Rep. Jake Auchincloss, D-Mass., has been one of several lawmakers introducing bills designed to ... [+] tackle "manipulative" business practices of pharmacy benefit managers. (AP Photo/Alex Brandon)Copyright 2023 The Associated Press. All rights reserved.Despite bipartisan support, a last-ditch effort to pass a healthcare package that included pharmacy benefit manager reforms was scuttled last week. This marks the umpteenth time that lawmakers couldnt cross the threshold to pass and enact changes to how PBMs do business.Its not for lack of congressional hearings on PBM reform over the years, or the introduction of numerous bills that include provisions directed at potentially anti-competitive practices. Lawmakers on both sides of the aisle agree that changes are needed.The legislative initiatives center around issues such as spread pricing, which is a practice where PBMs charge health plans or employers a higher price for medications than what they pay to pharmacies, keeping the difference (spread) as profit. Bills also target lack of transparency, particularly regarding proprietary rebates negotiated between PBMs and drug makers. Moreover, proposals take aim at conflicts of interest when PBMs steer patients to affiliated pharmacies or limit access to the cheapest biosimilar medications in favor of private label alternatives manufactured by PBM subsidiaries.There was a bipartisan agreement last December to include several key PBM reforms in a sweeping healthcare package into a so-called continuing resolution, which is a temporary spending bill that allows federal government operations to continue when final funding appropriations have not yet been approved by Congress and the President.Besides addressing changes to the methods by which PBMs operate, the CR would have included a series of other policy measures, such as extensions of Medicare telehealth flexibilities, reauthorizations of legislation to prevent pandemics and address the opioid crisis, as well as add-on payments to community health centers and a rollback of Medicare physician payment cuts. But Republican Speaker of the House Mike Johnson pulled PBM reforms and other changes from the CR, under apparent pressure from then President-elect Donald Trump and current de facto head of the Department of Government Efficiency, Elon Musk.This month, Senate Democrats laid the groundwork to pass a major bipartisan, bicameral healthcare policy package that failed to make it in December. Senators Ron Wyden (D-Oregon) and Bernie Sanders (I-Vermont) brought the proposal to the floor, trying to pass it by unanimous consent, which means that no member objects. But their attempt was blocked Friday, Mar. 14th, as Senator Rick Scott of Florida objected without, however, offering a reason.What Are PBMs And What Do They Do?To most lay people, the acronym PBM means nothing. But PBMs serve as key intermediaries at the center of the complex and often opaque United States pharmaceutical distribution chain. They manage the prescription drug benefitthe portion of insurance that involves pharmaceutical carefor around 275 million Americans. In this context, PBMs negotiate the net prices of prescription drugs and the terms and conditions for patient access.Following a series of recent mergers and acquisitions, the leading PBMs are now each part of healthcare behemoths that also include health insurers, pharmacies and healthcare provider services. The three largest PBMs which control 80% of the U.S. prescription drug market are OptumRx, Express Scripts, and CVS Caremark. Due to their size and the manner in which vertical integration has rolled multiple entities in the drug supply chain into one conglomerate, PBMs have considerable control over which drugs are available to patients, at what price and where patients can access them.A focal point of policy discussions has been the role of rebates in supposedly driving up list prices and therefore patient cost-sharing. Rebates are payments from drug manufacturers to PBMs in exchange for moving market share toward products with preferred positioning on formularies or lists of covered medications. When a patient fills a prescription for a drug that carries a rebate, the pharmaceutical manufacturer remits an amount to the PBM, according to terms laid out in the contract. Subsequently, the PBM passes through part of the rebate to the patients plan sponsor, while keeping a portion as profit. PBMs can pass through up to 100% of these payments to those with whom they contract. The percentage of pass-through depends on the parameters of the signed agreements between PBMs and contractors.From a drug makers perspective, rebates can function as a way to boost or maintain market share for products. Accordingly, PBMs can do a number of things to help ensure certain drugs get sufficient volume uptake. Their main tool for this purpose is placing a rebated product in a preferred spot on the formulary. And so, rebates can mutually benefit PBMs and the manufacturers of the drugs that are given preferred positioning. Further, rebates can help to mitigate increases in beneficiary premiums by lowering net costs for health plans, employers and other clients for whom PBMs work.But while rebates may help PBMs, health plans and employers financially, they are not directly passed through to patients at the pharmacy counter. Additionally, patients out-of-pocket costs are often calculated based on percentages of list prices that are often substantially higher than net prices.PBMs may favor higher list-priced products in certain instances because of the greater rebates attached to them. This is because the rebate portion retained by PBMs is often calculated as a percentage of a drugs list price.Defenders of PBMs say their role as intermediaries is indispensable as they work at the behest of employers and health plans to lower net prescription drug costs. UnitedHealths OptumRx told Fortune that it helped patients save $1.3 billion in out-of-pocket costs. Also, the PBM trade group, the Pharmaceutical Care Management Association defends PBMs use of their own specialty pharmacies, saying that they are less expensive than other pharmacies.And all the focus on PBMs may let plan sponsors and drug manufacturers off the hook. After all, PBMs work on behalf of employers and health plans. And ultimately pharmaceutical pricing is the result of negotiations between two parties, drug makers and PBMs. To illustrate how this can serve interests of both stakeholders in ways that dont necessarily help out patients, consider how manufacturers can avoid competition from lower-cost rivals by switching to reformulated versions of their original product via product hopping. PBMs may facilitate this process by promoting uptake of new formulations when they give preferential placement on formulary to such products.Failure to include PBM reform in the end-of-year CR as well as the latest draft proposal may be a sign of political fracturing among lawmakers in 2025 and the difficulties of breaking the impasse.Going forward, rather than pursuing legislation that may seem too comprehensive if it covers too much territory, perhaps lawmakers with stand-alone proposals focused on PBMs have a better chance. For instance, Earl Buddy Carter (R-GA), Lisa Blunt Rochester (D-DE) and Jake Auchincloss (D-MA) introduced the Protecting Patients Against PBM Abuses Act aimed at delinking PBM compensation from the list prices of medications, which presumably would remove the incentive for PBMs them to drive up prices. The bill also seeks to increase transparency and address conflicts of interest.To date, PBMs have evaded reform efforts. Well have to see what the future will bring.