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Congress Proposes New PBM Regulations Amid Funding Deal

Congressional leaders have unveiled a legislative package that includes 97 pages of new requirements for pharmacy benefit managers (PBMs) serving employer health plans. The proposal is part of the "Further Continuing Appropriations and Disaster Relief Supplemental Appropriations Act, 2025," a 1,547-page bill aimed at preventing a federal government shutdown and providing disaster relief.

The legislative package, revealed on December 17, 2024, aims to continue funding federal agencies through March 14, 2025. If the continuing resolution does not pass this week, the federal government could begin a partial shutdown as early as Sunday, December 22, 2024.

Key Provisions of the New PBM Regulations

One of the most notable provisions requires PBMs serving large fully insured or self-insured employer health plans to pass 100% of any prescription drug rebates or other discounts directly to the employer plan's sponsor. This aims to ensure that the savings from negotiated discounts benefit the employers and, ultimately, the employees.

For Medicare Part D prescription drug plans, the regulations would limit PBMs to collecting service fees and prohibit them from tying their compensation to the size of the discounts they negotiate. This measure aims to prevent conflicts of interest and ensure that PBMs act in the best interest of Medicare beneficiaries.

The new regulations also set stringent reporting requirements for PBMs. They must provide employers with detailed reports on wholesale prices, discounts, and patient out-of-pocket costs for each drug covered by the plan. This transparency is intended to help employers better understand and manage their pharmacy benefits.

The legislation also bans "spread pricing" in Medicaid and requires PBMs to reimburse pharmacies at the national average drug acquisition cost (NADAC) plus the state's fee for service dispensing fee for all Medicaid managed care programs.

Additional Provisions in the Legislative Package

The package includes a two-year extension of the telehealth exception to the prohibition on pre-deductible coverage for employees covered under high-deductible health plans with health savings accounts (HSAs). This extension is welcome news for employers that offer free telehealth coverage, even if it comes frustratingly close to the beginning of the 2025 plan year for many.

The package would also include a 2.5% increase in physician payments for Medicaid, nearly erasing the 2.8% cut in the Medicare fee schedule finalized last month. While the Medicare fee schedule doesn't directly affect most group health plans, it does have an indirect impact on the amounts billed by and paid to health providers and hospitals.

Implications for Employers and Employees

If enacted, the new PBM regulations will have significant implications for employers and employees:

• Increased Transparency: Employers will gain greater insight into the pricing and cost structures of their pharmacy benefits, enabling them to make more informed decisions.
• Potential Cost Increases: While the regulations aim to pass savings to employers, PBMs warn that the increased transparency and rebate pass-through requirements could lead to higher costs for both employers and employees.
• Enhanced Accountability: The regulations include penalties for PBMs or health insurers that knowingly provide incorrect report information, with fines of up to $100,000 per item of false information. This accountability measure is designed to ensure compliance and accuracy in reporting.

The proposed PBM regulations represent a significant shift in how pharmacy benefits are managed and reported. As the legislative process unfolds, it will be crucial for employers, employees, and other stakeholders to stay informed and engaged. The outcome of this legislative effort could reshape the landscape of pharmacy benefits and impact millions of Americans.