Democratic lawmakers are accusing Pennsylvania’s auditor general of releasing a misleading report that unfairly criticizes the Shapiro administration’s lack of oversight.
Those critics include state Rep. Malcolm Kenyatta (D-Philadelphia), Republican Tim DeFoor’s primary opponent in the general election. DeFoor defended his office’s work, noting the audit was initiated with the support of the state Department of Human Services.
“I’m a little perplexed by the response,” he told Spotlight PA.
At issue are pharmacy benefit managers and drug intermediaries who regulators say are jacking up prices to increase their own profits.
Defools report We focused on PerformRx, which helps Pennsylvania process drug prescriptions for 2.8 million state Medicaid recipients each year. The audit alleges that the PBM billed taxpayers $7 million in undisclosed fees in 2022, and blamed poor oversight by the Pennsylvania Department of Human Services.
The agency rejected the audit’s findings, saying DeFoor was confusing spread pricing, which is prohibited, with (for now) permissible transmission charges.
The spread price is the difference between the amount the PBM reimburses the pharmacy for the drug and the amount the PBM charges the medical administrator. PBMs make money when the reimbursements they pay are lower than the fees they charge. Telecommunications fees, on the other hand, are typically small amounts charged by PBMs for each prescription the pharmacy fills.
Mr. DeFoor’s office rejected this distinction, saying the effects were exactly the same.
“If it works like spread pricing and has the effect of spread pricing, you can call it whatever you want,” lead auditor Peggy Morningstar told Spotlight PA. spoke. “But at the end of the day, this is still spread pricing.”
The Comptroller General is one of three elected officials in Pennsylvania and is tasked with overseeing how public money is spent to uncover waste, fraud, and fraud. There is. Despite the importance of the role, competition for the role typically receives little public attention. A recent Spotlight PA poll found that just 31% of voters follow the policy very or somewhat closely.
Kenyatta is a young gay congressman from Philadelphia who was first elected in 2018 and has pitched himself to voters as a progressive fighter for workers. He frequently appears on cable TV and rose to national prominence as a surrogate for President Joe Biden after his failed bid to win a U.S. Senate seat in the 2022 primary.
DeFour was unknown in state politics before flipping his chair in 2020. He has run a low-profile campaign focused on his accomplishments during his tenure, promoting himself as a trained auditor who adheres to the fundamentals of his job.
Auditing is often politicized. The results have fueled partisan rhetoric and policy debates over everything from social safety nets to election laws.
Following the audit’s release, health care-focused legislative Democrats jumped into the fray. State Representative Dan Frankel (D-Allegheny) said: statement He was “absolutely shocked” at how easily Defour could “snook.” Kenyatta supporter, state Rep. Jessica Benham (D-Allegheny) law The audit was described as “very unserious” as it further regulates PBMs.
Kenyatta criticized Defour for timing the president’s release so close to elections.
“Pennsylvanians deserve better than politicians who pretend to tackle serious policy issues before an election to score political points,” Kenyatta said in a statement.
Joey Mattingly, a former pharmacist who now studies the industry as a professor at the University of Utah, said spread pricing and transmission fees are different. He added that the former contributes more to PBM profits than the latter.
But Mattingly’s research found that even after spread pricing was banned, PBMs still found ways to increase profits by adding new fees and techniques and leveraging their market power. did.
“How else are we going to get paid?” Mattingly said. “See, they’re a for-profit company, too.”
Commonwealth Media Services
What does a pharmacy benefits manager do?
It is a long and complex process involving many intermediaries for a drug to get from a manufacturer’s assembly line to someone’s cupboard. These include pharmaceutical companies that sell to distributors. They then sell it to pharmacies that dispense the medicine to patients.
Mattingly said pharmacy benefits managers help insurers and employers decide what drugs to pay for, at what prices, and under what circumstances. Their original goal was to keep the overall cost of health benefits low for employers who purchase plans and the workers covered by those plans.
But through a series of acquisitions over the past few decades, PBMs have become part of a small number of health care conglomerates whose size dictates market conditions, raising costs rather than lowering them, regulators say. There is.
According to the Federal Trade Commission in July reportthe top three PBMs, CVS Caremark (which owns CVS Pharmacy), Express Scripts, and OptumRx, filled 80% of the 6.6 billion prescriptions dispensed to Americans in 2023.
“As a result, dominant PBMs are often able to exercise significant control over which drugs are available at what prices and which pharmacies patients can use to obtain their prescriptions.” says the report.
PBMs counter that the benefits they earn are passed on to employers and their workers, and say they keep down prepaid health care costs.
DeFoor first announces PBM audit in the fall of 2023 With support from the Democratic Shapiro administration. In a joint statement with DeFoor, DHS Secretary Val Arkoosh said, “We hope this audit will help the agency better understand the relationships between the players involved.”
DeFoor’s investigation focused on PerformRX, which does not have a direct contract with the state. Instead, the company subcontracts to a handful of large health systems that provide care to low-income Pennsylvanians.
In addition to the $7 million in charges, the audit found that PerformRX failed to report communication charges to the Pennsylvania Department of Human Services, as required by 2020 law.
DeFoor said the department did not learn that fact until his office reviewed the contract.
“PBMs have lacked transparency, and that’s where the problem lies,” DeFoor, a Republican, told Spotlight PA in an interview last month. “DHS was not monitoring it.”
DHS admitted it did not know about the fees, but blamed PerformRX for not reporting the fees as required by law.
The spokesperson added that transmission fees are not a form of spread pricing because the fees are known and agreed to by pharmacies when they enter into contracts with PBMs. Spread prices, on the other hand, are determined by PBMs without input from health plans or pharmacies.
Still, the agency said it plans to ban such fees from contracts starting in 2025.
ongoing discussion
The standoff over DeFour’s audit comes as lawmakers debate how to regulate PBMs and grapple with fierce opposition from the healthcare industry.
Sponsored by Benham of the Allegheny County Democratic Party. law It prohibits PBMs from requiring customers to use their affiliated pharmacies or automatically enrolling consumers in mail-order pharmacies.
It also requires PBMs to reimburse affiliated and unaffiliated pharmacies the same amount for each prescription. Previously, PBMs reimbursed independent pharmacies less for the same drug than they paid pharmacies affiliated with the same company.
Benham’s original bill included a provision that would extend the state’s ban on spread pricing from applying only to Medicaid to private insurance companies. The language passed the state House of Representatives with near-unanimous support, despite opposition from PBMs, a national trade group for health insurance companies, and even other health care giants like Highmark.
The Pharmaceutical Care Management Association, an industry group for PBMs, said in a statement to Spotlight PA that it would “drastically limit the tools PBMs use to lower drug costs and give drug companies more power to raise prices.” “Requiring the disclosure of information that may be compromised could ultimately harm the interests of pharmaceutical companies.” Most of the bill would increase drug costs for Pennsylvanians and patients. ”
After weeks of closed-door discussions alongside budget negotiations, the Republican-controlled state Senate amended the bill to remove the spread pricing language. The Legislature approved the amended bill and sent it to Gov. Josh Shapiro’s desk. He signed in July.
State Senate Majority Leader Joe Pittman (R-Ind.) told Spotlight PA last month that he considers it “one of the most important accomplishments of Congress.”
Benham is unapologetic about his loyalty.
“Malcolm is my love,” she told Spotlight PA. They co-chair the state Legislature’s LGBTQ Equality Caucus. We raised money togetherand her public statement about the audit was reprinted in Kenyatta’s campaign release attacking the timing of Defour’s report.
Still, she said she is trying to approach PBMs on a bipartisan basis and has worked with Republican colleagues on the issue. She said she agrees with DeFoor that both transmission charges and spread pricing are issues, but also agrees with the Department of Homeland Security that they are not the same.
“You need to solve both, but when you confuse both, it’s much harder to solve,” Benham said.
90.5 WESA is partnered with Spotlight PA, a reader-funded, collaborative newsroom that produces responsible journalism across Pennsylvania. For more information, spotlightpa.org.
