Chavez-DeRemer, colleagues introduce legislation to help lower prescription drug costs

WASHINGTON (KTVZ – Rep. Lori Chavez-DeRemer (OR-05) joined Reps. Mariannette Miller-Meeks (IA-01), Nanette Diaz Barragán (CA-44), Kathy Manning (NC-06), Nicole Malliotakis (NY-11), Brad Schneider (IL-10), Tom Kean, Jr. (NJ-07), and Abigail Spanberger (VA-07) to introduce the Delinking Revenue from Unfair Gouging (DRUG) Act. The bipartisan proposal would tackle practices used by pharmacy benefit managers (PBMs) that drive up costs for prescription medications.

“Pharmacy benefit managers manipulate the current payment model by creating an environment that favors more expensive prescription medications, which ultimately drives up health care costs for patients,” Chavez-DeRemer said. “By implementing a flat-fee compensation system, the DRUG Act would streamline drug price negotiations – lowering costs by improving transparency and reducing administrative burdens. I’ll continue working in a bipartisan manner to bolster transparency and accountability in the health insurance industry to make health care more affordable for Oregon seniors and families.”

The news release goes on to say:

PBMs are a growing faction in the distribution and payment ecosystem for prescription medicines. As the entity between pharmaceutical companies and pharmacies, PBMs initially played a key role in reducing prescription medicine costs and increasing access and affordability for patients.

Unfortunately, PBMs have grown and vertically integrated to the point where the three largest PBMs control over 80 percent of prescriptions, up from 30 percent in 2010. Their modern-day practices of driving up list prices in order to extract higher rebates for formulary placement are occurring at the expense of patients in the form of higher insurance premiums and higher prescription drug costs.

PBMs often bill patients more than what they pay to the pharmacy for medicines and keep the difference, enriching themselves instead of the patients they are supposed to benefit. This business practice, known as spread pricing, adds opacity to a supply chain that needs transparency. PBMs have attempted to rebrand spread pricing, calling it “risk mitigation pricing” and contending that it provides predictability for plan sponsors and lowers drug cost.

However, a 2020 analysis by the Congressional Budget Office found that prohibiting the use of spread pricing contracts just in Medicaid alone would save approximately $929 million over 10 years.

The DRUG Act includes several reforms to address PBM abuses: 

• Implements delinking policies, which allows PBMs to only charge a flat fee for drug placement versus letting them continue to charge a percentage of the drug.
• Bans spread pricing, which occurs when a PBM pays a pharmacy less for a drug than what they receive from the insurer.
• Prohibits PBMs from paying affiliated pharmacies more than independent community pharmacies for the same services; and 
• Bans patient steering, which occurs when a PBM encourages or requires patients to use its affiliated pharmacies instead of a pharmacy that is most convenient for the patient.

Full text of the bill is available HERE.