Today, the Senate Commerce Committee will hold an executive session considering S. 127, the Pharmacy Benefit Manager Transparency Act (PBMTA), legislation that was recently re-introduced by Senate Commerce Committee Chair Maria Cantwell (D-Wash.). Senators should oppose this legislation, as it would expand the power of Lina Khan’s Federal Trade Commission (FTC), could increase costs on consumers, and would increase the deficit by up to $40 billion.
S.127 would further insert the FTC into business-to-business contracts. It would prohibit PBMs from using basic auditing practices to combat fraud, waste, and abuse, prohibit routine contracting processes used to insulate payers from price fluctuations in the market, and prohibit them from lowering reimbursements for drugs. It would also require PBMs to disclose pricing information, which would hamper individual PBMs’ ability to negotiate for lower prices.
Professor Casey Mulligan, Ph.D., out of the University of Chicago has done extensive research on the consequences of further PBM regulation. In a recent paper examining “Quantitative models of PBM regulations and their consequences,” Mulligan concluded that the PBTMA would increase premiums by $10.2 billion to $13.3 billion and could increase the federal deficit by up to $40 billion.
He asserts that the costs to consumers, insurers, manufacturers, and others are at least six times higher than the cost benefits to pharmacies:
“Overall, the net cost of the pharmacy DIR provision of the PBM Transparency Act would be about $8 billion, which includes a net benefit for pharmacies. In other words, the costs to patients, plans, manufacturers, and other market participants are at least six times the benefits to pharmacies.”
Further, a July 2022 NBER paper from Mulligan demonstrated that PBM services provide at least $145 billion annually in savings, compared to a market with no PBM services.
In this way, it is unclear that S. 127 would benefit consumers as it intends to. In fact, there is good evidence that it would have the opposite impact.
Most concerning about this bill is the fact that it would expand the FTC’s power. Lina Khan’s FTC has already become notorious for going beyond their scope of power, making several attempts at reshaping entire industries including agriculture, health, telecommunications, and technology companies.
Two FTC commissioners explained that Khan has a “disturbing trend of pulling the rug out under from honest businesses and the lawyers who advise them, with no explanation and no sound basis.” Last month, FTC Commissioner Christine Wilson announced her resignation, citing Lina Khan’s “disregard for the rule of law and due process.”
Khan’s “abusive” and “tyrannical” leadership has tanked morale agency-wide. A MLEX survey showed widespread dissatisfaction at the agency, even with those who agree with Khan’s radically expansive view of antitrust law. One staffer said: “There is a view inside the agency that there is a willingness to just kind of ignore the law and the facts sometimes if it’s going to further the ideological mission.”
Under Khan’s leadership, the agency refuses to work within the law. Surely, the law should not green-light this corrupt behavior – especially when doing so does not help consumers.