President Trump Signs Historic PBM Reforms Into Law

The new federal funding package that was passed by Congress and signed into law by President Trump didn’t just avert another prolonged government shutdown. It also marked the most sweeping PBM and Medicare Part D reforms seen in decades. This is a hard-fought moment which pharmacy advocates in Michigan and across the country have been battling to achieve for years. After many near misses and false starts, several critical reforms have finally made it across the finish line. Here’s a closer look at the pivotal changes:

• The Centers for Medicare and Medicaid Services (CMS) must now define “reasonable and relevant” contract terms through their rulemaking process. Although federal law has long required Medicare Part D to contain “reasonable and relevant terms,” the lack of a legal definition has left the federal government with little ability to stop the blatantly abusive Part D contracts offered to pharmacies in recent years. By defining “reasonable and relevant,” CMS has the power to do many things, such as limiting retroactive fees, standardizing payment timelines, and reducing arbitrary reimbursement variability that has contributed to sweeping pharmacy closures in Michigan and across the country.
• PBMs can no longer tie their Medicare Part D compensation to drug list prices or manufacturer rebates. This reform, often referred to as “delinking,” forces PBMs to rely on flat administrative fees and eliminates their incentives to prefer higher-priced drugs. This critical reform is aimed at directly reducing patient costs at the pharmacy counter and potentially paving the way for fairer reimbursement for pharmacies as PBMs move away from spread pricing and rebate-driven formularies.
• CMS has been empowered to track pharmacy payment trends and PBM network inclusions. This includes a new designation of “essential retail pharmacies.” Though the package does not define the designation, it directs CMS to establish a definition through its rulemaking process. The bill also includes provisions mandating greater pricing and contract transparency for employers and plans, including disclosure of negotiated rates and payment flows.
• The law allocates $188 million to CMS to enforce PBM contract terms and create a formal appeals process for pharmacies. As we’ve seen with the implementation of our state reforms, new regulations are meaningless without effective enforcement. The funding allocation supports the expectation that these reforms, as well as those introduced in the forthcoming rulemaking process, will be enforced.

MPA echoes our national colleagues in thanking the members of Congress who were so critical to this long fight and this much-needed legislative victory.

“I came to Congress with the goal of building a health care system that put patients before profits,” Rep. Buddy Carter, R-Ga., a key sponsor of the bill, said in a statement. “Today, I can proudly say that we have enacted the first major PBM reform in decades, a meaningful step toward achieving that goal. PBMs have been stealing hope and health from the American people for decades, inflating prescription drug costs, forcing pharmacy closures and blocking access to medications. To that I say: Not on my watch. The PBM mafia has officially been put on notice. I’m excited to continue working with President Trump to help build a quality, accessible and affordable health care system for patients.”

Last, but not least: Thank you to each and every one of you who have taken the time to advocate for this issue. Whether it was signing a form letter or taking your valuable time to fly to Washington D.C., this would not have happened without your actions. You are the voice of pharmacy, and by working together, we will continue to improve the lives of our patients and the health of our communities.