Grassley Leads Bipartisan Bill Requiring FTC Study of the Role, Behavior, and Recent Merger Activity of Prescription Drug Supply Chain Middlemen
Apr 29, 2019
WASHINGTON – Senate Finance Committee Chairman Chuck Grassley of Iowa and Senator Maria Cantwell of Washington today introduced legislation requiring the Federal Trade Commission (FTC) to study the role and recent merger activity of pharmacy benefit managers (PBMs), as well as possible anticompetitive behavior. The Prescription Pricing for the People Act of 2019 helps to shine a light on the PBM industry by examining the effects of consolidation on pricing and other potentially-abusive behavior. It also requires the FTC to provide policy recommendations to Congress to improve competition and protect consumers. The legislation is cosponsored by Senators Steve Daines of Montana, Richard Blumenthal of Connecticut, James Lankford of Oklahoma and Joni Ernst of Iowa.
“Competition and transparency are key ingredients to improving affordability of prescription medications. While PBMs play a significant role in determining how much patients and the government pay for drugs, much of their business model is cloaked in secrecy, and the industry has experienced significant consolidation in recent years. The Prescription Pricing for the People Act helps provide a better understanding of the PBM industry through a comprehensive FTC review designed to inform policymakers, protect patients and safeguard competition. This bill is just one of many steps I’m taking as Finance Committee chairman to improve access to affordable medications,” Grassley said.
“People’s lives depend on getting affordable access to medicine. We need greater transparency and oversight to increase competition and make sure patients get a fair deal on the medications they need,” Cantwell said.
“Montanans can’t afford to keep paying the outrageous costs of prescription drugs,” Daines said. “Transparency and accountability in drug pricing is long overdue. That’s why I’m introducing this bill to protect Montanans and ensure those responsible for negotiating drug prices are focused on driving costs down, not lining the pockets of their own industry.”
“Pharmacy Benefit Managers (PBMs) are the power players in the pharmaceutical supply chain nationwide. Since 2005, the overall PBM industry has consolidated itself to the point that only three companies dominate the lion’s share of the marketplace. With so little competition left, a select few companies now have sweeping power over the cost of drugs, decision-making authority over which drugs patients can access, and which pharmacies can sell each drug. In light of this market concentration, Congress must understand what effect PBMs have on supply chain, as it relates to both cost and access. I am proud to join my colleagues today in asking the Federal Trade Commission (FTC) to take a look at the PBM marketplace companies and identify any anticompetitive practices,” Lankford said.
PMBs serve as middlemen in the prescription drug supply chain, but the industry has been under scrutiny for how it determines the prices of prescription drugs. Recent consolidations between PBMs and insurance providers have resulted in vertical integration whereby a small number of companies now manage the vast majority of prescription drug benefits. The Prescription Pricing for the People Act requires the FTC to study the industry, in light of recent consolidations, and report its findings to Congress. Specifically, the legislation commissions the FTC to evaluate whether PBMs:
- Charge certain payers, including Medicare and Medicaid, a higher price than reimbursement rates for competing pharmacies while reimbursing pharmacies in which the PBMs have an ownership interest at the rate charged to payers;
- Steer patients to pharmacies in which the PBM has an ownership stake; and
- Use formulary designs to depress the market share of low-cost, lower-rebate prescription drugs.
The legislation also directs the FTC to evaluate the current state of the industry, determine whether more information about the roles of intermediaries would benefit consumers and offer policy recommendations to improve transparency, prevent anticompetitive behavior and promote efficiencies for patients. The legislation will be referred to the Senate Judiciary Committee, which has jurisdiction over antitrust matters.
Legislative text is available HERE.
As chairman of the Judiciary Committee in 2018, Grassley sought the FTC’s perspective about increasing consolidation in the prescription drug supply chain. Now as chairman of the Finance Committee, Grassley has held several hearings on the drivers of rising drug prices, including one with drugmakers and one with PBMs.