Attorney General Jeff Jackson of North Carolina said on May 4 that he and 44 other attorneys general are urging the U.S. Department of Labor to require pharmacy benefit managers (PBMs) to disclose how they profit and allow employer audits.
The call for increased transparency comes as PBMs play a significant role in determining which prescriptions are covered and at what cost.
“PBMs act as middlemen between insurers and drugmakers, controlling which prescriptions are covered and the costs. Just three companies manage roughly 80% of prescription claims in the U.S., but there’s little transparency into how they make money or why drug costs change,” Jackson said on social media.
The proposed rule from the U.S. Department of Labor would require PBMs and certain affiliates to disclose direct and indirect compensation to self-insured employer health plans. The proposal is intended to help plan fiduciaries assess PBM compensation, rebates, spread pricing, and other payments tied to prescription drug benefits, according to the Department of Labor’s fact sheet.
The Federal Trade Commission reported that the three largest PBMs manage nearly 80% of prescriptions filled in the United States, giving a small number of middlemen significant influence over drug formularies, pharmacy reimbursements, rebate negotiations, and patient access. That market concentration is central to concerns about whether employers and patients can see how prescription drug prices are shaped.
Spread pricing allows a PBM to charge an employer or health plan more for a prescription than it reimburses the pharmacy, keeping the difference. This practice can raise costs for plan sponsors while leaving pharmacies with lower reimbursements and limited visibility into how much money is retained between the payer and pharmacy, according to JAMA Health Forum.
Manufacturer rebates and fees can reward placement of higher-list-price drugs on formularies, creating incentives that do not always align with the lowest net cost for patients at the pharmacy counter. Patients with deductibles or coinsurance can be especially exposed when cost-sharing is tied to list price rather than post-rebate price, according to MedPAC’s June 2023 report.
Jackson serves as North Carolina’s Attorney General, leading the state’s Department of Justice. The office represents state agencies in court, handles criminal appeals, assists law enforcement with complex cases, oversees consumer protection efforts, and provides legal representation to defend the rights of North Carolina residents statewide.
