Lawmakers have sights on middlemen blamed for rising drug costs

Lawmakers have sights on middlemen blamed for rising drug costs
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With public outrage growing over the rising costs of prescription drugs, Congress is targeting the middlemen they say are to blame. 

Specifically, lawmakers are moving to ban “gag clauses” that prohibit pharmacies from telling customers they can save money on a drug if they pay with cash instead of using their health insurance. 

These clauses are sometimes included in contracts between pharmacies and pharmacy benefit managers — the middlemen who act as negotiators between drug companies and insurers.


The clauses prevent a pharmacist from telling a customer if their $20 co-pay is higher than the pharmacy’s cash price for a drug. 

“Pharmacists want to be able to give their consumers information about what’s the best way to buy the medication they need, but the gag rule prohibits the pharmacists from doing that,” said Rep. Peter WelchPeter Francis WelchOne Vermont Republican wins statewide nomination in six races Live results: Wisconsin, Minnesota, Vermont, Connecticut hold primaries Overnight Health Care: Trump officials approve proposals to shore up ObamaCare | Study says 'Medicare for All' would cost .6T over 10 years | Dems court conservative Republican in drug pricing fight MORE (D-Vt.), co-sponsor of a House bill that would ban gag clauses. 

The practice of charging a co-pay that is higher than the cash price of a drug is called a “clawback.”

The National Community Pharmacists Association (NCPA), one of the groups pushing for a federal “gag clause” ban, notes that it’s the pharmacy benefit managers or “PBMs” that keep this extra money, not the pharmacies. 

“Obviously that’s intended to fatten the profits of the PBMs at the expense of the consumers, and it’s interfering with the trusting relationship pharmacists have with their clients,” Welch said. 

Bipartisan bills in the House and Senate, sponsored by Sen. Susan CollinsSusan Margaret CollinsKavanaugh accuser agrees to testify next week The Memo: Could Kavanaugh furor spark another ‘year of the woman’? Kavanaugh fight roils an already ugly political climate MORE (R-Maine) and Rep. Buddy CarterEarl (Buddy) Leroy CarterOvernight Health Care: Opioids package nears finish line | Measure to help drug companies draws ire | Maryland ObamaCare rates to drop Overnight Health Care: HHS diverts funds to pay for detaining migrant children | Health officials defend transfers | Lawmakers consider easing drug company costs in opioids deal Overnight Health Care: Obama calls 'Medicare for all' a 'good' idea | Study finds modest ObamaCare premiums hikes for next year | Trump officials consider South Carolina plan to defund Planned Parenthood MORE (R-Ga.), wouldn’t ban clawbacks, but would ban gag clauses so pharmacists can tell their customers whether they’d save money on their prescription if they pay with cash instead of their insurance. 

The Collins bill is expected to come up for a committee vote on June 20. 

A spokesperson for Carter said the congressman is still continuing to push for a hearing and building member support. 

It’s difficult to know how often customers are charged more for their co-pay than what they’d pay for buying a drug with cash.

The Pharmaceutical Care Management Association, the industry group for PBMs, says it doesn't endorse gag clauses and that they are rare. 

But in a survey conducted by the NCPA in 2016, 39 percent of pharmacists said gag clauses prevented them from telling customers about cheaper alternatives between 10 and fifty times in the past month. 

“Prohibiting PBM 'gag clauses' will empower pharmacists to inform patients of lower prescription price options and help improve price transparency. Our members always want to assist their patients in receiving the affordable medications they need,” the American Pharmacists Association said in a statement. 

A recent study in the Journal of the American Medical Association reviewed 9.5 million insurance claims and found that 23 percent of prescriptions filled through insurance ended up costing more for customers than if they would have paid cash.

But pharmacists with these “gag clauses” in their contracts are unable to tell their customers this, or they could face severe penalties from PBMs. 

Bans on these clauses have grown in popularity at the state level, with at least 15 states enacting bans since 2017.

The popularity around banning gag clauses comes as anger surges about the rising cost of prescription drugs. 

More than 80 percent think the costs of prescription drugs are unreasonable, according to a recent poll from the Kaiser Family Foundation. 

The president and administrative officials have put PBMs in the hot seat over the practice. 

“This is a total rip-off and we are ending it,” President TrumpDonald John TrumpSunday shows preview: Trump sells U.N. reorganizing and Kavanaugh allegations dominate Ex-Trump staffer out at CNN amid “false and defamatory accusations” Democrats opposed to Pelosi lack challenger to topple her MORE said last month during a speech on rising drug prices.  

Just this week, Health and Human Services Secretary Alex Azar said such clauses are “completely unacceptable.” 

Seema Verma, the administrator for the Centers for Medicare & Medicaid Services, issued a letter last month telling plans the agency will no longer tolerate gag clauses in Medicare drug plans.

“We want to make it clear that CMS finds any form of ‘gag clauses’ unacceptable and contrary to our efforts to promote drug price transparency and lower drug prices,” she wrote.