Lawmakers Believe Their Breakthrough Bill Will Lower Drug Costs. It May Not.

After years of trying, Congress is finally on the verge of passing legislation aimed at lowering prescription drug prices by targeting the intermediaries that help negotiate them.

The new policies were a top priority for lawmakers “on both sides of the aisle that were negotiated over many months — in some cases years — and it is great to see them one step closer to becoming law,” said Senate Finance Committee Chair Mike Crapo (R-Idaho), who led the effort.

The bill’s passage, part of a $1.2 trillion funding package passed by the Senate last week and now under consideration by the House, would mean “lower prices for seniors at the pharmacy counter,” Crapo said.

The overhaul caps a years-long push to crack down on the industry and arrives as players across the health care sector face intensifying scrutiny from lawmakers for their role in rising health care costs. In his health care plan announced last month, Trump demanded Congress end kickbacks to the intermediaries and require greater transparency from insurers, which own the largest companies in the industry.

Yet it’s unclear whether new rules for pharmacy benefit managers — which haggle with drugmakers on behalf of commercial employers and other groups that fund insurance for consumers — will meaningfully alter what most Americans pay for prescription drugs.

That’s because the industry has been working overtime to stay one step ahead of any new regulations.

A long lobbying effort

Drugmakers, under pressure to reduce high prescription drug prices, have spent millions on ad campaigns to persuade the public that the pharmacy benefit managers are the culprit. Lawmakers, who largely agree with them, crafted a similar reform package at the end of 2024, but it was effectively killed by billionaire Elon Musk, who was then advising President Donald Trump. Musk blasted the government funding legislation that contained the measures, prompting Republicans to drop them.

The new bipartisan health care package includes several policies that target the ways pharmacy benefit managers are compensated. A key goal is to make those business practices more transparent.

The industry’s critics have complained that the pharmacy benefit managers benefit from high list prices, because their compensation often is tied to the rebates they negotiate with drugmakers. The rebate amounts and the percentages that the intermediaries take from list prices are generally hidden from scrutiny by confidentiality clauses with drugmakers.

That practice can result in lower prices for insurers, but critics say the industry’s clients are often left in the dark about how the prices they receive are determined.

Under the likely changes Congress is considering, the companies’ compensation would no longer be tied to the size of list prices and rebates in Medicare Part D plans — a policy known as “delinking.” Instead, intermediaries negotiating on behalf of the program would be paid a fee that reflects the fair market value of their services.

The legislation also attempts to ensure all rebates negotiated by pharmacy benefit managers are passed on to commercial, or nongovernmental, plan sponsors as well — although, significantly, it does not include a provision to delink compensation for those plans.

The legislation’s impact would likely be muted because the major industry players have anticipated the long-debated changes and adjusted their business models to prepare for them, insurance and pharmaceutical lobbyists and policy analysts told POLITICO. At the same time, they could identify new revenue streams.

“This is largely a tolerable bill,” said Adam Colborn, associate vice president of congressional affairs for the Academy of Managed Care Pharmacy, which counts the intermediaries as members.

In October, Cigna announced that it would eliminate its rebate model in Express Scripts, its PBM subsidiary, following a commitment to pass through rebates from UnitedHealth’s Optum Rx in January and a decision by CVS Caremark to provide the option in 2019. Cigna CEO David Cordani told lawmakers in January at a congressional hearing that the changes to the company’s rebate model would cost up to $600 million next year.

Those three PBM companies, owned by insurers, account for 80 percent of the market. Critics argue their effective monopoly discourages inclusion of independent pharmacies as preferred providers.

Large industry players have further sought to counter criticism of their compensation methods and boost profits by replacing elements of their business models with new ones that generate revenue by charging insurers the price of a drug plus an administrative fee — sometimes referred to as a “cost plus” framework. But some critics say several of those efforts lack true price transparency.

Publicly at least, the industry remains vocally opposed to the package, arguing that drugmakers will benefit financially by reducing pharmacy benefit managers’ flexibility to negotiate lower prices on behalf of their clients. 

"This policy is a gift to the pharmaceutical industry, which has long sought to tie the hands of PBMs.That's because PBMs exist to fight back against drugmakers' egregiously high prices,” said David Marin, CEO of the Pharmaceutical Care Management Association, the largest trade lobby for pharmacy benefit managers.

A Whac-a-Mole game

The legislation’s proponents say it could go a meaningful distance toward lowering drug prices by better aligning market incentives.

Jesse Dresser, an attorney and head of law firm Frier Levitt’s pharmacy practice group, said breaking the tie between rebates and compensation in Medicare Part D plans could “radically transform” the way the intermediaries practice.

Despite the industry’s efforts to get ahead of the game, enshrining changes in legislation is “game over," said Shawn Bishop, who previously worked as chief health adviser to Sen. Ron Wyden (D-Ore.) on the Finance Committee until November 2024 and now works as a senior adviser at law firm Akin Gump.

But the industry’s powerful lobbying arm has also notched a few wins.

Since 2023, PCMA has spent $47 million lobbying against changes to its business practices, about twice its spending from the prior three-year period. The group has assembled an army of Republican lobbyists, hiring Trump-linked lobbying shop Continental Strategy, as well as former Rep. Ryan Costello (R-Penn.) and Noe Garcia, managing partner at Forward Global and a former senior policy adviser to former Senate Majority Leader Bill Frist (R-Tenn).

The current legislation does not include an earlier proposal to tie out-of-pocket costs for certain drugs in Medicare Part D plans to the smaller net price instead of the list price.

“That policy was already nixed in December 2024 negotiations, but it was one of the few policies aimed directly at out-of-pocket costs” for consumers, said one former congressional health staffer granted anonymity to discuss the PBM legislation.

The delinking of the intermediaries’ compensation from list prices and rebates also doesn’t apply to the much larger commercial market, a decision that would significantly constrain the policy’s impact for the roughly two-thirds of Americans who rely on private insurance.

The magnitude of the bill’s impact would depend on effective enforcement and how skilled plan sponsors are at using its provisions to lower drug prices for consumers, the former staffer said.

At a minimum, the package creates a framework that lawmakers weighing future policies could build on, champions for the new rules argue.

“Saying that this is beneficial at the edges is probably not a bad way of putting it,” said Brian Reid, principal at health consultancy Reid Strategic. “More transparency is always going to be better.”

But lawmakers will need to stay a step ahead of the industry.

Dresser said industry players could seek to manufacture their own drugs or integrate with different parts of the drug distribution channel to obtain new revenue sources. Specialty pharmacy revenue has become a larger share of their total revenue over the past several years.

“It’s a little bit of a Whac-a-Mole game," said Melissa Bartlett, senior vice president of health policy at the ERISA Industry Committee, a nonprofit group that lobbies Congress for employee benefit policies on behalf of large employers.

The group is pushing for legislation that would require drug-pricing intermediaries to have a fiduciary duty to their clients.

“This is very much the down payment, the beginning of the conversation on what things need to happen,” Bartlett said.