Under What Part of Gun Safety Does Pharmaceutical Benefit Manager Anti-Kickback Protection Fall?

August 10, 2022

Insurance Company to Doctor: "Please explain why your patient needs the prescribed medication instead of one of the preferred formulary alternatives."

Doctor to insurance PBM: "Please explain to me the kickbacks that you receive via rebate sharing, pharmacy spread, DIR fees, pass-through administrative fees, reimbursement rate, and the PBM-owned pharmacy profit margin differential related to the prescribed medication and all formulary alternatives and exclusions, and then we can see who should be asking the questions."

In case you had not noticed, on page 21 of the 32-page "Gun Safety Bill", a section unrelated to firearms reads: "Extension of Moratorium on Implementation of Rule Relating to Eliminating the Anti-Kickback Statute Safe Harbor Protection for Prescription Drug Rebates." In other words, let's not just take steps to reduce gun violence, let's also give PBM's another year of legally violating anti-kickback laws so they can continue to rip us all off until January 2027.

Why do pharmacy benefits managers (PBM's) need safe harbor from anti-kickback laws? Because when federal healthcare dollars are involved, you cannot financially reward those who refer business to you or get paid for referring. It is a conflict of interest and it is precisely the business model of PBM's. Such nefarious practices are a great disservice not just to patients and prescribers, but to independent pharmacies. Considering that PBM's control 80-85% of prescription claims, the wasted cost to the nation's healthcare economy is just immense.

The position that a drug sits within a formulary has everything to do with how often it is prescribed. A PBM that receives a "rebate" from a drug manufacturer in exchange for placing it higher up on the formulary is receiving a kickback from greater prescribing. And since they negotiate the price of a drug and determine both the cost to the insurance company and payment to the pharmacy, they determine their profit from this discount. They position their drugs on the formulary so that prescribing patterns will best feed their coffers.

Pharmacy benefit managers' protection has about as much place in a gun safety law, as a late-term abortion ban in a state budget. These issues should each be specifically and publicly debated and decided. Elected representatives at all levels need to know that this approach to backroom negotiations that enshrine into law measures without a fair public hearing and unrelated to the stated purpose of a bill needs to stop, as does any role of PBM's in prescription medication coverage.


Eric Kropp, MD
NHMS President

Please send comments or questions to eric.kropp@nhms.org.