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NAM Calls on Congress to Enact PBM Reform

While small and medium-sized manufacturers have reported that rising health care costs are their number one business challenge (NAM’s Manufacturers’ Outlook Survey), manufacturers remain deeply committed to providing health benefits to their workers. In fact, more than 93% of manufacturing employees were eligible for health insurance benefits in 2023.

Competitive health care benefits allow manufacturers to attract and retain employees and maintain a healthy and productive workforce. More importantly, manufacturers believe providing health care to their employees is the right thing to do.

But middlemen in the health insurance marketplace—called “pharmacy benefit managers,” or PBMs—exert enormous leverage over employers, insurers, biopharmaceutical companies and pharmacies, ultimately driving up health care costs for manufacturers and manufacturing workers.

Congress must act to institute comprehensive PBM reform that increases transparency into these underregulated actors and limits their outsized control over the prices patients pay at the pharmacy counter.

Why Congress Must Act

The Problem with PBMs

PBMs directly contribute to the rising costs of health care by making it more expensive for manufacturers to offer health care benefits and for manufacturing workers to access the medicines they need.

PBMs sit between health insurers, employer health plan sponsors, biopharmaceutical manufacturers, drug wholesalers and pharmacies. Compared to these other health care stakeholders, PBMs are underregulated and, until recently, largely escaped scrutiny from policymakers and the public.

PBMs’ job is to reduce the cost of prescription medicines—but they often do the opposite. According to a recent New York Times investigation, they steer patients toward pricier drugs, charge steep mark-ups and impose costly, hidden fees that drive prices up across the board. In fact, PBMs are known to pocket significant portions of the rebates that are supposed to reduce costs for manufacturing workers and their families. And their compensation increases the higher they push the list price of a medicine.

Ultimately, PBMs dictate what medicines are covered by health insurance plans and what patients pay for those medicines—yet they operate with little transparency into how those decisions are made and how their hidden fees manipulate patients’ health care choices.

The Solution

The NAM is calling for comprehensive PBM reform that institutes much-needed transparency and accountability and reduces health care costs for manufacturers and manufacturing workers. The NAM supports:

• Increased transparency into PBMs’ business models, including how their compensation influences health care decisions and how their policies dictate a medicine’s cost and formulary placement;
• Rebate passthrough, which will ensure health care savings are passed directly to manufacturers and manufacturing workers rather than being pocketed by the PBMs; and
• Delinking PBMs’ compensation from a medicine’s list price, removing their incentive to put upward pressure on list prices in order to maximize their own profits.

It is vital that Congress adopt these reforms in the commercial insurance market—where manufacturers offer health benefits to their workers—as well as in government programs like Medicare and Medicaid.

Learn More

• A New York Times investigation detailed how PBMs are “driving up drug costs for millions of people, employers and the government.”
• An FTC report highlighted PBM business practices that enable PBMs to “boost their profits and increase the spending of the health plans and employers that hired them to control costs.”
• A report from the House Committee on Oversight and Accountability “identified numerous instances where the federal government, states, and private payers have found PBMs to have utilized opaque pricing and utilization schemes to overcharge plans and payers by hundreds of millions of dollars.”
• In May, the NAM responded to a powerful step the House Ways and Means Committee took toward comprehensive PBM reform.
• The DRUG Act, recently approved on a bipartisan basis by the House Committee on Oversight and Accountability, would ensure that PBMs charge a flat rate for their services rather than charging a percentage of a medication’s list price.
• The House passed the Lower Costs, More Transparency Act last year to increase transparency into PBMs’ business practices and reform their pricing strategies.
• Leaders of the Senate Finance Committee—joined by the NAM—have called for immediate action on PBM reform.