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PBM Issues

PBM Issues

Pharmacy Benefit Managers PBMsPBM (Pharmacy Benefit Managers) are drawing significant national media and news attention regarding their role in the problem of  “skyrocketing” healthcare costs across the United States. As we just recently discussed in Florida, this Tuesday (February 20th) the Florida Senate’s Banking and Insurance Committee will be considering SB 1494. The Senate Bill being heard by the committee would make several changes to the way that Pharmacy Benefit Administrators (PBM’s) currently operate in Florida if passed. The proposed legislative changes include:
1. Requiring that all PBM’s must register with the Florida Department of Insurance Regulation.
2. That the PBM’s must update their MAC lists to market prices every seven (7) days.
3. That a pharmacist must inform their patient if a lower cost alternative to a prescription is available when the patient’s insurance “cost sharing obligation” exceeds what the retail price of the Rx would be if there was no prescription coverage in place.

PBM Legislation In Wisconsin

In Wisconsin a new bill was just introduced this past week to allow the state itself to  regulate pharmacy benefit managers. Basically, the bill would allow the Wisconsin Insurance Commissioner to both oversee and regulate all pharmacy benefit managers that administrate a healthcare plan for residents of the state. It is interesting to note that bill itself, although written by a Democrat (Representative Debra Kolste), was submitted as a bipartisan bill with support from both political parties. Assembly Bill 621 already has received a hearing by the Wisconsin Assembly Committee on Health and is moving rapidly towards being heard by both the Wisconsin Senate and House.

New Kentucky Legislation For Changes To Medicaid Pharmacy Benefits

Last week (February 14th) a Senate committee in Kentucky overwhelmingly approved a new bill that would allow the state to administer its own pharmacy benefits program. The bill was actually initially introduced as a means to prevent the alarming number of independent retail community pharmacies from being  shutdown and closed in the rural areas of Kentucky. A major part of the blame for the retail community pharmacies being forced to go out of business was placed on the low reimbursement rates from Medicaid. The bill (SB5) is now awaiting full Senate approval and then will move to the House for approval and if passed, Kentucky Governor Matt Bevin would have to sign it into law.

As part of the SB5 bill proposed in Kentucky, it was noted that last year (2017) the federal and state Medicaid program spent approximately $1.7 billion dollars on pharmacy benefits. Roughly around $1 billion of these dollars went to individual pharmacies, while the remainder (an estimated $700 million dollars) went directly to pharmacy benefit managers or PBM’s. Basically the new proposed legislation would take that money away from the pharmacy benefit managers or PBM’s and give it to the State of Kentucky to administer their own pharmacy benefits program.

The Real PBM Issues

The real issue regarding the Pharmacy Benefit Managers seems to center on the fact they currently set all of the policies and rules with very little (or none at all) government oversight. Currently 34 states do not use any PBM’s or managed care organizations to oversee their Medicaid programs. Kentucky currently is one of the 26 states that does utilize a managed care organization, but 7 out of these 26 states have already chosen to administer the pharmacy benefits by themselves. West Virginia recently took self control of their pharmacy benefits and both Ohio and Arkansas are considering self-administration in the very near future.

Adding to the PBM issue is the fact that several states and the federal government have already filed several lawsuits against PBM’s. The suits are based on allegations of fraudulent and unethical misconduct by the PBM’s, plus failure to meet several safety standards.

Recently a group of Kentucky pharmacists presented a very compelling case in regards to what they consider to be unethical practices by CVS Caremark. CVS Caremark is a huge PBM, yet they own and operate greater than 9,000 pharmacies. Being the pharmacy benefit manager, CVS Caremark is allowed to set the rates that competing independent retail community pharmacies receive for reimbursement for certain Medicaid prescriptions. The Kentucky pharmacy owners showed evidence that CVS Caremark engages “in unfair competition by giving independent pharmacies arbitrary and capricious reimbursement rates without oversight or transparency”. The pharmacy owners were able to show that they each had received different reimbursement rates for the exact same prescriptions and that CVS Caremark often times changed the reimbursement rates several times in the same day.

The pharmacy owners also showed that reimbursement rates set by Caremark and other PBMs are often below their acquisition cost, plus they are lower than the rate set by the Federal Medicaid program. Kentucky’s Medicaid Commissioner proposed that pharmacy benefit managers be required to pay independent pharmacies a minimum dispensing fee of $3 or $4 dollars for each prescription dispensed. The dispensing fee currently is only $0.85 cents per Rx.

Are PBM Changes Necessary?

As HCC has previously stated, our intention in discussing the PBM issues is not to “build a case” against the Pharmacy Benefit Managers, but to openly examine what is taking place across the USA in regards to all of the new state legislation taking place. Many feel that reform and change are necessary for the independent retail community pharmacies and drugstores to continue to operate and be competitive.

It may be of interest to take note of two additional considerations when discussing the new proposed Kentucky legislation:
1. Kentucky Senator Tom Buford publicly stated that CVS was taking over the pharmacy benefit manager market and attempting to drive other pharmacies out of business (according to an article in US News). Surprisingly enough, so far CVS Caremark has chosen not to respond to this allegation.
2. During the meeting of the Kentucky independent community pharmacy owners noted above, several reported that they had received offers from CVS to purchase their pharmacies. Many question the ethics involved in having the same company that has controlled their reimbursements and decreased their profitability and value of their business turn around and offer to then buy them out.

Most people will agree that the intention of creating Pharmacy Benefits Managers was well justified. Maximizing the buying power for large groups of patients to result in major cost savings for prescription drugs makes perfect sense. So far, however, there is no proof that shows that any program members have actually received lower prescription pricing from a PBM. A study often noted by CVS claimed a 6.8% reduction in Rx pricing in 2015 for its members, but so far the results have not been independently substantiated. Interestingly enough in 2015 there were seven lawsuits filed independently against PBM’s for fraud, antitrust violations and criminal negligence. Lastly, at a 2014 ERISA hearing (Employee Retirement Income Security Act) it was clearly pointed out that in many instances the PBM has a “conflict of interest” in providing their members a reduction in their prescription drug spending.

Questions or Comments?

At Healthcare Consultants Pharmacy Staffing & Consulting, we welcome your feedback and are available to answer any questions that you may have. HCC has been the nationally renowned pharmacy consulting firm of choice for over 28 years now and can assist you with expert advice in any area of your pharmacy business or practice. With a full-time staff of in-house Pharmacy consultants and specialists, HCC can answer any questions that you have in all pharmacy settings. Contact us online or call us today at 800-642-1652 for a free consultation.


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