Senate panel advances bill that would ban spread pricing

Despite pushback from Republicans, a key Senate committee has advanced a bill that aims to reform pharmacy benefit managers, including a ban on spread pricing.

The PBM bill was among four passed by the Senate Health, Education, Labor and Pensions (HELP) committee on Thursday, one day after the senators heard input from major PBM and pharmaceutical manufacturer executives. The HELP committee approved the bill by a vote of 18 to 3.

The most contentious part of the PBM bill was a provision that would prevent these firms from deploying spread pricing models for their clients. In this model, a PBM would charge the insurer or plan sponsor more for a drug than it costs at the pharmacy and then pocket the difference.

Sen. Mitt Romney, R-Utah, aimed to introduce an amendment to the bill that would instead allow PBMs to offer spread pricing models but would require that they also provide an alternative, allowing the plan sponsor to select what works for them and injecting additional transparency into the negotiations.

However, this amendment was tabled after a contentious back-and-forth, as Chairman Bernie Sanders, I-Vermont, and ranking member Bill Cassidy, R-Louisiana, agreed to only consider amendments that have scores from the Congressional Budget Office or that would not prove "fatal" to the bill's passage in the full Senate.

Romney and fellow Republican Senator Rand Paul, of Kentucky, argued that spread pricing is a crucial for certain plan sponsors as well as smaller PBMs. Paul said that if it is eliminated in full, it could lead these smaller challengers to go out of business, decreasing competition in the PBM space.

"The big three PBMs have a diversified business model, but smaller PBMs depend on spread pricing," Paul said. "Banning these contracts could put smaller PBMs out of business and make the big three bigger."

Romney said that some smaller businesses, unions and other plan sponsors have said they prefer spread pricing, or would at least like to have an option to select the model that best fits their workforces' needs.

Paul also noted that pharmaceutical companies strongly support the reforms to PBMs, which should be a warning to legislators about who the reforms will truly serve.

"I don't think we're being too thoughtful about this," Paul said.

A slew of other amendments to the bill were approved, however, including a provision that would direct the Department of Labor to conduct a study into the fiduciary duties of PBMs that could be used to develop future legislation. Other changes included updates for additional transparency and access to Narcan, which reverses opioid overdoses and recently became available over the counter.

Sanders again emphasized that the committee will make drug pricing a major focus moving forward, which he noted at Wednesday's hearing as well as at a scuttled markup last week.

"This ain't the last markup we'll be having on this," he said.