President Trump and his Administration have been taking meaningful steps toward making prescription drugs more affordable for Americans. However, a redundant, competition-killing, cost-raising proposal by the Department of Labor (DOL) threatens to upend that progress and exacerbate the affordability crisis many families and small businesses are facing.
With implementation of landmark PBM reform included in the Consolidated Appropriations Act (CAA) well underway, the rule is not only redundant but also harmful. Policy experts and the mid-market pharmacy benefit managers (PBMs) are sounding the alarm and warning that if the proposed rule is finalized, health care costs will skyrocket and competition in the PBM market will be negatively impacted.
Lawrence J. Spiwak, President of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, 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.”
Spiwak goes on to explain that the DOL rule directly conflicts with President Trump’s Unleashing Prosperity Through Deregulation executive order aimed at bringing regulatory relief to Americans. He notes, “In the case of PBM transparency, two new sets of extensive regulations have been proposed with no offsetting deregulation in sight.”
Ike Brannon, Senior Fellow at the Jack Kemp Foundation echoed Spiwak, noting that the proposed rule will needlessly drive up costs for small businesses and is “the most expensive kind: a rule whose costs are buried in the paperwork itself.” He continued, “For a small employer without dedicated benefits staff, the compliance cost is heavy enough to drive them out of self-insuring altogether. Importantly, none of this affects what employers pay for drugs.”
Brannon advised the DOL to “prevent this by withdrawing the rule and rewriting it to implement the law we now have,” while Spiwak urged the department “to put down its pen.”
A recent DC Journal op-ed argued that the proposed rule will disproportionately affect smaller PBMs: “While making more information public often benefits consumers, it also comes with costs — costs that not every company is equally capable of bearing… By increasing costs across the board, the rule would make it harder for smaller PBMs to compete, exactly the opposite of what federal policymakers have been working toward.”
Several mid-market PBMs recently made similar arguments to the DOL and warned the proposal would add significant costs, leading to a chilling effect for new market entrants in the PBM industry.
University of Wisconsin-Madison Professor Tony Lo Sasso summarized the impact to Modern Healthcare, saying, “It’s the little guys who aren’t as vertically integrated who are trying to compete in this space that are not going to be able to.”
A Washington Examiner op-ed flagged that thanks to wide-ranging PBM reforms that are now law, the proposed rule is duplicative and unnecessary: “America’s healthcare market is about to get less fair and more costly, thanks to a badly written new set of compliance and declaration rules from the Department of Labor.” It went on to say that DOL is “punishing small businesses and mid-market benefits managers that lack substantial compliance departments.” Fortunately, the piece remarks, “It’s not too late to stop it.”
Another editorial 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.”
DOL should withdraw the proposed rule and give the wide-ranging transparency provisions included in the CAA time to be effectively implemented. America’s small businesses and mid-market PBMs should not pay the price for unnecessary regulatory overstep.
View a new graphic showing how the needless DOL rule provides no new transparency HERE.