Senate Passes Bill to Let Pharmacists Reveal ACTUAL Drug Costs

The United States Senate has passed the Patient Right to Know Drug Prices Act, which prohibits insurers and pharmacy benefit managers from using gag clauses to conceal lower prescription drug prices from patients or their employers.

Pharmacy Gag Clauses

Nearly 60% of Americans, including roughly 90% of seniors, take prescription drugs. According to the National Conference of State Legislatures, medical professionals write at least 4.45 billion prescriptions per year in the United States. Every year, consumers in the United States buy $235 billion of prescription drugs.

Commercial contracts between a pharmacy and a pharmacy benefit manager (PBM) play a large role in the distribution and sales chain between original manufacturer and the end consumer. The terms of these contracts are usually hidden from consumers and employer purchasers.

In some cases, these contracts include restrictions that prohibit pharmacists from informing consumers about different drug purchase options. Often, prescriptions are cheaper if consumers pay out of pocket rather than through their insurance plan.

Prescription drug overpayments (or “co-pay clawbacks”) occur when commercially insured patients’ copayments exceed the total cost of the drug to their insurer or pharmacy benefit manager. Pharmacists who disobey these clauses face significant penalties.

NBC Nightly News recently highlighted the issue of “pharmacy gag clauses.”

A 2016 industry survey found that nearly 20% of pharmacists were limited by gag clauses more than 50 times per month.

A study (“Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs”) published in the March 2018 Journal of the American Medical Association reviewed 9.5 million insurance claims and found that 23% of prescriptions would have cost less if customers paid out of pocket.

The University of Southern California’s Schaeffer Center for Health Policy and Economics researchers who performed the analysis found that consumers had overpaid to the tune of $135 million.

State and Local Laws

Increasingly, legislators are writing new laws to block contracts that prohibit pharmacies from informing customers about available alternative pricing for medications, including paying out-of-pocket or buying generic products that may be less costly for a patient. Many bills also address the “co-pay clawback” situation.

Between 2016 and 2018, at least 26 states have enacted laws that prohibit gag clauses in contracts between pharmacies and pharmacy benefit managers. The states that have enacted these laws include: Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Mississippi, Nevada, New Hampshire, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and West Virginia. Fifteen other states are considering or have considered similar legislation.

Some cities are also taking action. Chicago Mayor Rahm Emanuel announced a plan to “hold the prescription industry accountable” and reduce drug prices. As part of that plan, Chicago opened an investigation into the business practices of local pharmacy benefit managers. Chicago’s Chief of Policy Chris Wheat said, “A letter was sent to all PBMs that states the practice of gag clauses may be a deceptive practice that violates the city’s deceptive marketing act…There was over 150 million prescriptions filled in Illinois retail pharmacies last year, totaling nearly $19 billion, so it’s a huge issue.”

Federal Legislation

On the federal level, U.S. Senators Susan Collins (R-ME) and Claire McCaskill (D-MO) drafted The Patient Right to Know Drug Prices Act, which would prohibit an insurer or pharmacy benefit manager from restricting a pharmacy’s ability to provide drug price information to a plan enrollee when there is a difference between the cost of the drug under the plan and the cost of the drug when purchased without insurance. This bill would apply to plans offered through exchanges and by private employers.

The U.S. Senate passed S. 2554, the Patient Right to Know Drug Prices Act, by a vote of 98-2.

In relevant part, the bill reads:

SEC. 2729. INFORMATION ON PRESCRIPTION DRUGS.

A group health plan or a health insurance issuer offering group or individual health insurance coverage shall—

not restrict, directly or indirectly, any pharmacy that dispenses a prescription drug to an enrollee in the plan or coverage from informing (or penalize such pharmacy for informing) an enrollee of any differential between the enrollee’s out-of-pocket cost under the plan or coverage with respect to acquisition of the drug and the amount an individual would pay for acquisition of the drug without using any health plan or health insurance coverage; and

ensure that any entity that provides pharmacy benefits management services under a contract with any such health plan or health insurance coverage does not, with respect to such plan or coverage, restrict, directly or indirectly, a pharmacy that dispenses a prescription drug from informing (or penalize such pharmacy for informing) an enrollee of any differential between the enrollee’s out-of-pocket cost under the plan or coverage with respect to acquisition of the drug and the amount an individual would pay for acquisition of the drug without using any health plan or health insurance coverage.

Broad Physician and Pharmacist Support for S. 2554

Senators Barrasso (R-WY), Stabenow (D-MI), and Cassidy (R-LA) joined Senators Collins and McCaskill in introducing the Patient Right to Know Drug Prices Act in March. It was also co-sponsored by Senators Tina Smith (D-MN), Joe Donnelly (D-IN), Dianne Feinstein (D-CA), Lisa Murkowski (R-AK), Bob Menendez (D-NJ), Tammy Baldwin (D-WI), John Kennedy (R-LA), Maggie Hassan (D-NH), Richard Blumenthal (D-CT), Roger Wicker (R-MS), Shelley Moore Capito (R-WV), Heidi Heitkamp (D-ND), Deb Fischer (R-NE), Lamar Alexander (R-TN), John Boozman (R-AR), Angus King (I-ME), Sherrod Brown (D-OH), Martin Heinrich (D-NM), Chuck Grassley (R-IA), and Tom Udall (D-NM).

More than 40 organizations supported this legislation, including the National Community Pharmacists Association (NCPA), the American Medical Association, the Alliance for Transparent and Affordable Prescriptions, the ERISA Industry Committee, the Pharmaceutical Care Management Association, and America’s Health Insurance Plans.

The Pharmaceutical Care Management Association has stated, “We support the patient always paying the lowest cost at the pharmacy counter, whether it’s the cash price or the copay. We would oppose contracting that prohibits drugstores from sharing with patients the cash price they charge for each drug.”

Reaction to the Vote

Following the passage of the bill, Senator Collins stated, “Insurance is intended to save consumers money. Gag clauses that prevent pharmacists from telling patients how to pay the lowest possible price for their prescription drugs do the opposite … A recent study of 9.5 million insurance claims found that 23% of customers overpaid for their prescriptions when using insurance. Our bipartisan legislation to stop this egregious practice will help lower the cost of prescription drugs, saving consumers money and improving health care.”

Senator McCaskill said, “Nearly one in four Americans pay more for their prescriptions than they need to—and at a time when drug prices are skyrocketing and Missourians are struggling to pay for their prescriptions, that’s just unacceptable … I’m proud to have worked across the aisle to get this commonsense fix done that will help Missourians better afford their prescriptions, and I hope this bill moves quickly to the President’s desk.”

In a statement reacting to the vote, NCPA CEO B. Douglas Hoey, Pharmacist, MBA said, “Empowering pharmacists to discuss out-of-pocket payment alternatives with patients on private insurance, as S. 2554 does, may reveal lower-cost options. Helping patients know their alternatives increases the chances they can afford their medications—and that they will take them as they should and refill them when necessary.”

Related Legislation

The Senate also recently passed S. 2553, the Know the Lowest Price Act, which prohibits gag clauses in Medicare Part D plans.

Centers for Medicare & Medicaid Services (CMS) sent a letter to companies that provide Medicare prescription drug coverage in Part D explaining that so-called “gag clauses” are unacceptable. CMS Administrator Seema Verma wrote, “Many patients don’t know that some drugs are actually more expensive when they use their insurance. What’s worse is that some pharmacy benefits managers are preventing pharmacists from telling patients when this is happening, because they get a share of the transaction when the patient uses their insurance. Today we are taking a significant step towards bringing full transparency to all the back-end deals that are being made at the expense of patients.”

What’s Next

The Patient Right to Know Drug Prices Act now heads to the House of Representatives for consideration. If the bill passes the House, it will then be sent to the President for review.

President Trump has already announced his support for the legislation. He wrote a tweet stating, “Americans deserve to know the lowest drug price at their pharmacy, but “gag clauses” prevent your pharmacist from telling you! I support legislation that will remove gag clauses and urge the Senate to act. #AmericanPatientsFirst.”

Eliminating gag clauses is part of the Trump Administration’s plan to lower drug prices for American consumers. Secretary of Health and Human Service Alex Azar has stated that in addition to eliminating gag clauses, the administration will take steps to change up the roles and functions of PBMs to decrease the costs of drugs across the board.