Employers' opinions mixed on legislation to lower rising drug costs 

November 30, 2023

Pharmacy benefit managers (PBMs) have become a focus for Democrats and Republicans in recent years as both parties at the state and federal level seek to drive down rising drug costs. The PBM industry argues that their role is to save money for health plans, while critics contend that they drive up the list prices of prescription drugs by demanding larger rebates or discounts from drug companies, often leading to higher prices for plan participants.

Mercer recently surveyed over 300 employers of all sizes to learn their views on a number of health policy issues, including the plethora of federal and state legislation and proposals that address prescription drug price transparency, pricing practices and other activities of PBMs. The survey described 10 specific reforms that appear in many of the various PBM reform proposals and included, where possible, Mercer’s estimate of the potential cost impact on employer plans. (Note that these reforms do not occur in all legislative proposals and may be worded differently.) Employers were asked whether they support or oppose each reform, or if they would need more information to form an opinion. The survey results discussed below are based on respondents with 500 or more employees.

Given the complexity of much of the legislation, it’s not surprising that for seven of the 10 proposed reforms the largest vote-getter was “need more information.” On two reforms — detailed PBM reporting and 100% rebate pass-through to plan sponsors — employer support was high. Flashpoint issues like PBM fiduciary status and a spread pricing ban also received modest support.

However, on the five reforms that reduce plan sponsors’ autonomy — steerage restrictions, “any willing provider” networks, point-of-service rebates, maximizer bans and mandated dispensing fee levels — support ranged from low to very low.

* The financial projections are not specific to any one version of the proposed reforms or to any one employer; rather they provide a range of the expected financial impact of each provision.

The results suggest that many employers want to know more about these reforms before taking a position. They also clearly show that employers are opposed to actions that would erode the autonomy of self-funded plans. A resounding majority of respondents told us preserving ERISA preemption is extremely important (71%) or important (16%) – it allows multistate employers with self-funded health plans to abide by a uniform set of rules, helping them control costs, ease administration and maintain affordability.

Pharmacy benefits have become the biggest driver of health plan cost growth and are of critical importance to plan members. This survey provides one avenue for employers to share their views on consequential reforms. Clearly, employers need to know more about the evolving legislative landscape and how proposed changes might affect their programs. As we’ve seen many times, when employers speak up about pending legislation, their voices can influence the outcome.