Bipartisan Legislators Propose Legislation Mandating Health Insurers to Sell Off Pharmacy Holdings
The proposed legislation aims to dismantle major health care conglomerates in an effort to reduce drug prices.
A bipartisan coalition of lawmakers is seeking to address conflicts of interest in the healthcare industry.
On December 11, Senators Elizabeth Warren (D-Mass.) and Josh Hawley (R-Mo.) unveiled a bill that would require health insurers and the intermediaries that negotiate drug prices to separate their pharmacy operations.
Pharmacy benefit managers (PBMs) act as intermediaries among drug manufacturers, health insurance companies, and pharmacies. Their roles include negotiating drug prices, processing claims, and determining the formulary of covered medications.
Currently, around 80% of pharmacy benefit management in the U.S. is dominated by three healthcare conglomerates—CVS Health, Cigna, and UnitedHealth Group—that also operate health insurance and pharmacy entities.
Should this legislation be passed, it would mandate these conglomerates to divest their pharmacy operations within three years.
“PBMs have distorted the market for their own gain—raising drug prices, exploiting employers, and pushing small pharmacies out of business,” Warren stated. “My new bipartisan bill seeks to resolve these conflicts of interest by controlling these intermediaries.”
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Hawley mentioned that the legislation would also dismantle insurance monopolies by preventing health insurers and PBMs from further consuming the healthcare market and increasing costs for American families.
A corresponding bill in the House is co-sponsored by Representatives Diana Harshbarger (R-Tenn.) and Jake Auchincloss (D-Mass.).
Harshbarger, who has a background in pharmacy, highlighted that she has seen firsthand how PBMs “self-deal and skew the system” to inflate costs, restrict options for patients, and drive independent pharmacies out of business.
“I proudly identify as a conservative Republican, but our antitrust laws exist for a purpose,” she stated.
In particular, the commission asserted that the PBMs artificially inflated insulin prices by demanding greater rebates from manufacturers in exchange for formulary inclusion.
The FTC stated that this “rebate-chasing strategy” compelled drug manufacturers to raise their list prices to accommodate higher rebate offers.
“Millions of Americans with diabetes rely on insulin for survival, yet for many of these vulnerable patients, insulin prices have surged over the last decade, partially due to the avarice of powerful PBMs,” remarked Rahul Rao, deputy director of the FTC’s Bureau of Competition, during a September 20 statement announcing a lawsuit against these firms.
“As gatekeepers to necessary medications, Caremark, ESI, and Optum have extracted millions of dollars from patients in dire need of lifesaving treatments.”
The companies identified in the lawsuit have refuted the FTC’s assertions, claiming they are erroneous and reflect a misunderstanding of the drug pricing mechanism. They are also contesting the commission’s administrative processes in court.
“Thus, it is not surprising that the Commission chose to pursue this action in its own controlled environment, where it defines the allegations, establishes the rules, conducts the fact-finding, interprets the law, and decides the outcomes,” according to the lawsuit.
The FTC’s administrative complaints are reviewed by an internal administrative judge, whose findings are then voted on by the commissioners.
The pharmacy benefit managers’ lawsuit characterizes this process as “completely partisan and biased,” contending that it infringes upon their due process rights. It emphasizes that the claims involve the companies’ private rights, necessitating litigation in a court setting.
“Compelling Plaintiffs to defend themselves in an unconstitutional, illegal, and misguided process would lead to irreparable harm that cannot be rectified on appeal,” the complaint asserts, seeking the cessation of the administrative proceedings.
