PBMs administering Medicare drug plans would be required to report all payments received from drug manufacturers to the Department of Justice and the HHS Inspector General under the Senate's Medicare legislation.

A pharmacy benefit manager that wishes to participate in the Medicare drug program would have to report annually "the aggregate amount of any and all rebates, discounts, administrative fees, promotional allowances, and other payments received or recovered from each pharmaceutical manufacturer," the bill states.

The disclosure is one of the PBM "transparency requirements" added to the Senate Medicare bill (S 1) through an amendment by Sen. Maria Cantwell (D-Wash.).

The amendment (S Amdt 942) was passed by voice vote June 26. The Senate cleared the overall package June 27.

The amendment was inspired by the lawsuits against PBMs and government investigations into their practices.

In her floor statement about the amendment, Cantwell referred to DoJ's decision June 23 to join two whistleblower cases against Merck PBM subsidiary Medco (see ¹ Also see "Reproductive Toxicity Factors Weighted Equally To Guard Against Bias - FDA" - Pink Sheet, 28 June, 1999. ).

One of the amendment's provisions would ensure that Merck carries through with its planned spin-off of Medco to Merck shareholders: language states that a Medicare drug plan "shall not enter into a contract with any pharmacy benefit manager that is owned by a pharmaceutical company."

The bill does not provide a definition of ownership or of a PBM.

PBMs would have to report additional information to DoJ and the IG, including "the amount of payments received or recovered from each pharmaceutical manufacturer for each of the top 50 drugs as measured by volume."

PBM margins on retail prescriptions would also be disclosed to the government. The firms would have to turn over information on "the percentage differential between the price the PBM pays pharmacies for a drug...and the price the PBM charges a Medicare Prescription Drug plan or a MedicareAdvantage organization for such drug."

PBMs failing to provide any of the required information would be liable for a civil penalty.

To protect PBMs' ability to continue negotiating low drug prices under the system, the government would be required to keep the payment information confidential.

The information would be exempt from disclosure under the Freedom of Information Act and "no such information may be made public," the bill states.

Exceptions to the confidentiality rule could be made "as may be relevant to any administrative or judicial action or proceeding." Congress would also be permitted to obtain the information.

Cantwell said the financial information disclosure requirement "provides an incentive to return as much of that savings as possible to Medicare, which will in turn help reduce the high cost of prescription drugs."

Some members of the Congress believe price negotiations will not be sufficient to control Medicare's drug costs and are pushing for allowing drug reimportation.

The reporting requirement appears to make the bill more of an antitrust tool than an instrument to help HHS choose the best-value benefit administrators.

Cantwell noted that DoJ oversight of the system "allows for regular review of these financial arrangements to weed out any potential collusion on pricing." The PBM reports to DoJ would be directed to the Assistant Attorney General for Antitrust.

The House version of the Medicare bill does not contain PBM transparency language, making it one of several issues that will need to be sorted out in conference.

PBM Fees Under Medicare Would Be Reported To DoJ, HHS In Senate Bill

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