State Attorney Generals Urge Congress to Act on PBMs

Feb. 26, 2024
Thirty-nine AGs urge passage of legislation to limit pharmacy benefit managers from unjustifiably increasing drug prices and to mandate steps that increase transparency of their practices

The National Association of Attorneys General sent a letter to Congressional leaders on behalf of 39 attorneys general who urge the U.S. Senate and House of Representatives to reform the current practices of pharmacy benefit managers (PBMs).

The bipartisan letter, authored by the Attorneys General of Arkansas, North Carolina, Ohio and Pennsylvania, demands that Congress take decisive action to reform the way PBMs conduct business and bring more transparency to their work.

A PBM is a third-party company that functions as an intermediary between insurance providers and pharmaceutical manufacturers, ostensibly to reduce the cost of prescription medication for its clients. It typically negotiates discounts and rebates with drug manufacturers, contracts with pharmacies, and develops and maintain drug formularies, or lists of covered drugs.

Because a PBM ultimately decides which drugs it covers, it can bargain for rebates from drug manufacturers who want to get their products on its “formularies,” or lists of covered drugs. As a result of this leverage, PBMs essentially force drug manufacturers to raise list prices in order to provide ever-growing rebates.

“A small number of PBMs hold significant market power and are reaping abundant profits at the expense of the patients, employers, and government payors the PBMs are supposed to help,” the letter states. “Pharmaceutical buyers and sellers have little choice but to employ PBMs, allowing them to extract both monopoly profits from individuals and monopsony profits from the market. Moreover, PBMs often dictate reimbursement rates and rules to independent pharmacies, making it difficult for many to survive.”

The letter emphasizes the urgent need for legislative action to address potential abuses within the PBM industry. Specifically, the coalition highlights three bills – the DRUG Act (S1542/HR6283), Protecting Patients Against PBM Abuses Act (HR2880), and the Lower Costs, More Transparency Act (HR5378) – as crucial pieces of legislation that offer necessary reforms.
Together, the legislation is intended to limit PBMs from unjustifiably increasing drug prices and to mandate steps that increase transparency of their practices. Specifically, this step encompasses the obligation for PBMs to furnish pricing data to health plans and federal and state regulators in a standardized format. Such measures will empower health plans to negotiate more advantageous agreements with PBMs and enable regulators to more effectively hold PBMs accountable for their actions.

“In our work to protect healthcare consumers, we must bring transparency to the way pharmacy benefit managers conduct their business in this country,” Michigan Attorney General Dana Nessel  said, in a statement. “These reforms seek to bring accountability to PBMs' prescription drug pricing practices and ensure state and federal regulators have access to meaningful pricing data. I stand firmly with my colleagues in asking Congress to bring robust regulation to PBMs to help protect consumers from the rising cost of prescriptive medication.” 

The following states joined this letter:
AK, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IL, KS, MA, MD, ME, MI, MN, MS, NC, NH, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VI, VT, WI, WY

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