Legal expert issues warning over federal disclosure bills aimed at pharmacy benefit managers

Joanna Shepherd, professor, Emory School of Law
Joanna Shepherd, professor, Emory School of Law

Government-mandated disclosure bills could have a negative impact on competition if pharmacy benefit managers are forced to publicly disclose too much information on their negotiations with drug companies, according to Emory School of Law professor Joanna Shepherd.

Two bills have been introduced in Congress, one by Sen. Ron Wyden (D-OR), the other by Rep. Doug Collins (R-GA) to mandate greater transparency by pharmacy benefit managers (PBMs). 

"I think they are problematic because they could give rise to anti-competitive concerns," Shepherd told American Pharmacy News, noting government-mandated disclosure is different from voluntary disclosure between PBMs and their clients. 

In 2013, Shepherd published a paper in the Cornell Law Review entitled, Is More Information Always Better? Mandatory Disclosure Regulations in the Prescription Drug Market.

"Not only are (mandatory disclosure) regulations unnecessary to achieve competitive outcomes, they also impose significant costs on PBMs," wrote Shepherd in that paper. "More importantly, the regulations foster tacit collusion and reduce PBMs’ ability to negotiate discounts with pharmacies and rebates with drug manufacturers. By disrupting competition in the prescription drug market, mandatory disclosure regulations will ultimately increase the prices that consumers pay for prescription drugs."

She said the bills currently pending in Congress are likely a result of the furor over rising drug prices that has gripped the Beltway over the past several months.

"Obviously, everyone is jumping on the 'lower drug prices' issue, and drug companies and PBMs have started pointing the blame finger at each other," Shepherd said. "So people are starting to pick sides."

Mark Merritt, the president of the Pharmaceutical Care Management Association (PCMA) that represents PBMs, agrees consumers want transparency, but in a different form. 

“What consumers want is transparency of premiums, copays and other costs that help them make better choices,” Merritt said in a media statement. “Unfortunately, this bill would grant drug companies inside information that would empower them to raise prices for consumers.”

Merritt also pointed to a recent Moran Company study that showed the Wyden bill, S. 637 (the "Creating Transparency to Have Drug Rebates Unlocked" Act), would increase federal spending by $20 billion over 10 years. 

"The so-called 'transparency' policies" in the legislation "would result in more access to pricing information for competing drug manufacturers, which the Congressional Budget Office has often suggested would lead to higher prices, particularly in Medicare Part D," according to a PCMA statement.

The two bills were introduced this year, largely centering on what bill sponsors say is a need for more transparency of PBMs, including how much of any rebate or price negotiated with drug companies is passed on to the insurance companies and employers.

Wyden's bill would also reform Medicare Part D so seniors would pay a percentage of the negotiated drug price, not the manufacturer’s more expensive listed price.

In an interview this year with American Pharmacy News, Tom Scully, former administrator of the Centers for Medicare and Medicaid Services, warned against tinkering with Medicare Part D. Scully has been a vocal proponent that PBMs are successfully helping to contain costs in the popular prescription drug benefit program. 

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Organizations in this story

Pharmaceutical Care Management Association 325 7th St NW Washington, DC - 20004

U.S. Representative Doug Collins (GA-9) 210 Washington Street Northwest Gainesville, GA - 30501