Senator targets PBM 'secrecy' in new legislation

Sen. Ron Wyden has introduced legislation aimed at bringing transparency to pharmacy benefit manager rebates. Photo courtesy of Joe Frazier.

Right on the heels of a high-profile dust-up between Gilead Sciences and the world’s top pharmacy benefits manager, Express Scripts, Sen. Ron Wyden has introduced a bill to “lift the veil of secrecy” around PBMs and their finances.

Hired by health insurers, PBMs negotiate drug rebates on behalf of hundreds of millions of Americans and in some cases return a percentage to their clients. But in recent months, drug "middlemen" have come under scrutiny as one potential cause for high drug costs in the U.S.

Dubbed the C-THRU Act, Wyden's legislation would first force PBMs to report the total amount of rebates they collect from pharma companies and the share of that amount returned to health plans. After two years, the bill would mandate that PBMs return a minimum proportion of their drug rebates to insurers to help alleviate patient expenses.

Wyden said his bill represents “the first step of an effort to lift the veil of secrecy about prescription drug prices.”

Among other points, Wyden’s bill would also mandate that Medicare Part D patients benefit from behind-the-scenes negotiations by setting their cost-sharing on negotiated prices rather than list prices.

It's the latest affront to PBMs as drug pricing attention has turned to the groups in recent months; execs at Mylan, Gilead and Novo Nordisk have each pointed to their role in the complex pricing system. On several occasions, drug execs have said their companies have to put in place high price hikes in order to see a net gain due to growing rebates and discounts.

To that point, a new pharma-sponsored study found that rebates have swelled in recent years, up to $105 billion in 2015 from $67 billion in 2013.

But the Pharmaceutical Care Management Association, an organization representing PBMs, isn’t happy with Wyden’s proposals.

PCMA said the legislation would “increase premiums by undermining the tools employers, unions, and public programs, including Medicare, use to reduce prescription drug costs.”

Express Scripts, the largest player in the PBM field, said in a statement it's "working with Senator Wyden and he's made changes to his bill because he understands the harm that can occur if inappropriate information is disclosed to allow pharma and pharmacies to price fix." Wednesday's announcement included those changes, an Express Scripts spokesperson said.

Public rebate reporting would give drugmakers and drug stores “unprecedented pricing power that could help them tacitly collude with their competitors,” according to the PCMA’s statement.

RELATED: Behind-the-scenes rebates take a growing bite out of pharma sales, industry-funded study says

Wyden’s proposals comes at a time of stepped-up scrutiny on the PBM industry, kicked off last year when Mylan CEO Heather Bresch said drug “middlemen” were at least partially responsible for high costs. EpiPen's price had grown significantly in past years, and patients recently started bearing more costs because of a move to high-deductible health plans.

Since Bresch's statement, the National Community Pharmacists Association (NCPA) has called for an investigation and Rep. Buddy Carter called the groups the “man behind the curtain” in drug pricing. In a new statement Wednesday, NCPA lauded Wyden’s efforts.

“There’s mounting evidence that PBM profits grow in lockstep with—and contribute to—rising prescription drug costs,” according to the group.

RELATED: With new calls for congressional hearings, PBMs could be next on Capitol Hill's hot seat

Those developments set the stage for an exchange this month between top PBM Express Scripts and Gilead Sciences, the maker of costly hep C meds Sovaldi and Harvoni. To start it off, Gilead EVP of worldwide commercial operations, Jim Meyers, said PBMs count on high drug prices to trigger rebates that fill their own coffers.

Meyers said he’s never “met, in this entire experience, a PBM or a payer outside of the Medicaid segment that preferred a price of $50,000 over $75,000 and a rebate back to them.”

RELATED: In quick rebuttal, Express Scripts blasts Gilead exec's pricing blame

Express Scripts took issue with that claim, quickly firing back that Gilead sets its own drug prices. Based on Meyers’ argument, the PBM giant pushed Gilead to make a significant repayment on its hep C meds.

“If you’re saying that the drug really is worth about $50,000, then it’s only right to make sure payers are made whole for overpaying,” an Express Scripts exec wrote.

Gilead declined to comment on the Express Scripts letter.

RELATED: PBMs counter pharma's pricing blame with proposals to cut $100B in drug costs

Amid the scrutiny, the PBM industry is pushing back, detailing some of its own proposals that would gut pharma profits if enacted. PCMA has been “meeting with key officials all over Washington” to talk drug prices, CEO Mark Merritt recently told FiercePharma.

“Obviously they hear a lot from drug companies on this issue,” he said. “They also know that drug companies are selling the drugs. When it comes to lower costs, you have to talk to those on the buying side.”