TV ad targeting U.S. Sen. Ted Budd misleads North Carolinians about health bill

A new political advertisement warns North Carolinians about legislation that could increase regulation on the health care industry. But the ad exaggerates the bill’s likely effects and omits key details that might give voters a different impression of it.

The Council for Citizens Against Government Waste, the lobbying arm of a nonpartisan group devoted to reducing government spending, paid for the ad about the "Pharmacy Benefit Manager Reform Act," a bill (S. 1339) filed in the U.S. Senate in April. 

Citizens Against Government Waste’s focus tends to align with Republican policies, PolitiFact has reported.

The ad’s narrator says:

"This is a conservative voter alert: Bernie Sanders is at it again — this time with a radical plan to increase government control of your pharmacy benefits.

"Even worse? Some Republicans are supporting it.

"Sanders’ socialist plan is not just an attack on your health benefits, it’s his next step toward government-run health care — shattering your pharmacy benefits, increasing drug costs and threatening private health insurance.

"Call Ted Budd and tell him to oppose Bernie’s radical health care takeover."

The ad’s final frame features text referring to the bill, which U.S. Sen. Bernie Sanders, I-Vt., introduced in April. Budd, R-N.C., was among the senators who supported the bill in an 18-3 vote during a May committee meeting. 

If enacted, the bill would introduce more government oversight of pharmacy benefit managers. But health care analysts say the ad greatly exaggerates the bill’s likely effects — both on consumers and on the health care industry. 

"The ad seemed incredibly overwrought to me," said Matthew Fiedler, a senior fellow with the Brookings Schaeffer Initiative on Health Policy. "Whatever one thinks of the merits of these proposals, it's not a radical change in U.S. health policy,"

Tom Schatz, president of the group that paid for the ad, defended the ad in a statement to PolitiFact. Sanders "is once again leading an attack on private health care to achieve his stated goal of nationalized health care," Schatz said. "No conservative lawmaker should support any bill that gives the government more control over health care, particularly his legislation, which will increase costs for patients and reduce choices for small businesses."

Budd’s office defended his vote in a statement to PolitiFact. "Senator Budd voted for the bipartisan PBM Reform Act in committee because it would increase transparency and lower out of pocket costs for patients," the statement says. "He will always support conservative solutions that give patients more access to lower cost medications. Senator Budd’s conservative bona fides are best defended by his lifetime rating from [the Council for Citizens Against Government Waste] itself, of 99%."

Pharmacy benefit managers, or PBMs, are third-party intermediaries that manage prescription drug benefits for health insurance companies and Medicare Part D drug plans. They can influence consumer costs because they help insurance companies determine which prescription drugs to cover (or, which to consider in-network). They also negotiate prices with drugmakers and work directly with individual pharmacies on pricing. 

Pharmacy benefit managers have faced increased scrutiny in recent years because their operational methods are opaque according to the Commonwealth Fund, a private foundation that supports independent health care research. 

PBMs often receive rebates that are calculated as a percentage of the manufacturer’s list price. Therefore, the Commonwealth Fund argued, these managers receive a larger rebate for expensive drugs than they do for ones that may provide better value at lower cost.

PBM industry representatives say they’re being unfairly blamed for high prescription drug prices and that drug manufacturers deserve more scrutiny. Ad sponsors pointed out that North Carolina State Treasurer Dale Folwell recently credited PBM contract negotiators for saving the state $800 million, Business NC reported.

Fiedler said the bill has four main aims:

• Increasing transparency of pharmacy benefit manager decisions and operations.

• Requiring PBMs to pass on to employers all of the rebates they get from drug manufacturers.

• Banning "price spreading," which is when a PBM charges an insurance plan a price for a prescription drug that exceeds the price paid to the pharmacy for the drug.

• Requiring PBMs to have a process for allowing exceptions to "step therapy," in which plans require patients to try cheaper drugs for an ailment before covering a more expensive drug.

The bill doesn’t come close to offering the type of sweeping change the ad suggests," said Joshua Cohen, an independent health care analyst. He said PBM reform has "nothing to do with government-run health care."

In an email, Cohen said, "Government has long been in the business of regulating insurance under both Democratic and Republican Administrations and in all 50 states. Without such regulation, consumers lose valued protection against anti-competitive practices or simply egregious profiteering which disadvantages them." 

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"Unless one takes an extreme libertarian view — that government has no place in health care or anywhere else in the economy — then it's quite normal for both the federal and state governments to intervene on behalf of their constituents," he said.

And it’s not a partisan issue. Republican Sens. Chuck Grassley of Iowa and Lamar Alexander of Tennessee have sponsored bills pushing new regulations for PBMs.

The bill’s effects on drug prices and people’s health insurance plans are hard to predict, experts told PolitiFact. With Sanders’ bill, they said they don’t foresee dramatic changes in consumers’ plans. But different parts of the bill could cause different ripple effects — some for the better and some for the worse.

The bill’s supporters have pointed out that a similar effort to increase PBMs’ transparency would reduce commercial market spending and decrease the deficit by $1.7 billion over a 10-year period, according to the Congressional Budget Office.

Meanwhile, Fiedler and Cohen said they could foresee the bill’s directive on rebates having little to no effect on costs. In many cases, PBMs already pass along rebates to employers.

"If PBMs have to pass through (all) rebates to employers, they're likely to respond to that by demanding a higher fee for their services to the plan," Fiedler said. "So, I don't see this as a particularly effective policy change if the goal is to reduce cost to employers. But mechanically, that's what (bill sponsors) are trying to achieve."

Cohen, the independent analyst, speculated that the directive could lead to higher premiums.

"If, as a result of the legislation, rebates were to be removed from the system, the de facto unintentional consequence could be that PBMs raise premiums in, say, the Medicare Part D benefit," he wrote in an email, referring to the outpatient benefit. 

"Until now, rebates have perhaps kept Part D premiums in check," Cohen told PolitFact in an email, emphasizing that empirical evidence is scarce. "This may change as a result of legislation."

Experts are also skeptical of the effectiveness of proposed bans on price spreading. Banning the practice would remove incentives for PBMs to prefer pharmacies "that have the largest spreads’ rather than the pharmacies with the lowest prices, which could reduce costs," Fiedler said. PBMs could also recoup the lost revenue in other ways. 

"It’s perfectly plausible that banning spread pricing would increase costs on net, although I doubt any increases would be large," Fiedler said. "Regardless, it’s hard to see how any of these debates over the fine points of spread pricing could substantiate the sweeping claims in the ad."

The ad says Sanders’ bill would "increase government control" of pharmacy benefits and is "radical health care takeover."

The bill, which is receiving bipartisan support, would introduce new regulations on pharmacy benefit managers. Some experts say this regulation could affect Americans’ health insurance plans by changing which prescription drugs their insurance plans cover or how much they pay for them.

However, the ad exaggerates the bill’s potential effects, which fall far short of a "health care takeover."

The ad contains an element of truth but ignores critical facts that would give a different impression. We rate it Mostly False.