‘Turning around the Titanic’: How the incoming PBM reforms will transform CMS
Zachary Brennan
Senior Editor
The Centers for Medicare and Medicaid Services has never played a significant role in regulating pharmacy benefit managers, the middlemen that have historically relied on high drug prices for profits. But the government spending package that’s nearing the finish line this week is poised to change that.
The sweeping, bipartisan reforms would begin to take effect in 2028 and are seen by many as a win for the pharma industry. The changes, which have been floated in various forms in Congress for at least three years, will redefine how PBMs can be compensated and make CMS the new standard-setter for how they operate.
The Senate passed the spending bill last week, and the House narrowly passed the bill on Tuesday, paving the way for President Donald Trump’s signature.
Under the bill, CMS would get about $190 million in funding to crack down on pharmacy benefit managers and ensure they’re complying with the new law. That includes ensuring PBMs can no longer receive revenue or compensation in any way tied to the cost of the drug.
The current system incentivizes PBMs to seek higher drug prices so they can pull in higher rebates. But under the spending bill, the drug middlemen would no longer be able to derive revenue from rebates they retain, whether in full or a percentage of them.
“You’re turning around the Titanic here,” Jesse Dresser, a partner in the law firm Frier Levitt’s life sciences department, told Endpoints News. Dresser helped Congress draft the PBM portions of the bill.
The bill also requires CMS to investigate and enforce any PBM complaints from pharmacies, making “a complete 180” from past practices on PBMs, Dresser said. He said CMS may have to hire new experts to help collect new data on PBMs and do research in order to be able to set appropriate standards.
Drug middlemen have long been under scrutiny for their allegedly deceptive practices, like overcharging insurers while underpaying pharmacies. How the bill plays out in reality will depend on how CMS cracks down on PBMs — and how they react.
For example, CVS Health owns the PBM Caremark as well as Aetna and SilverScript, which Dresser said are two of the nation’s largest Part D plan sponsors.
“So if CVS Caremark improperly retains money at a PBM level and has to disgorge it to the Part D level, it’s just kind of moving it from one pocket to the other. So there’s a big question mark as to what this is going to look like,” Dresser said.
A spokesperson for CVS Health said in a statement that “[i]n this spending bill, Pharma wins. To drugmakers’ credit, they’ve funded a decades’ long lobbying and advertising campaign to try to shift the blame for rising drug prices to anyone but them.”
Dresser also noted that PBMs “are very good at playing games,” adding that there is a concern that PBMs will “double down” on other components within the pharma supply chain or lobby CMS when it begins setting new standards for PBMs in ways that make them less effective.
PBMs, however, claim that this bill will increase the price of drugs across the board.
David Marin, president and CEO of the PBM industry group the Pharmaceutical Care Management Association, said in a statement following the Senate’s passage of the bill last week: “Congratulations to the big drugmakers, who have lobbied for years to enact these mandates. They will now have more power, and employers and patients will pay the consequences through higher drug prices. Americans already pay the highest prescription drug prices in the world, and under this bill, they will pay even more.”
