Senate Health and Human Services Committee Moves Forward Bill on Monday to escalate oversight of pharmacy benefits managers.
Pharmacy benefit managers are middlemen in the pharmaceutical industry. They are largely responsible for overseeing the prescription drug side of health insurance plans. In this role, they negotiate drug costs on behalf of insurance companies, often receiving discounts on exorbitant drugs in exchange for listing those drugs on a plan’s formulary. They are also responsible for reimbursing pharmacies for drugs when patients only pay a copay up front.
The nation’s largest pharmacy benefit managers have recently come under scrutiny from state lawmakers (e.g., Pennsylvania) and federal regulators.
The FTC is currently conducting an antitrust investigation into some of the largest pharmacy benefit managers. The three largest pharmacy benefit managers operate under parent companies that also have their own huge insurance companies and pharmacy chains. It is estimated that the three largest pharmacy benefit managers in the country are responsible for overseeing prescription benefits in 70% of U.S. health plans.
Take CVS Health, one of the most profitable health care companies in the country and one of the most profitable companies overall. latest Fortune 500 listCVS Health was ranked as the 6th largest company in the country by revenue, over $357 billion earned in 2023 aloneIn addition to owning the largest pharmacy network in the country, CVS Health also owns one of the largest pharmacy benefit managers, Caremark, and one of the largest health insurance providers, Aetna.
Prescription for Trouble: Pennsylvania Pharmacists Say PBMs Are Causing Pharmacy Closures
A Pennsylvania law would allow the state Department of Insurance to regulate certain aspects of the activities of pharmacy benefit managers that have been deemed anti-competitive.
The bill would seek to prohibit a practice known as “patient steering,” in which a pharmacy benefits manager steers patients away from independent pharmacies to preferred pharmacies, often owned by the same parent company.
The current version of the bill would also ban a practice called “spread pricing,” in which pharmacy benefit managers charge insurance plans one price for a drug, reimburse pharmacies that dispense it at a lower price, and make money on the difference.
It would also require pharmacy benefit managers to report more details about their revenues and profits to the state insurance department. That would include how or whether they operate money they receive from contracts with drugmakers to lower costs for patients.
The state Department of Insurance would be responsible for enforcing the regulations and would also have to develop a procedure for resolving disputes between pharmacies and pharmacy benefit managers.
However, in its current wording, the bill does not include a key provision requested by pharmacists.
Many independent pharmacists have accused pharmacy benefit managers of underpaying them; this means that pharmacies are paid less for some of the medicines they dispense than it costs to stock and distribute them. This effectively forces pharmacies to operate at low profits or, worse, losses.
Although Pennsylvania pharmaceutical trade groups lobbied to include language that would curb this practice, it is not included in the current bill. There is, however, a notable exception.
The bill would require any pharmacy benefit manager hired to oversee the prescription side of a public employee health plan to reimburse pharmacies at a rate that ensures they don’t lose money when filling prescriptions. But that would only represent a diminutive fraction of the total number of prescriptions filled at most pharmacies.
Pennsylvania lawmakers have passed a law regulating pharmaceutical brokers. But the state isn’t enforcing it.
The Pennsylvania Pharmacists Association and the Philadelphia Association of Retail Pharmacists (PARD) blame low reimbursement rates for forcing dozens of pharmacies across the state to close over the past year.
“It’s warm and fuzzy and nice,” Rob Frankil, PARD’s executive director, said of the parts of the bill that remained intact. “But pharmacies really need a reimbursement fix, and that’s not in there.”
Two versions of the bill, from the House and Senate, respectively, have been working their way through the state legislature for months. They were pushed through with bipartisan support from lawmakers and the backing of Gov. Josh Shapiro. Pharmacy trade groups in the state have also been pushing lawmakers to limit pharmacy benefit management.
Ultimately, it appears the House version of the bill, sponsored by Reps. Jessica Benham (D-Allegheny) and Valerie Gaydos (R-Allegheny), will pass if either of them does so.
Negotiations have been ongoing for the past several weeks among House Democrats, Senate Republicans, Shapiro’s office, the Pennsylvania pharmacy association and another association representing the largest pharmacy benefit managers on the final version of the bill.
Sen. Judy Ward (R-Blair), the lead sponsor of the Senate version of the bill, said it likely will be amended again before passing the full Senate.
The House of Representatives, which passed an earlier version of the bill, will have to accept any changes made by the Senate.
