Antitrust Lawyer Blog Commentary on Current Developments

Trump Signs Two Bills into Law Banning PBM Gag Clauses

On a day, that President Trump’s Department of Justice approved CVS’ acquisition of Aetna, allowing the vertical integration of a pharmacy benefit manager with a health insurer, he signed two bills into law intended to lower patients’ prescription costs: the Know Your Lowest Prices Act and the Patient Right (S. 2553) to Know Drug Prices Act (S. 2554). The bills prohibit health insurers and pharmacy benefit managers (“PBMs”) from including so-called “gag clauses” in contracts with pharmacies. The clauses ban pharmacists from notifying patients when they could pay less for medicines without using their health insurance than they would for their copayment.

The Laws Should Reduce Patient Out-of-Pocket Spending by Eliminating Gag Clauses and Increase Drug Pricing Transparency

It is important to eliminate pharmacy gag clauses that prevent pharmacists from informing consumers of lower priced alternatives.  In a competitive market, we would expect providers would have the ability to guide consumers to the best products at the lowest cost.  The fact that PBMs had a practice of preventing pharmacies from disclosing this information means competition was not working as it should.

As consumers face rising prescription drug costs, the laws prohibiting PBMs from inserting provisions in their contracts with pharmacists that keep pharmacists from telling consumers about lower cost alternatives or that the cash price for a prescription drug may be less expensive than their insurance co-pay, should be welcomed by consumers.

The only purpose of the gag clause was to conceal the costs of prescription drugs from consumers at the pharmacy, causing consumers to pay more, with the only clear benefit going to the PBM’s bottom line.

Unfortunately, most consumers are not provided with a full set of information when purchasing a prescription drug.  It is not obvious to a consumer that sometimes the cheapest way to buy prescription drugs at the pharmacy is to pay cash rather than to use her insurance plan.  When those situations arise, a pharmacist should be allowed to do the right thing so consumers can make an informed purchase and save money.

Consumers have a right to know the costs of their prescription drugs.  Gag clauses serve no procompetitive purpose and their elimination is an important step towards increasing drug pricing transparency for consumers.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com