September 13, 2018

S. 2554 – Patient Right to Know Drug Prices Act

NOTEWORTHY

Background: The Patient Right to Know Drug Prices Act, legislation sponsored by Senators Collins and McCaskill, would prohibit the use of “gag clauses” in contracts for employer-sponsored and individual health insurance plans. The bill was introduced on March 14, 2018, and reported out of the HELP committee by voice vote on July 25, 2018.

Floor Situation: The Senate will vote on the bill Monday, September 17.

Executive Summary: The bill would ban the inclusion of pharmacy “gag clauses,” which are contract provisions imposed by health plans and pharmacy benefit managers that restrict pharmacy providers from providing certain pricing information to enrollees. 

OVERVIEW OF THE ISSUE

Pharmaceutical benefit managers are companies that administer and oversee prescription drug plans for employer and individual health insurance plans. These companies negotiate the prices that insurance plans and other payers pay for prescription drugs.

Some contracts between insurers or PBMs and pharmacies include “gag clauses.” These prevent pharmacists from sharing certain pricing information with patients, such as when a prescription drug would cost less by paying for the drug out-of-pocket rather than with their insurance plan. If a pharmacist breaks the clause by disclosing information, they face a penalty.

The Senate passed a similar bill by unanimous consent on September 4, 2018. The Know the Lowest Price Act prohibits health insurers and PBMs from using gag clause limits in contracts for Medicare Advantage and Part D plans.

While several states have laws restricting the use of gag clauses by insurers and PBMs, there is no federal law.

NOTABLE BILL PROVISIONS

Section 2 – Prohibition on limiting certain information on drug prices

The bill amends the Public Health Service Act by adding language to prohibit employer and individual health insurance plans from forbidding pharmacies from disclosing pricing information to plan enrollees. The prohibition applies to entities that provide PBM services under a contract with a group or individual plan.

The bill also restricts health plans from penalizing pharmacies for sharing pricing information with patients.

The term of “out-of-pocket cost” is defined broadly to include the amount paid by the enrollee under the plan for the acquisition of the drug, whether described as cost-sharing, deductible, copayment, coinsurance, or any other expenditure as determined by HHS.

Section 3 – Modernizing the reporting of biological and biosimilar products  

The bill amends the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to extend current reporting requirements for generic and brand pharmaceutical companies to submit patent settlement agreements to the Federal Trade Commission and the Justice Department. The requirements would now include settlement agreements reached between the manufacturers of biologics and biosimilar drugs. The inclusion of biologics and biosimilars will ensure patent settlement agreements between these companies are not anti-competitive in nature, delaying biosimilar drugs from entering the market.

ADMINISTRATION POSITION

The Trump administration’s blueprint to lower drug prices called for the elimination of gag clauses, specifically in Medicare Part D plans. The administration’s support for passage of S. 2554 by the HELP Committee was included in its report of accomplishments in the 100 days following the blueprint’s release.

COST

The Congressional Budget Office estimates the bill will reduce the defecit by $40 million over the next decade: 2019-2028.