PBM Transparency: Why Employers Need to Pay Attention to Congressional Demands
The House Committee on Oversight and Accountability has sent a loud and clear message to employers. The Committee is demanding that the three largest PBMs clarify their testimony from the hearing “The Role of Pharmacy Benefit Manager in Prescription Drug Markets.” This is a result of the inconsistencies between the PBMs’ testimony and the House Oversight Committee and Federal Trade Commission (FTC) findings. This isn’t just about regulatory compliance, it’s about employers being able to trust the partners managing their prescription drug benefits.
The Role of PBMs and Why It Matters
Pharmacy Benefit Managers, or PBMs, are intermediaries between insurers, pharmacies and pharmaceutical companies. They negotiate discounts, manage formularies and process claims. In theory, these functions should make medication distribution smoother and cheaper. But recent investigations suggest PBMs may put profits over patient care and that’s a big problem for the health care system.
Congressional Concerns: Are PBMs Lying to Employers Too?
At a recent congressional hearing, top executives from the largest PBMs made statements that contradicted ongoing investigations. The House Oversight Committee pointed out the discrepancies and are demanding further clarification. This should be a wake-up call for employers who rely on PBMs to manage pharmacy benefits for their employees. If PBMs aren’t transparent with Congress, can they be trusted to be fair with employers? If they are misleading Congress, are they also misleading employers? The fact that these companies are lying to Congress means employers may be getting a raw deal too.
Greg Baker, CEO of AffirmedRx, testified at two separate hearings, the first of which was the kickoff to a three-part series that ended with the CEOs of the largest PBMs. His testimony showed the devastating impact of PBM practices on independent pharmacies and patient care. Baker explained how PBMs pay independent pharmacies less than the acquisition cost of medications, effectively putting them out of business. He also explained how these practices limit patient access to necessary medications, an industry where profit always trumps patient care.
Baker’s testimony is a reality check compared to the CEOs of the big three PBMs who testified later in the series. While he was straightforward about the need for transparency and fair practices, the responses from the larger PBMs only raised more questions. His testimony is a reminder that not all PBMs are created equal. While some may be built around practices that put profits over patient care, others, primarily newer PBM market entrants, show the industry can be done right – with fairness, transparency and by putting patients first.
The CAA and Employer Liability
This goes beyond bad business. The Consolidated Appropriations Act (CAA) has put employers under strict fiduciary responsibility for their health care purchasing choices. Ignoring or overlooking PBM deception could mean lawsuits against their companies but also significant personal liability for executives involved in the decisions to work with them. The CAA requires employers to be transparent and fair in their health care dealings. If they don’t, they could face severe legal consequences.
Employer Wake-Up Call
Employers need to re-evaluate their PBM relationships now. Many PBM contracts have hidden clauses that siphon money away from employers and employees, increasing costs and reducing benefits. With the spotlight on the big PBMs and the CAA’s fiduciary responsibilities, employers can no longer afford to be asleep at the switch. Class action lawsuits are already targeting companies for not managing their benefits properly and the individuals responsible are being held personally accountable.
The recent Johnson & Johnson lawsuit provided a concrete example of the threat to employers, and highlighted two critical points: First, a prudent fiduciary must receive all of their data to make appropriate purchasing decisions. Second, the lawsuit underscores the potential for individual benefit leaders to be held personally responsible for failing to meet their fiduciary duties, not just the companies they represent.
Independent Pharmacies and Patient Care
The current PBM practices hurt employers but also independent pharmacies and patient care. The House Oversight Committee and the FTC have shown how PBMs manipulate formularies to favor high-cost drugs, restrict independent pharmacies from dispensing certain medications and engage in price gouging. These actions not only put independent pharmacies out of business but also reduce consumer choice and patient care, especially in underserved communities.
For patients, the consequences are clear. Higher out-of-pocket costs, limited access to necessary medications and reduced treatment options. When PBMs put profits over patient health, the entire health care system suffers.
The Solution: Transparency, Accountability and Competition
This requires action. Legislative measures to increase transparency and accountability in the PBM space must be prioritized. Employers, policymakers and other stakeholders must work together to require clear pricing disclosure, standardize reimbursement rates and stop anti-competitive behavior.
The House Committee is a wake-up call that the current PBM practices are a threat to the entire health care system. Employers need to realize that being lied to by PBMs is not just a regulatory issue – it’s a business risk with serious legal implications. By demanding transparency and accountability from PBMs, employers can protect themselves from liability and ensure their employees are getting the fair and effective benefits they deserve.
