Trump Signs Bill With Major Reforms for Pharmacy Middlemen

 President Trump signed a $1.2 trillion spending package this week, provisions of which could radically change the way pharmacy benefit managers (PBMs) operate. The legislation also brought an end to a partial government shutdown that started Saturday morning.

One of the main functions of PBMs is to negotiate discounts for health plans. However, critics of the pharmacy middlemen say that PBMs have driven prices higher, rather than reining in drug costs. That's because the way reimbursement is structured, PBMs benefit from high list prices. Higher list prices on drugs mean higher rebates, and PBMs keep a portion of those rebates.

Under the new law, however, PBMs will be prohibited from linking rebates to drug companies' list prices and be required to pass through 100% of rebates to plans and sponsors.

Additionally, the legislation will require the Centers for Medicare & Medicaid Services (CMS) to establish and enforce "reasonable and relevant" contracts for Medicare Part D plans. The legislation also includes the following provisions:

• Calls for greater transparency in the generic drug and biosimilar markets
• Requires PBMs to submit semi-annual reports of drug spending, rebates, spread pricing, formulary rationale, and benefit design
• Grants CMS enforcement authority
• Creates a new designation known as "essential retail pharmacies" (defined as non-affiliated pharmacies in rural areas with no other retail pharmacy for 10 miles, or for 2 miles in suburban areas or 1 mile in urban areas)

The PBM provisions of the bill had seemed poised to be made into law toward the end of 2024 until Elon Musk, then an advisor to president-elect Trump, intervened.

Other parts of the spending package signed by Trump this week included HHS funding, such as the 2026 budget for the National Institutes of Health, temporary extensions of telehealth flexibilities for Medicare, and pandemic-era hospital-at-home flexibilities.

PBMs 'Crushing Small-Business Pharmacies'

In January 2025, a Federal Trade Commission (FTC) investigation found that the three largest PBMs -- CVS Health's Caremark Rx, Cigna's Express Scripts, and UnitedHealth's OptumRx -- inflated the prices of specialty generic drugs, including medications for heart disease and cancer, beyond their costs of acquisition, earning more than $7.3 billion in revenue from 2017 to 2022.

In addition, PBMs reimbursed affiliated pharmacies at higher rates than unaffiliated independent pharmacies for almost every one of the generic drugs that FTC staff analyzed.

The National Community Pharmacists Association (NCPA) this week applauded the new restrictions on PBM practices.

"For years, our members and we have been telling anyone who will listen -- and worked to convince others who wouldn't listen -- about the PBM-insurer conglomerates gobbling up market share, driving up drug costs, crushing small-business pharmacies, and making it more difficult for patients to receive the care they need," NCPA CEO B. Douglas Hoey, RPh, said in a press release.

"We've been warning that unless action is taken, more pharmacies will close, and more pharmacy deserts will grow. Unfortunately, as time passed, we were proven correct and finally, there is action to help reverse these trends," he said.

Hoey thanked "our champions in Congress" and President Trump for helping the provisions reach the finish line.

And Transparency-Rx called it a "game-changer" and "critical first step" toward restoring market competition.

"The provisions remove perverse incentives tied to high list prices and rebate‑driven compensation, standardize PBM definitions and guarantees across the marketplace, and strengthen contract transparency and audit rights to provide greater visibility into how rebate arrangements truly function," said the coalition of licensed transparent PBMs, in a press release.

The National Alliance of Healthcare Purchaser Coalitions called passage of the legislation "a historic milestone."

"Today's bipartisan passage is not only a policy win -- it is a long overdue correction to a system that has lacked transparency for far too long," said Shawn Gremminger, the organization's president and CEO, in a press release. "For years, employers have navigated a healthcare marketplace where critical information about pricing, rebates, and formulary decisions was kept out of view. These reforms finally level the playing field and put employers and working families first."

Pharmaceutical Care Management Association, the lobbying group for PBMs, expressed its disappointment with the spending bill.

"The pharmaceutical industry deserves serious credit for this campaign, which managed to persuade people that discounts are in fact bad, and PBM transparency, somehow, is the roadblock to falling drug prices," Brendan Buck, the association's chief communications officer, wrote in an open letter. "It's absurd on its face. But it worked."

FTC Targets Insulin Markups

In addition to the changes Congress made, the FTC announced on Wednesday a settlement with Express Scripts requiring it to make certain changes in its practices that would increase transparency and lead to lower prices.

The change made by the settlement are projected to lower patients' out-of-pocket costs for certain drugs, including insulin, by up to $7 billion over 10 years, the FTC said.

FTC's lawsuit claimed Express Scripts had "artificially inflated the list price of insulin drugs by using anticompetitive and unfair rebating practices, and impaired patients' access to lower list price products, ultimately shifting the cost of high insulin list prices to vulnerable patients," according to a press release.

"The FTC's settlement with [Express Scripts] will end its business practices that have kept drug prices high, ultimately providing meaningful financial relief to American patients who depend on [Express Scripts] to access life-sustaining prescription drugs as well as community pharmacies who will see new revenues each year and relief from being squeezed," said FTC Chairman Andrew N. Ferguson.

NCPA's Hoey said the settlement "will help lower consumers' copays that have been tied to artificially inflated prices that feed Cigna's insatiable appetite for more and more rebates and GPO [Group Purchasing Organization] fees."

"The settlement also obliterates the big-PBM industry fiction that they work to lower the cost of drugs for Americans. Obviously, the opposite appears to be true," he added. "I hope this is only the beginning of righting the games leading to higher drug prices and harming competition."

https://www.medpagetoday.com/washington-watch/reform/119762