Montana Legislature: Bill takes aim at ‘middle man’ to lower prescription drug costs

State Auditor Matt Rosendale

(UM Legislative News Service) A bill introduced in the Montana Legislature seeks to lower prescription drug costs by targeting a hidden “middle man” who helps determine drug prices.

State Auditor Matt Rosendale said pharmacy benefit managers, or PBMs, siphon money when they work with drug manufacturers to find cheap drugs for pharmacies and create lists of drugs, called formularies, that insurers will cover.

Representatives from the Montana State Auditor’s Office said PBMs will often practice “spread pricing,” telling pharmacies the cost of drugs are higher than what the manufacturer charged, then keeping the difference for themselves. They also said manufacturers will often incentivize PBMs to put their products on formularies with an extra rebate, and that additional cost is pocketed by PBMs.

“So we make sure the consumer is getting the benefit of all this additional revenue that’s being pumped into the system,” Rosendale said during Senate Bill 71’s initial hearing in the Senate Business, Labor and Economic Affairs Committee. “Right now, in many cases, the PBM is the only beneficiary.”

Federal law prevents regulating PBMs, so the bill would instead put limits on how insurers and pharmacies are allowed to work with them. Under the bill, pharmacies must pay the cost that manufacturers charge. It also requires that rebates offered by manufacturers go to the insurer in order to reduce rebates.

But Sean Slanger with America’s Health Insurance Plans said PBMs are valuable partners because they find cheap drugs quicky. He also said the high cost of medicine is due to the manufacturers themselves.

“We understand that ‘Big Pharma’ is posting record profits, while hardworking Americans often must choose between paying bills and their lifesaving medication,” Slanger said. “This bill has nothing to do with lowering manufacturers’ costs.”

There were 17 supporters and five opponents during the hearing Friday. The Senate Business, Labor and Economic Affairs Committee did not immediately vote on the bill.

Tim Pierce is a reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association, the Greater Montana Foundation and the Montana Newspaper Association.