Proposed Legislation Indicative of Continued Congressional Efforts to Expand PBM Oversight
On December 11, 2024, a bill was introduced in the U.S. House of Representatives that, if enacted, would have substantial implications for pharmacy benefit managers (“PBMs”) and pharmacies across the country. Titled the Patients Before Monopolies Act (the “Act” or the “Bill”), this bipartisan Bill generally seeks to restrict the influence and control that PBMs and affiliated entities can have on pharmacy businesses. More specifically, the goal of the proposed legislation is to require insurers and parent companies of PBMs to divest any and all pharmacy assets. According to the Bill’s authors, there is a notable conflict of interest looming in the industry. They note several instances where parent companies of PBMs also have vested interests in related health insurers and pharmacy businesses. These authors – Sen. Elizabeth Warren (Mass.), Sen. Josh Hawley (Mo.), Rep. D Harshbarger (Tenn.), and Rep. Jake Auchincloss (Mass.) – claim that organizational structures such as this cannot be permitted, as it has enabled prominent health care companies to monopolize the drug delivery chain. Thus, despite the Act being in its legislative infancy, the potential consequences associated with its enactment all but demand the attention of potentially implicated businesses. With that in mind, the following alert seeks not only to provide a comprehensive analysis of the proposed legislation but also to briefly summarize the legislative process and what can be expected moving forward.
What Does the Bill Say?
While not complex in its construction, language from the Act clearly identifies its intended purpose and has broad applicability. As discussed, adoption of the Act would make it unlawful for any person to simultaneously own, operate, or control – either directly or indirectly – (1) a pharmacy; and (2) an insurance company or a PBM. For those persons whose current organizational structure is found to be in violation of this provision, a three-year grace period would be granted upon enactment to divest all pharmacy assets. Should any person, defined to include corporations and associations, remain in violation of these provisions after such time, a civil action may be brought against the person, after which violators would be required to cease and desist their improper business activities, divest all pharmacy assets, disgorge any and all revenue received by the pharmacy from the sale of prescription drugs during the period of violation, and any other equitable relief deemed necessary by the presiding court.
Subsequent to these proposed requirements, any divestment of a pharmacy or PBM would also have to be reported to the FTC and the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice. These bodies would then review the divestiture for its effect on competition, financial viability, and public interest.
Relevant to the Act, potentially implicated entities include the following:
Person – “Person” shall mean corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, the laws of any State, or the laws of any foreign country.
Pharmacy – “Pharmacy” shall mean any person, business, or entity licensed, registered, or otherwise permitted by a State or a territory of the United States to dispense, deliver, or distribute a controlled substance, prescription drug, or other medication to the general public or to a bed patient for immediate administration. The term shall specifically include the following entity types: mail-order pharmacies; specialty pharmacies; retail pharmacies; nursing home pharmacies; long-term care pharmacies; hospital pharmacies; infusion or other outpatient treatment pharmacies; any organization whose NPI has one or more taxonomy codes under the pharmacy section of the National Uniform Claim Committee; and any other type of pharmacy.
Pharmacy Benefit Manager – “Pharmacy Benefit Manager” shall mean any person, business, or other entity, such as a third-party administrator, regardless of whether such person, business, or entity identifies itself as a pharmacy benefit manager, that, either directly or indirectly through an intermediary or an arrangement with a third party, provides any one of the following services:
- Acts as a negotiator of prices, rebates, fees, or discounts for prescription drugs on behalf of a health plan or health plan sponsor;
- Contracts with pharmacies to create pharmacy networks and designs and manages such networks; or
- Manages or administers the prescription drug benefits provided by a health plan, including the processing and payment of claims for prescription drugs, arranging alternative access to or funding for prescription drugs, the performance of utilization management services, including drug utilization review, the processing of drug prior authorization requests, the adjudication of appeals or grievances related to the prescription drug benefit, contracting with network pharmacies, controlling the cost of covered prescription drugs, or the provision of related services.
Initial Impressions
Upon its introduction, the Bill received stark criticism from the PBM industry, which cited increased prescription drug costs as a possible consequence of the Bill’s enactment. For example, the Pharmaceutical Care Management Association (PCMA)–a major lobbying group for PBMs–through its CEO J.C. Scott, made the following remarks regarding the proposed Bill:
“[T]his proposed legislation would severely limit access to safe and affordable pharmacies that patients value and rely on for prescription drugs. . . . Congress should be thoughtful in understanding the value that PBMs provide before taking away consumer’s ability to access their medicines how and where they’d like, while making the cost of prescription drugs more expensive.”
While commentary on the Bill has temporarily ceased with the beginning of a new legislative session, similar remarks from others within the PBM industry can be expected upon the Bill’s likely re-introduction in the new Congress.
What Happens Next?
As previously noted, the Act was introduced near the end of the 118th Congressional legislative session. Thus, it would have to be re-introduced at some point in order to continue down the path towards possible enactment. Nevertheless, despite the uncertainty related to its legislative timeline, the mere introduction of the Bill reflects a continued effort by Congress to expand the regulatory oversight of PBMs. Given the significant implications discussed in this alert, we will continue to closely monitor Congressional activity in this area and provide additional updates as needed.
If you have additional questions related to the Patients Before Monopolies Act or other legislation of this kind, reach out to your Quarles attorney or:
- Amy Cotton Peterson: 602-229-5530 / amy.cottonpeterson@quarles.com
- Bailey Walden: 602-229-5432 / bailey.walden@quarles.com
- Jake Pallotta: 317-399-2810 / jake.pallotta@quarles.com