Gun Safety Bill Extends Drug Middlemen Protection From Anti-Kickback Measure
The recent gun safety bill, called the Bipartisan Safer Communities Act, was both hailed as the most significant measure taken by Congress on the topic in 30 years and a measure that left much undone.
But there’s another criticism that’s been largely overlooked. The bill that President Joe Biden signed into law isn’t just about gun safety and at least one of the measures—noticed by the American Economic Liberties Project and reported on by the Iowa Capital Dispatch—is eyebrow raising. It’s a major break for the big middlemen in the prescription drug trade, which in so out of control with an often supporting Congress that Mark Cuban has been able to provide some relief that should have been done long ago.
It’s not unusual for bills to include measures that are technically unrelated to the stated purpose of the bill. This often happens when politicians strike deals with one another to get enough support to pass a measure. There’s probably a strong correlation between the purity of a bill’s language and its lack of chance to become a law.
Politics is about compromise, which means having to give in where you can, so others do the same. But sometimes the deals seem a bit extraordinary.
In the final text of the Bipartisan Safer Communities Act, on page 21 of 32, there’s a section called Title III—Other Matters. And first up is section 13101, “Extension of Moratorium on Implementation of Rule Relating to Eliminating the Anti-Kickback Statute Safe Harbor Protection for Prescription Drug Rebates.”
Drug rebates have been contentious for years, as I wrote for Fortune in 2019. A big player in drug distribution are the pharmacy benefits managers, or PBMs. Although originally developed to process pharmaceutical drug claims under insurance plans, they do much more as the American Economic Liberties Project explains:
“They bargain with pharmaceutical companies to determine drug prices, decide which drugs are covered by your insurance, decide which pharmacies are in and out of a health insurer’s network, and decide how much you, the pharmacy, and your insurance company must pay for a drug. On top of this, they own physical, mail-order, and specialty retail pharmacies of their own, and they manage pharmaceutical benefits for government programs like Medicare Part D and Medicaid.”
This creates existing conflicts of interest. A PBM can look to charge insurance companies and consumers more while paying pharmacies less to boost its profits. And, oddly enough, this systemic power involves a lot of money and ownership by the largest pharmacy chains and health insurance providers. The top three—Caremark (owned by CVS Health
Among other things, the PBMs control their formularies, or the lists of drugs eligible for coverage. The better a position on the formulary, the more a drug company’s products will sell, so there’s an incentive to play ball. For many years, the PBMs most if not all of those discounts, cranking up their own profits at the expense of everyone paying for medicines.
To help lubricate the system and ensure better placement, drug companies offer rebates to the PBMs. That creates some heavy conflicts of interest, though not illegal ones even if immoral. Remember hearing about incredibly high insulin prices? The manufacturers aren’t the sole culprits. According to a Senate investigation last year, it’s the way the drug companies and PBMs do business together that keeps prices high.
But, not illegal. Unless, that is, practices cross the bounds into services to Medicare. Here’s where the inspector general’s office of the U.S. Department of Health and Human Services explains the existing federal anti-kickback statute:
“Under the Federal Anti-kickback Statute, you may not knowingly and willfully offer, pay, solicit or receive anything of value to induce or reward for referrals of Federal health care program business. In some industries, it is acceptable to reward those who refer business to you. In health care however, it’s a crime. The prohibition against kickbacks applies to those who pay for referrals and to those who receive them.”
That should include rebates to PBMs, except that Congress put into place a specific moratorium preventing the anti-kickback provision from applying. That was supposed to end on January 1, 2026. Too soon for the industry, apparently, as someone added the following provision to the gun control bill: “Section 90006 of division I of the Infrastructure Investment and Jobs Act (42 U.S.C. 1320a–7b note) is amended by striking ‘January 1, 2026’ and inserting ‘January 1, 2027’.”
That’s now part of U.S. law and would literally take an act of Congress to change, which is unlikely to happen.
And while we’re at it, immediately following the extension of the anti-kickback moratorium was a change to the Medicare Improvement Fund. Here’s an explanation from the Alliance for Health Policy:
“Established in 2008, the fund allowed the Department of Health and Human Services to make improvements under the original Medicare fee-for-service program under Parts A and B. For fiscal year 2014 through fiscal year 2017, $19.9 billion would be made available from the Parts A and B trust funds. The Affordable Care Act (ACA) eliminated the Medicare Improvement Fund and created a new Innovation Center within Centers for Medicare & Medicaid Services, making the fund redundant.”
Well, eliminated for the federal fiscal years 2014 and 2015, as the House Ways and Means Committee explains. But it came back and now it just apparently got a boost from $5 million in 2021 to $7.5 billion in 2022. Is that good? Bad? Who knows? There doesn’t appear to have been a major discussion.
Just an example of why it’s important to watch the details of legislation that goes through, to see what else is being done.