New Law Opens Door to Direct Drug Sales for Employers

Companies might soon buy prescription drugs straight from manufacturers, cutting out costly middlemen and potentially saving billions for American workers and their families.

President Trump signed sweeping pharmacy benefit manager reforms into law this week. The changes require these middlemen, known as PBMs, to pass 100% of drug rebates to employer health plans and reveal exactly how they make money.

For years, large employers wanted to buy medications directly from drugmakers to avoid inflated prices. But pharmaceutical companies refused, worried about angering the powerful PBMs who control which drugs get covered by insurance. Elizabeth Mitchell, who leads the Purchaser Business Group on Health, says that's about to change.

The new transparency requirements will show employers exactly where their drug spending goes. Once companies see how much money PBMs keep for themselves, drugmakers may feel more comfortable making direct deals.

PBMs currently negotiate rebates with drug companies in exchange for favorable placement on insurance formularies. But there's a catch: drugmakers raise their list prices to offer bigger rebates, and patients pay copays based on those higher prices. The middlemen keep a portion of the savings.

The law also tackles another controversial practice called spread pricing. That's when PBMs charge health plans more for drugs than they pay pharmacies, pocketing the difference. Now they'll have to report those numbers every quarter.

Pharmacies are celebrating too. The reforms direct federal regulators to crack down on PBMs steering patients to pharmacies they own and ensure fair reimbursement rates for independent drugstores.

The PBM industry warns the changes could backfire. Their lobby group argues that restricting their negotiating power will lead to higher prices overall. But employers and pharmacies have been pushing for these reforms for years.

The law arrives alongside TrumpRx, a planned government website connecting consumers with drugmakers' direct sales programs. Together, these initiatives could reshape how Americans buy prescription medications.

The Ripple Effect

The reforms complement a recent Department of Labor proposal requiring even more disclosure from PBMs. Legal experts say having a federal law on the books strengthens that rule as it moves through the approval process.

The changes affect both commercial insurance and Medicare, meaning protections will extend to retirees and people with disabilities. Hospital billing transparency measures and pediatric cancer research funding came along in the same bill.

Mitchell believes creative new arrangements between employers and drugmakers are now possible. When companies can compare direct prices with what they're paying through PBMs, market competition could finally drive costs down instead of up.

For the 160 million Americans who get health insurance through work, that could mean lower premiums, smaller copays, and better access to the medications they need.