This bill would lift the so-called “pharmacy gag clause,” which currently prohibits pharmacists from informing customers which of their two payment options — paying fully out of pocket or using their health insurance — would cost less for their prescriptions.
What is Senate Bill S. 2554?
Cost of Senate Bill S. 2554
In-Depth: Sponsoring Sen. Susan Collins (R-ME) introduced this bill to protect patients from overpaying for prescription drugs:
“Insurance is intended to save consumers money. Gag clauses in contracts that prohibit pharmacists from telling patients about the best prescription drug prices do the opposite. Multiple reports have exposed how this egregious practice has harmed consumers, such as one customer who used his insurance to pay $129 for a drug when he could have paid $18 out of pocket. Americans have the right to know which payment method – insurance or cash – would provide the most savings when purchasing prescription drugs. By prohibiting gag clauses, our legislation would take concrete action to lower the cost of prescription drugs, saving consumers money.”
This bill is opposed by the health insurance industry and pharmacy benefit managers such as CVS Health, Express Scripts, or United Health. In a statement, the Pharmaceutical Care Management Association said:
“Pharmacy benefit managers (PBMs) typically reduce prescription drug costs by 30 percent for more than 266 million Americans enrolled in private and public plans, most notably Medicare Part D… PBMs use their substantial scale and expertise to negotiate aggressive rebates, discounts, and other price concessions from drug manufacturers and drugstores on prescription drugs.”
Of Note: 14 states have already ended pharmacy gag clauses. The range of states is across the partisan spectrum, and includes Minnesota, Connecticut, Mississippi, South Dakota, and Virginia.
The discrepancy between what patients pay out of pocket and what drugs actually cost is frequently created by “pharmacy benefit managers” (PBMs), companies hired by insurers to manage drug benefit programs and act as intermediaries between insurers, manufacturers, and pharmacies.
PBMs use their position to negotiate discounts, rebates, and other cost reductions from pharmaceutical companies in exchange for their drugs’ preferred placement on insurers’ formularies. The difference in price between the original price and the negotiated price, known as the “clawback,” is supposed to be passed on to patients — however, excess rebates and fees are often retained by PBMs rather than being passed on to patients. Consequently, patients’ out-of-pocket costs may not reflect the actual lower price of the drug.
A manufacturer might originally price a drug at $100. Then, a PBM negotiates that price down to $80. A pharmacy then purchases the drug from a wholesaler and the PBM pays the discounted rate to the pharmacy. The pharmacy pays a fee to the PBM for the negotiating service based on the drug’s list price ($100, rather than $80), bringing extra profit to the PBM.
The PBM may then charge the insurer a higher price for the drug ($90), even though it reimburses the pharmacy at the negotiated price. Simultaneously, the PBM also earns a rebate directly from the drug manufacturer for placing the drug on its formulary.
Finally, when a patient buys the drug from the pharmacy, he or she is charged a copay amount based on the list price ($100) rather than the negotiated price ($80). The co-payment may be higher than the cash price, and pharmacists are often prohibited from informing patients about this potential cost-saving opportunity due to PBM contracts.
Summary by Lorelei Yang(Photo Credit: Steve Debenport / iStock)
Patient Right to Know Drug Prices Act
A bill to ensure that health insurance issuers and group health plans do not prohibit pharmacy providers from providing certain information to enrollees.
- EnactedOctober 10th, 2018The President signed this bill into law
- The house Passed September 25th, 2018Passed by Voice Vote
- The senate Passed September 17th, 2018Roll Call Vote 98 Yea / 2 Nay
Committee on Health, Education, Labor, and PensionsIntroducedMarch 14th, 2018
- senate Committees