By Nicholas Johns, National Taxpayers Union
This week, the Senate Committee on Commerce, Science, and Transportation approved legislation to impose a range of restrictions and reporting requirements on pharmacy benefit managers (PBMs). The bill, the Pharmacy Benefit Manager Transparency Act (S. 127), has some good intentions but is fundamentally flawed, chiefly because it would hand the Federal Trade Commission (FTC) and Chair Lina Khan even more power to intrude in the private sector.
PBMs are companies that act as intermediaries between pharmacies, health insurance plans, and drug manufacturers. Recently, these companies have been subject to criticism from health policy stakeholders and on Capitol Hill for potentially driving up health care costs.
NTU recently noted our concerns with PBMs and their impact on taxpayers in a lengthy policy paper. But while the Pharmacy Benefit Manager Transparency Act certainly has positive intentions, the devil is in the details and its flaws should preclude Congress from passing the bill.
For one, while NTU has advocated for increased transparency on PBM spread pricing, especially in the Medicaid program, this legislation goes further and effectively bans the practice nationwide. While the provision allows for exceptions – under the condition that 100 percent of the price differential is passed through to the patient and reported – the policy amounts to an effective ban. While transparency is an admirable goal, banning business practices outright sets a poor precedent. This should remind observers of the current outright ban of non-competes that is pending at the FTC, which leads to the chief issue with this legislation – the current state of the FTC itself.
The FTC under Chair Khan has upended time-tested norms and standards, cratered agency morale, and is pursuing sweeping regulatory action against broad sectors of the economy. This FTC is suing to block more mergers and acquisitions than any FTC in recent memory, has rolled back most of its internal guardrails on regulation, and is exercising Section 5 authority in unprecedented ways. Section 5 of the Federal Trade Commission Act prohibits “unfair methods of competition in or affecting commerce.” Until recently, the FTC had issued rulemaking under these auspices alone very sparingly. However, under Chair Khan, this section of law has been reinterpreted to broadly increase the FTC’s enforcement and rulemaking authorities.
As Commissioner Wilson noted when the FTC issued its recent change of policy on Section 5 rulemaking; ”When the FTC pursued an expansive use of Section 5 through unfairness rulemaking in the 1970s, Congress expressed its disapproval by shutting down the agency for several days, failing to reauthorize the agency for fourteen years, and imposing additional procedural obstacles on trade regulation rulemaking for the FTC.” Clearly, the FTC has a historical and current tendency to buck congressional intent when handed more power.
It would be unwise for Congress to further expand the Commission’s statutory authority in a manner that could lead to unintended and damaging consequences for the American economy. NTU recommends a more targeted approach to achieving some of the transparency goals of this legislation. As it stands, this legislation would empower the FTC even further and may sweep even more of the private sector into the eye of the regulatory hurricane that Chair Khan is generating daily.
Nicholas Johns is a Policy and Government Affairs Manager for National Taxpayers Union.