Senate Finance Committee Bill Will Cost Taxpayers and is a $10 Billion Giveaway to Big Pharma

(Washington, D.C.) — The Pharmaceutical Care Management Association (PCMA) released the following statement today on legislation introduced by Senate Finance Committee members:

The just-released Senate Finance Committee legislation enables Big Pharma to profit immensely from the high list prices big drug companies set and raise – often without correlation to drug efficacy, medical need or R&D costs. A recently published National Bureau of Economic Research (NBER) working paper quantifies the economic risk of ending the current pay-for-PBM performance, incentive-based model that effectively saves payers and patients $1,040 per patient per year.

The so-called ‘de-linking’ provision in the bill would undermine incentives for pharmacy benefit companies to maximize competition in the market and secure savings for patients and health plan sponsors, resulting in higher drug costs and handing drug companies a profit-boosting windfall.

The new research paper, “Ending Pay for PBM Performance: Consequences for Prescription Drug Prices, Utilization, and Government Spending,” authored by University of Chicago Professor of Economics Casey Mulligan, published by NBER, thoroughly dissects the ‘delinking’ policy.

“Incentives matter for PBMs just as they do for other market participants. A financial reward for greater rebates and discounts results in greater rebates and discounts. Conversely, eliminating pay for PBM performance would reduce PBM performance. Absent the financial incentives, plans would pay more to manufacturers and to pharmacies because plans would receive less manufacturer rebates and pharmacy discounts,” Dr. Mulligan states in the paper.

Key Takeaways from the Paper:

  1. Financial Windfall for Big Pharma: The “delinking” policy has the potential to significantly increase drug prices, reduce drug utilization, and redistribute billions of dollars annually from patients and taxpayers to pharmacy companies and drug manufacturers. The result would be approximately an additional $10 billion every year for drug companies, while costing patients and payers up to $18 billion.
  2. Taxpayers Pay More for Medicare:Annual federal spending on Medicare Part D premiums would increase $3 billion to $10 billion.
  3. Higher Premiums for Seniors in Medicare Part D:Reducing the negotiated rebates and discounts PBMs pass to health plans to lower drug costs for patients and health plans could lead plans to raise premiums to finance drug benefits. Eliminating the pay for PBM performance incentives could also reduce insurance coverage and appropriate drug utilization as costs for patients rise.
  4. Reduces PBM competition:Introducing a new obstacle between buyers and sellers (in this case BETWEEN health plan sponsors and PBMs) is unlikely to increase competition or new entrants in the PBM market or improve patient welfare.

Pharmacy benefit companies support lower drug prices and recently applauded several drug companies’ decisions to lower prices on insulin products in the face of public scrutiny. PCMA continues to call on the pharmaceutical industry to reduce their high prices across other therapeutic areas.

We call on Congress to hold drug companies accountable for egregious exploitation of pricing power and patent abuses that keep prices high as lawmakers seek real solutions to address the gaps in prescription drug affordability.


PCMA is the national association representing America’s pharmacy benefit companies. Pharmacy benefit companies are working every day to secure savings, enable better health outcomes, and support access to quality prescription drug coverage for more than 275 million patients.