The Senate Health and Human Services Committee invoice Monday to increase oversight of pharmacy benefit managers.
Pharmacy benefit managers are middlemen for the pharmaceutical industry. They are primarily responsible for overseeing the prescription drug side of health insurance plans. In their role, they negotiate drug costs on behalf of insurance companies and often receive discounts on expensive drugs in exchange for having those drugs on the formulary drug list for certain plans. They are also responsible for reimbursing pharmacies for the cost of drugs when patients pay only their copay up front.
The nation’s largest pharmacy benefit management companies have come under increasing scrutiny recently from state lawmakers in Pennsylvania and elsewhere, as well as federal regulators.
The FTC is currently conducting antitrust investigations into several of the largest pharmacy benefit managers. The three largest pharmacy benefit managers operate under parent companies that each have large health insurance companies and pharmacy chains. The three largest pharmacy benefit managers in the United States are estimated to be responsible for overseeing the prescription drug benefits of 70% of Americans’ health insurance plans.
For example, CVS Health is one of the most profitable healthcare companies in the United States, and one of the most profitable companies in general. Latest Fortune 500 ListCVS Health is the sixth largest company in the country by revenue. It will earn more than $357 billion in 2023 alone.CVS Health owns the nation’s largest pharmacy chain, as well as the largest pharmacy benefits manager, Caremark, and the largest health insurance provider, Aetna.
Prescribing trouble: Pennsylvania pharmacists say PBMs are driving pharmacy closures
The Pennsylvania bill would allow the state’s Department of Insurance to regulate certain aspects of pharmacy benefit managers’ business that are deemed anti-competitive.
The bill would outlaw a practice known as “patient steering,” in which pharmacy benefit managers steer patients away from privately owned pharmacies to preferred pharmacies, often owned by the same parent company.
The current version of the bill would also ban a practice known as “spread pricing,” in which pharmacy benefit managers charge insurance plans a flat price for a drug, then reimburse pharmacies that dispense it at a lower price, making a profit on the difference.
The bill would also require pharmacy benefit managers to provide more detailed reports to state health departments about their revenues and profits, including how and whether they are using funds from contracts with drug companies to reduce patient costs.
State insurance departments would be responsible for enforcing the law and would also be required to establish procedures for resolving disputes between pharmacies and pharmacy benefit managers.
However, as it stands, the bill lacks key provisions requested by pharmacists.
Many independent pharmacists accuse pharmacy benefit managers of undercompensating them — meaning pharmacies receive less for some of the drugs they dispense than it costs to stock and deliver them — essentially forcing them to operate with low profits or, worse, at a loss.
Pennsylvania’s pharmacy industry association lobbied to include language to prevent the practice, but it is not included in the current bill. However, there are notable exceptions.
The bill would require pharmacy benefit managers, hired to oversee prescription services for the state employee health plan, to reimburse pharmacies at a rate that ensures pharmacies do not incur a loss when filling prescriptions, which represents only a small fraction of the total number of prescriptions filled by most pharmacies.
The Pennsylvania General Assembly has passed a law regulating pharmacy brokers, but the state has not enforced it.
Both the Pennsylvania State Pharmacists Association and the Philadelphia Association of Retail Pharmacists (PARD) have blamed low reimbursement rates for forcing dozens of pharmacies to close across the state last year.
“These are heartwarming, feel-good, wonderful things,” PARD Executive Director Rob Frankil said of the parts of the bill that remain unchanged, “but what pharmacies really need is a reimbursement fix, and that’s not in the bill.”
Two versions of the bill, one proposed in the House and one proposed in the Senate, have been in the Legislature for months. The bill has had bipartisan support from lawmakers and the backing of Gov. Josh Shapiro. State pharmacy trade groups have also been pressuring lawmakers to rein in pharmacy benefit managers.
Ultimately, the House version of the bill, introduced by Reps. Jessica Benham (D-Allegheny) and Valerie Gaydos (R-Allegheny), is likely to pass if either of them passes.
Negotiations have been ongoing over the past few weeks between House Democrats, Senate Republicans, Shapiro’s office, Pennsylvania’s pharmacy trade association and another trade group representing the largest pharmacy benefit managers over what the final bill would look like.
Sen. Judy Ward (R-Blair), the lead sponsor of the Senate version of the bill, said the bill will likely be amended again before passing the full Senate.
The House has already passed an earlier version of the bill and would need to agree to any changes the Senate makes.
