Bipartisan Bills to Prohibit “Gag Clauses” That Cause Consumers to Overpay for Prescription Drugs Head to President’s Desk

Washington, D.C. – Today, the U.S. House of Representatives unanimously passed two bills authored by U.S. Senators Susan Collins (R-ME), Claire McCaskill (D-MO), Debbie Stabenow (D-MI), John Barrasso (R-WY), and Bill Cassidy (R-LA) to remove barriers that prevent patients from paying the lowest possible prices for their prescription drugs.  The bills passed the Senate earlier this month and now head to the President’s desk to be signed into law.  President Trump has expressed his support for their legislation.

The Patient Right to Know Drug Prices Act and the Know the Lowest Price Act will prohibit the use of “gag clauses” by health insurers and pharmacy benefit managers, an egregious practice that conceals lower prescription drug prices from patients at the pharmacy, causing consumers to needlessly overpay.

“Insurance is intended to save consumers money.  Gag clauses in contracts that prohibit pharmacists from telling patients about the best prescription drug prices do the opposite,” said Senator Collins.  “Who would think that using your debit card to buy your prescription drugs would be less expensive than using your insurance card?  It’s counterintuitive. Americans have the right to know which payment method provides the most savings when purchasing their prescription drugs.  I am delighted that our legislation to lower the cost of prescription drugs received overwhelming bipartisan support, and will be signed into law.”

“This bipartisan effort will help lower out of pocket costs for Missourians, and I’m proud it’s on the way to be signed into law,” Senator McCaskill said. “With prescription drug costs skyrocketing out of control, we need to be doing all that we can to lower costs in every way possible, and this is an important step in that fight.”

“It’s wrong that a person overpays for their medication simply because their pharmacist is not allowed to tell them they could pay a lower price with cash instead of insurance,” said Senator Stabenow. “Thanks to a successful bipartisan effort, we’ve banned this outrageous practice once and for all. This is an important step toward lowering the skyrocketing prices of prescription drugs for Michigan families.”

Pharmacy gag clauses forbid pharmacists from proactively telling consumers if their prescription would cost less if they paid for it out-of-pocket rather than using their insurance plan.  Pharmacists who disobey these clauses face significant penalties.

The Patient Right to Know Drug Prices Act, sponsored by Senators Collins and McCaskill, will prohibit insurers and pharmacy benefit managers from restricting a pharmacy’s ability to provide drug price information to a plan enrollee when there is a difference between the cost of the drug under the plan and the cost of the drug when purchased without insurance.  This bill will apply to group plans sponsored by employers and plans offered in the individual market.” This bill passed the Senate earlier this month 98-2 and is cosponsored by Senators Barrasso, Stabenow, Cassidy, Tina Smith (D-MN), Joe Donnelly (D-IN), Dianne Feinstein (D-CA), Lisa Murkowski (R-AK), Bob Menendez (D-NJ), Tammy Baldwin (D-WI), John Kennedy (R-LA), Maggie Hassan (D-NH), Richard Blumenthal (D-CT), Roger Wicker (R-MS), Shelley Moore Capito (R-WV), Heidi Heitkamp (D-ND), Deb Fischer (R-NE), Lamar Alexander (R-TN), John Boozman (R-AR), Angus King (I-ME), Sherrod Brown (D-OH), Martin Heinrich (D-NM), Chuck Grassley (R-IA), and Tom Udall (D-NM).

The Know the Lowest Price Act, sponsored by Senators Debbie Stabenow (D-MI), Collins, McCaskill, John Barrasso (R-WY), Bill Cassidy (R-LA), and Ron Wyden (D-OR), will provide this same protection for individuals who are covered by Medicare Advantage and Medicare Part D plans.  This legislation passed the Senate unanimously earlier this month.

During a Senate Health Committee hearing last year, Senator Collins referenced a report that was broadcast by NBC “Nightly News,” which highlighted the issue of “pharmacy gag clauses.”  A 2016 industry survey found that nearly 20 percent of pharmacists were limited by gag clauses more than 50 times per month.  A study published in the Journal of the American Medical Association that reviewed 9.5 million insurance claims found that 23 percent of prescriptions filled through insurance ended up costing more for customers than if they had paid out of pocket. 

Nearly 60 percent of Americans, including roughly 90 percent of seniors, take prescription drugs.  In 2016, Americans spent as much as $340 billion on prescription drugs, including $45 billion out of pocket.

More than forty organizations support banning this unfair restriction, including the National Community Pharmacists Association, the American Medical Association, the Alliance for Transparent and Affordable Prescriptions, the ERISA Industry Committee, the Pharmaceutical Care Management Association, America’s Health Insurance Plans, and patient groups.

The gag clause legislation is a continuation of Senator Collins work to reduce the cost of prescription drugs.  In 2015, Senators Collins and McCaskill launched the Senate’s first bipartisan investigation into the causes, impacts, and potential solutions to egregious price spikes for certain off-patent drugs.  They released a report on their investigation in 2016.  Following their investigation, Senators Collins and McCaskill authored a bill to improve generic competition and lower the cost of prescription drugs that was signed into law as part of the FDA Reauthorization Act.