End Pharmacy Benefit Managers ability to work for insurance companies

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Draft Bill: Prohibition of Pharmacy Benefit Manager and Insurance Company Affiliation Act

SECTION 1. SHORT TITLE

The PBM Independence Act of 2025.

SECTION 2. FINDINGS AND PURPOSE

(a) Findings—Congress finds that:

  1. Pharmacy Benefit Managers (PBMs) are intended to manage prescription drug benefits on behalf of health insurers, Medicare Part D plans, and large employers.
  2. PBMs are often vertically integrated with insurance companies, creating potential conflicts of interest that may negatively impact drug prices, patient access, and market competition.
  3. The affiliation of PBMs with insurance companies may lead to practices that increase prescription costs, reduce transparency, and limit patient choice.

(b) Purpose—The purpose of this Act is to prohibit Pharmacy Benefit Managers from working for or being affiliated with insurance companies to ensure independent, transparent, and equitable management of pharmacy benefits.

SECTION 3. DEFINITIONS

For the purposes of this Act:

  1. Pharmacy Benefit Manager (PBM)—The term “Pharmacy Benefit Manager” refers to an entity that contracts with pharmacies on behalf of health plans to administer or manage prescription drug benefits, including but not limited to negotiating drug prices, creating drug formularies, and processing drug claims.
  2. Insurance Company—The term “Insurance Company” refers to any entity that provides health insurance plans or products, including but not limited to health maintenance organizations, Medicare Advantage plans, Medicare Part D plans, or private health insurers.
  3. Affiliate—The term “Affiliate” refers to any direct or indirect ownership interest, control, or partnership between a PBM and an insurance company, including shared ownership by a parent company or holding company.

SECTION 4. PROHIBITION ON AFFILIATION BETWEEN PBMS AND INSURANCE COMPANIES

(a) Separation Requirement—No Pharmacy Benefit Manager shall be directly or indirectly owned, operated, or controlled by any Insurance Company, nor shall any PBM share financial interests or executive leadership with an Insurance Company.

(b) Prohibition on Contractual Relationships—No Insurance Company may contract with a Pharmacy Benefit Manager in which it holds a financial or governance interest.

SECTION 5. ENFORCEMENT

(a) Regulatory Oversight—The Department of Health and Human Services (HHS), through the Office of Inspector General (OIG), shall monitor PBMs and Insurance Companies to ensure compliance with the provisions of this Act.

(b) Penalties—Any entity found to be in violation of Section 4 shall be subject to the following:

  1. Civil monetary penalties of up to $100,000 per day for each day of noncompliance.
  2. A prohibition from contracting with any federal health care program for up to five years for severe or repeated violations.
  3. Potential criminal penalties if intentional collusion is found to increase consumer costs or manipulate market competition.

(c) Public Reporting—The HHS OIG shall publish an annual report detailing enforcement actions taken under this Act, including a list of PBMs and Insurance Companies found in violation, penalties imposed, and corrective actions required.

SECTION 6. TRANSPARENCY REQUIREMENTS

(a) PBM Disclosure of Financial Ties—Pharmacy Benefit Managers shall be required to annually disclose any financial ties with third parties related to drug pricing, formulary placement, or rebate arrangements.

(b) Insurance Company Disclosure Requirements—Insurance Companies shall disclose the terms of any PBM contracts, including pricing structures, rebate terms, and any financial relationships with PBMs or related entities.

SECTION 7. IMPLEMENTATION AND RULEMAKING

(a) Rulemaking Authority—The Secretary of Health and Human Services shall issue regulations to carry out the provisions of this Act within 180 days of enactment.

(b) Effective Date—The provisions of this Act shall take effect one year from the date of enactment.

SECTION 8. SEVERABILITY

If any provision of this Act, or the application thereof, is found to be invalid or unconstitutional, the remainder of this Act, and the application thereof, shall not be affected.

Explanation of Key Sections:

  • Separation Requirement: This explicitly prohibits PBMs from being owned or controlled by insurance companies, effectively breaking up any vertical integration that currently exists.
  • Enforcement and Penalties: This section gives oversight responsibility to HHS and establishes penalties for noncompliance, including monetary fines and the potential for exclusion from federal healthcare programs.
  • Transparency Requirements: This is intended to ensure that any financial relationships or rebate agreements are disclosed, which could provide more visibility into how drug pricing decisions are made.

This draft provides the general framework. The language might need to be refined further in collaboration with legislative aides or lawyers who specialize in healthcare regulation to ensure clarity and enforceability.

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