DV Journal

Pennsylvania has a new law regarding Pharmacy Benefit Managers (PBM). While a few decent reforms were achieved, the public ought to know that the changes made to the bill the day before the vote substantially weakened the original legislation.

The changes watered down much needed transparency for PBM and will allow these wealthy corporations to continue to grow wealthier at the expense of Pennsylvanians, especially those with multiple chronic medical conditions.

Pharmacy Benefit Managers (PBM) are middlemen with colossal influence over the whole pharmaceutical chain. The Big 3 PBM that control 80 percent of the prescription drug market became Fortune top 15 companies by dipping their nimble fingers in a host of revenue pockets.

PBM collect hidden ‘rebates’ (legalized kickbacks) and fees from pharmaceutical companies– an enormous conflict of interest,  given that  PBMs define the formulary, the list of drugs “covered” by insurance. The FTC has been investigating PBM  rebate practices, questioning how they drive high drug prices while operating with little transparency.

PBMs serve as payment conduits between the payers and pharmacies. In this role, they have been accused of paying independent pharmacies less than big box stores like CVS (which owns one of the three biggest PBM), thus forcing the closure of community pharmacies. Over 140 pharmacies have closed in Pennsylvania this year, many in underserved, rural areas.

 In addition, the PBM makes money by charging payers (including  Medicaid) more than they pay the pharmacy and keeping the difference. Some would call this thievery, but it is euphemistically known as ‘spread pricing.’

In Ohio alone, PBMs were caught helping themselves to over $240 million yearly.

PBMs have been able to steer patients to get their medication at PBM-owned pharmacy chains, further padding their revenues and putting independent pharmacies at risk.

When faced with scrutiny regarding their questionable business practices, the PBMs play a shell game of enhancing a previously lesser-tapped revenue stream. A decade ago, the biggest share of PBM profits was from the aforementioned rebates.

Now nearly 40 percent of their gross profits come from the specialty pharmacy business.  The big PBM own their own specialty pharmacies. Specialty drugs are medications used for complex, chronic or life-threatening problems like cancer or multiple sclerosis, usually include the most expensive medications.

What did the Pennsylvania bill do? Rep. Jessica Benham (D-Pittsburgh) and Sen. Judy Ward (R-Blair) highlighted the positives for independent pharmacies, including prohibiting  PBMs from reimbursing more to their  PBM-affiliated pharmacies and clawing back money from independent pharmacies. Excellent measures.

What about the last-minute changes? For starters, the ban on spread pricing was removed, letting legal thievery continue in Pennsylvania.

Changes also eroded PBM transparency measures. What transparency can we count on when the changes provided that PBM report on rebates and fees in the aggregate, not specifically concerning the drug, class of drug, insurer, client or PBM?

Individuals paying exorbitant amounts for a drug they need will not be able to see how ‘rebates’ and fees drove the cost. Patients covered under applicable plans will not be able to see data on how their medications may be marked up by specific PBM under specific plans.

It’s happening. At a recent congressional hearing, it was pointed out that a cancer drug had been marked up by as much as 63,000 percent. Multiple examples were given.  Without specific financial information, this transparency means little. And even less, given that changes to the law stipulate that all financial info is privileged, not subject to discovery, subpoena or right-to-know laws.

Gov. Josh Shapiro stated that the new law ‘put a stop to PBM steering.” It didn’t.  Amendments added gave exceptions for PBM’s ability to steer patients toward a specialty pharmacy.  As mentioned above, these are often the most expensive medications and where the bulk of PBM profits are made nowadays.

An additional last-minute change expands the age at which pharmacists and interns can administer injectable medications and biologics down to age 8. This can have positive ramifications for those with chronic diseases who are having trouble accessing specialized medications.

However, given the past performance of consolidated PBM to game the system toward profits, with their ability to steer patients for specialty drugs, and administer injectables to young children we must remain vigilant that our youngest and most vulnerable patients are receiving only medically necessary, quality care and that they do not become yet another inflated revenue stream at the hands of the PBMs.

Lastly, it bears mention that this law applies to only roughly 17 percent of Pennsylvanians. The law does not apply to employer-sponsored coverage that falls under the ERISA  (Employee Retirement Income Security Act ) law.  Federal legislation is needed. While, as mentioned, the new law has some wonderful benefits, especially for our state’s trusted independent pharmacies, the last-minute changes are a disappointment to those who fought for PBM transparency. Instead it allows the PBMs to use their consolidation to keep their revenues flowing at the expense of the patients.

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Local pharmacies are boarding up nationwide. Nearly 2,200 American pharmacies shut their doors between 2017 and 2020, leaving 20,000 in business nationwide — about half the number in 1980.

Rural areas are particularly hard hit. About 630 rural communities that had access to at least one pharmacy in March 2003 had none by 2018.

These closures are bad for local communities and patients’ health. When small, independent shops close, patients lose access to the pharmacist who personally knows local residents. They have personal knowledge of their health conditions, prescribed medications, and the potential interactions those medicines might have with new ones. Local communities may also lose a convenient place to get a flu shot, other immunizations or blood-pressure screening.

Small pharmacies often operate as town hubs, and many sponsor local events. Although their numbers are falling, they still employ more than 300,000 people.

Fortunately, lawmakers across both parties are aware of the plight of local pharmacies and the consequences of their diminishing numbers. That is why bipartisanship has rallied behind three dozen bills during this session of Congress. These bills aim to curb the power of pharmacy benefit managers (PBMs) — the giant, secretive corporations that have played a significant role in driving drug prices higher and independent pharmacies out of business.

PBMs negotiate discounts from drugmakers on behalf of insurers. In exchange, pharmaceutical companies receive favorable inclusion of their products on a plan’s formulary. PBMs also administer reimbursements from the system’s payers — insurers, federal and state governments, and corporations — to providers, including pharmacies and clinics.

Their apparent role in the health system is to lower drug costs and save consumers money. Instead, PBMs have made the system increasingly complex, enabling them to extract outsized revenue from it while crowding out the small mom-and-pop drugstores that have long supplied various community needs.

Three big PBMs — CVS Caremark, Express Scripts and OptumRx — control 80 percent of the market for prescription drugs.

Today’s biggest PBMs are vertically integrated with drugstore chains and their mail-delivery services, and the biggest insurance companies. That creates additional opportunities for advantageous self-dealing.

Drugstores buy medicines wholesale, but PBMs decide how much pharmacies get reimbursed for dispensing medications to patients with insurance. There’s no legal requirement for PBMs to provide equal reimbursement, so they can favor affiliated pharmacies while leaving independents out. PBMs also coordinate with their insurance companies to steer plan enrollees to their pharmacy groups.

They do so by restricting where patients can access specific medicines or requiring patients to refill prescriptions at an affiliated pharmacy, no matter which drugstore supplied the original dose. PBMs can also encourage insurers to push unaffiliated pharmacies out-of-network. Hence, patients face higher prices if they stick with their neighborhood drugstore.

As one would expect, the operations of these middlemen take place out of sight. Rules for the disclosure of contractual and other arrangements are practically nonexistent.

PBMs have also taken on the role of quality-control enforcer in prescription dispensing. Purportedly, this is to incentivize high-quality service. In reality, PBMs use their audits to justify “clawing back” fees from, you guessed it, small, independent pharmacies.

During the COVID-19 pandemic, some PBMs even revoked reimbursements for failing to obtain patient signatures. These clawbacks, called “direct or indirect remuneration fees,” wreak havoc on the small-business finances of independent drugstores.

It’s time to put an end to secret and unsavory practices. It’s time PBMs were required to make their negotiations public, forbidding the practice of clawing back reimbursements and allowing patients to access the local pharmacy of their choosing.

The dust has settled on the midterm elections, and we are back to an era of divided government. Healthcare continues to take center stage as many Americans struggle to afford prescription drugs, and efforts to increase patients’ access, improve accessibility, and lower the cost of prescriptions remain unresolved.

The current environment is a ripe opportunity for policymakers to focus on addressing a policy problem that both parties agree denies choice and raises patient costs. It is time to crack down on the behavior of Pharmacy Benefit Managers (PBMs), hidden middlemen working on behalf of insurers who have more say about which drugs you take and what they cost you than most patients realize.

These middlemen have developed complicated schemes to prevent patients from accessing the medicines their doctors recommend — including denying them the full benefit of any copay assistance vulnerable people rely on to afford their medications.

Many manufacturers provide financial copay assistance to patients with rare, life-threatening or complex chronic conditions, contributing $12 billion in 2021. PBMs, however, have developed schemes to pocket this assistance for themselves and their insurer clients without giving patients full credit. These programs are known as copay accumulators and copay maximizers, and they are sticking patients with a greater share of prescription drug costs and other costs related to their illness.

Copay accumulators are a scheme where copay assistance that would normally count toward a patient’s insurance plan’s deductible and the out-of-pocket maximum is prevented from doing so. Once the aid runs out, too often, patients cannot afford the sudden, high costs and will stop taking the vital medicine their doctors have prescribed. The likelihood that a plan includes a copay accumulator is fairly high — 43 percent in 2021 — up from 28 percent in 2018.

In a maximizer scheme, PBMs require patients to participate in the program to have their drugs covered. The maximum value of the manufacturer’s copay program is usually applied evenly throughout the year. While this may sound like it benefits patients, the scheme fails to count assistance toward deductibles or out-of-pocket maximums — forcing patients to come up with these costs that have risen dramatically. And anyone with a chronic illness knows that prescription drugs are not the only costs patients incur: Doctors’ visits, lab tests, medical equipment and occasionally hospital stays are all part of it. Not being able to apply copay assistance to their deductibles means patients have to foot more of the bills out of pocket for these services even as the plans rake in more money.

One would expect our federal agencies, tasked with protecting consumers, would step to the plate and regulate these schemes, but they have not. Unfortunately, the Centers for Medicare and Medicaid Services has allowed these accumulator and maximizer policies to flourish by permitting insurers to exclude copay assistance from cost-sharing calculations. In response, patient advocacy groups filed a lawsuit challenging a recent rule from CMS that permitted insurers to use copay accumulators, alleging the rule violates existing federal law and directly contradicts the government’s definition of cost-sharing.

Lawmakers at the federal and state levels have a renewed opportunity to do their part and prohibit PBMs and plans from implementing these schemes. Sixteen states have banned copay accumulators, but that affects only 10 percent of all commercially insured patients. The time for federal action is now to enact legislation introduced by a bipartisan group of lawmakers — the HELP Copays Act — which would reverse CMS’ rule allowing insurers to use these schemes.

It is time to stand up to PBMs lining their pockets at patients’ expense. If policymakers want to show they are serious about helping patients afford their prescription drugs, they need to overhaul the environment that has allowed PBMs and health plans to create a drug supply system to benefit themselves over patients.

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