Through changes to business models and a sweeping new federal law, pharmacy benefit managers (PBMs) are already well on their way to becoming the most transparent part of the drug supply chain. A proposed Department of Labor (DOL) PBM rule, however, is raising serious concerns about competition, affordability, and regulatory overreach. Experts are warning that the rule will increase costs for everyone, make it harder for new and innovative PBMs to compete, and is completely unnecessary.
Before DOL finalizes the proposed rule, there are three questions the agency should answer about its impact on American families, employers, and the PBM market:
Question #1. How is DOL ensuring the rule won’t cause prescription drug costs to soar for patients, employers, and unions across the country?
- With employers and the PBMs who serve them forced to build out expensive new reporting systems and take on additional compliance costs, patients will see higher costs for their prescription drug coverage. Lawrence Spiwak of the Phoenix Center wrote that “piling on regulatory requirements increases compliance costs—costs that will ultimately be passed through to the American consumer at a time when health care affordability is a headline concern.”
- Ike Brannon, Senior Fellow at the Jack Kemp Foundation sounded the alarm that the proposed rule will needlessly drive up costs for small businesses. He explained, “For a small employer without dedicated benefits staff, the compliance cost is heavy enough to drive them out of self-insuring altogether. “
- Even DOL acknowledges this will be an expensive rule, as one op-ed flagged that, “According to government analysis, the DoL will create new adherence costs for smaller players of $1 million in the first year alone (although PBMs themselves say this is a huge underestimate).”
Question #2. How will the new PBM rule impact competition in the market, especially among smaller PBMs that will be hit hardest by higher costs and burdens?
- PCMA’s Head of Research, Amanda Frost, PhD, recently explained how the DOL rule will have unintended consequences and cause massive ripples, forcing small and mid-size PBMs to leave the market, leading to less competition and fewer choices for employers.
- Several mid-market PBMs recently made similar arguments to DOL and warned the proposal would add significant costs to their business, leading to a chilling effect for new market entrants in the PBM industry. Another op-ed warned that the DOL rule “may end up creating a healthcare system where only the largest firms can afford to survive, competition shrinks as smaller players are pushed out, and the high costs policymakers set out to address become even more entrenched.”
Question #3. Why is DOL’s proposed rule necessary after Congress and President Trump just enacted sweeping pharmacy benefit manager reform?
- A Washington Examiner op-ed called the DOL rule “a compliance maze,” and concluded “If the Trump administration wants to help employers and the workers who depend on them, the fix isn’t a second rulebook. It’s aligning with the one Congress already wrote.”
- Wide-ranging Consolidated Appropriations Act (CAA) transparency provisions make the DOL rule outdated and as a result, it would provide no additional meaningful transparency for employers.
- Spiwak outlined the extensive information PBMs will provide on drug pricing and rebates, and why the DOL rule is “a regulatory double-dose.” He went on to say that “the CAA represents a clear statement by Congress on exactly how the federal government should regulate transparency in the PBM industry.”
Meaningful transparency is important in every market, but until DOL can answer these questions and provide assurance that prescription drug costs will not increase for patients, they should press pause on their proposed rule and conduct a thorough assessment of the impact of such a market-changing move.