HEALTHCARE UNCOVERED: PBM Reform Comes to Washington But It’s Only the Tip of the Iceberg

Congress tucked long-sought pharmacy benefit manager reforms into the government spending package that President Donald Trump signed this week to keep the federal government funded. The bill cleared the House on a razor-thin vote after passing the Senate last week, ending a brief shutdown and funding the government through September.

The PBM provisions are real progress. They begin to unwind one of the most perverse incentives in the drug supply chain by changing how PBMs are paid in Medicare Part D, shifting compensation away from rebate-driven, list-price-inflating arrangements and toward flat, market-based service fees.

As Politico reported , the centerpiece of the reform - "delinking" PBM compensation from rebates and list prices - applies only inside Medicare's outpatient drug benefit. It does not extend to the commercial market, where roughly two-thirds of Americans get their coverage.

"It's a little bit of a Whac-a-Mole game," said Melissa Bartlett, senior vice president of health policy at the ERISA Industry Committee, which represents large employers. "This is very much the down payment, the beginning of the conversation on what things need to happen."

In the same vein as Bartlett, Representative Buddy Carter (R-Ga.) told me via email: "I am proud to have secured meaningful wins for patients and pharmacists, who have waited too long to be free of PBMs' chains. After more than a decade of advocacy, under President Trump's leadership, we are building a health care system that puts patients before profits. As my fellow pharmacists know, there is significant work ahead, and I will continue the work of creating a more affordable, accessible, and higher-quality health care system for all." Another pharmacist in Congress, Rep. Diana Harshbarger (R-Tenn.), added that "this legislation restores fiscal responsibility to the appropriations process while delivering real reforms that lower costs for patients and families."

Carter is right about the significant work ahead because PBMs do far more business outside Medicare than inside it. Employer plans and ACA marketplace coverage operate under a patchwork of federal and state rules - and the new law leaves most of that system untouched. Which is why the next fight is already encompassing the Department of Labor, the federal regulator of employer-sponsored health insurance.

Last week, the Labor Department proposed what it described as the most significant federal transparency reform of PBMs in decades and aimed squarely at employer-sponsored health plans governed by the Employee Retirement Income Security Act (ERISA).

Under the DOL's proposal, PBMs would, for the first time, be required to disclose to plan fiduciaries (which includes their employer clients):

• how much in rebates and other payments they receive from drug manufacturers,
• how much of their compensation is tied to the difference between what a plan pays and what a pharmacy is reimbursed, and
• how much in fees and payments they recoup from pharmacies.

The rule would also give employers the right to audit PBM disclosures and assess whether the compensation being paid is reasonable - a basic fiduciary safeguard that has been largely impossible in today's opaque contracting environment.

Employer plans cover most of America's working adults. For years, employers have been told to trust PBMs while being denied visibility into how those middlemen actually make their money.

As I wrote earlier this week , PBM reform was treated as a niche cause inside health policy circles for years. The PBM provisions would not have been included in the spending bill if it hadn't been for a broad, coordinated push by patient groups, pharmacists, employers and policy advocates (like the Lower Out-of-Pockets (LOOP) NOW Coalition that I lead ) that refused to let this issue fade back into the background.

While Congress's new PBM law is a meaningful step for seniors, advocates on the ground - and a growing number of lawmakers in Washington - know it is just the tip of the iceberg. As Bartlett put it, the reforms that just passed are "beneficial at the edges." The remaining work - whether its employer and ACA coverage or speciality drugs and hospital-PBM (340B) arrangements - is now in sharper focus.