Pennsylvania has a new law regarding Pharmacy Benefit Managers. 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 PBMs 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 are middlemen with colossal influence over the whole pharmaceutical chain. The Big 3 PBMs that control 80% of the prescription drug market became Fortune top 15 companies by dipping their nimble fingers in a host of revenue pockets.
PBMs collect hidden ‘rebates’ (legalized kickbacks) and fees from pharmaceutical companies. That’s 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 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 PBMs), thus forcing the closure of community pharmacies. More than 140 pharmacies have closed in Pennsylvania this year, many in underserved, rural areas.
In addition, PBMs make 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 more than $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% of their gross profits come from the specialty pharmacy business. The big PBMs 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 PBMs 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%. 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 PBMs’ 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 PBMs 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% of Pennsylvanians. It 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.
Dr. Marion Mass is a Bucks County pediatrician and co-founder of the Practicing Physicians of America. This piece first appeared in the Delaware Valley Journal on Aug. 2.
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