drug middlemen profits, but unlikely to reduce drug prices

Written by Diane Archer

Stat News reports that bi-partisan Senate legislation to address unexpected medical bills includes legislation that could bring down the profits of the middlemen who buy drugs from pharmaceutical companies on behalf of health insurers. But, the legislation does not hurt pharmaceutical company profits or in any way ensure uniformly lower drug prices. We need Congress to regulate drug prices.

Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA), who head the Senate health committee, have crafted a bill that would stop Pharmacy Benefit Managers (PBMs) from being able to keep for themselves the difference between the price the PBM charges an insurer, such as Medicaid, for a drug and the price it pays the pharmacy for the drug, “the spread.” The spread could be many times the pharmacy price, as Bloomberg reports.

The bill does not appear to hurt pharmaceutical companies. Indeed, it could help them. They might be able to take advantage of this law to raise the wholesale price of drugs and profit more without affecting the price people pay for them.

If this legislation is enacted, PBMs also would have to report more information about the amount they pay for drugs and the amount of the rebates they get. Their clients, Medicaid and commercial insurers, would receive all rebates and discounts. This would likely put an end to, or significantly reduce, rebates and discounts. It also could mean that insurers pay PBMs more for their services. Would it bring down drug prices?

Under the legislation, PBMs would pay a penalty of $10,000 a day if they did not comply. For PBMs, $10,000 a day is a drop in the bucket. They are multi-billion companies for whom $3.65 million a year is chump change. In 2017, they earned $223.7 million from the spread on Ohio Medicaid alone.

In October 2018, the Patient Right to Know Drug Prices Act became law. It forbids gag clauses, which have kept pharmacists from telling patients when the actual price of a drug is less than its copay.

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