In the past two weeks, Ohio leaders have been out front in a bipartisan effort to impose the strictest rules yet on pharmacy middlemen said to be using anticompetitive practices to drive up the price of drugs and to drive pharmacies out of business.
State Attorney General Dave Yost and U.S. Representative Troy Balderson, R-Zanesville, are calling for continued reform efforts.
Pharmacy benefit managers, or PBMs, are middlemen who facilitate insurance-covered prescription drug transactions. Each of the top three is a subsidiary of one of the 15 largest corporations in the United States: UnitedHealth Group, CVS Health, and Cigna-Express Scripts, and each owns a top-10 insurer.
The big three PBMs control nearly 80% of the market and decide which drugs are covered by insurance and which have low or no copays. This allows them to negotiate significant rebates and fees from drugmakers in exchange for insuring their products.
PBMs claim that this allows them to save money for their customers. However, the deals are not transparent, and it is unclear how much of what they receive from drugmakers ends up in the PBMs’ bottom lines.
Academic research has discovered that as rebates increase, so do list prices and out-of-pocket costs for consumers. The Federal Trade Commission is also suing the large PBMs, accusing them of excluding cheaper forms of insulin from their lists of covered drugs in favor of more expensive ones that generate larger rebates.
Meanwhile, PBMs decide how much to reimburse pharmacies for the medications they dispense. Each of their parent companies has a mail-order pharmacy, and CVS owns the largest retail chain. As a result, the PBMs are now responsible for determining how much to pay themselves and their competitors.
For nearly a decade, independent pharmacies and small chains have claimed that big PBM reimbursements are so low that they are driving them out of business.
There may be something to those claims. According to a data tool released this month by the Ohio Board of Pharmacy, the state’s retail pharmacy count fell below 2,000 for the first time in at least a decade, despite modest population growth.
In light of this, the United States House of Representatives nearly passed the most comprehensive federal PBM reforms yet in December as part of a deal to keep the government open. With then-President-elect Trump’s support, the reforms made it into what appeared to be the final agreement.
The continuing resolution included a provision that would prohibit PBMs from paying hundreds of different, non-transparent prices for the same drug in state Medicaid programs.
Instead, all reimbursements would be based on a single, publicly available list, with PBMs receiving a flat administrative fee. This measure would save taxpayers an estimated $1 billion over ten years.
Another proposal would prohibit PBMs from imposing take-or-leave-it contracts on pharmacies in Medicare Part D programs.
However, billionaires Elon Musk and Vivek Ramaswamy derailed the deal by claiming it was too expensive. Despite their expected savings, the PBM reforms were not included in the massive spending plan approved by Trump.
Rep. Jake Auchincloss, D-Mass., described it as “an embarrassing capitulation to the health insurance lobby.”
But Yost, Ohio’s attorney general, is attempting to keep any “capitulation” brief. After investigating drug middlemen as a state auditor and suing them as attorney general, he led a bipartisan group of 39 state attorneys general last week in urging Congress to act.
“Our offices and other state attorneys general are very concerned about actions taken by PBMs that have unduly raised drug prices for consumers, and we are engaging on the issue on a number of fronts, including investigation, litigation, and advocating for legislative and policy reforms,” according to their letter. They did, however, state that there is no substitute for federal action.
The attorneys general are advocating for the passage of three bills.
One would decouple PBM charges from drug prices, removing any incentive to prefer more expensive drugs over cheaper ones. Another would require PBMs serving Medicare Part D to charge flat fees specified in a written agreement that are unrelated to drug prices or rebates.
The third, the Lower Costs, More Transparency Act, aims to shed light on all types of health-care transactions, including hospitalization. For drugs, it would necessitate disclosure of what drugs are prescribed, their net prices, and patients’ out-of-pocket expenses.
“Together, the legislation is intended to limit PBMs from unjustifiably increasing drug prices and to mandate steps that increase transparency of their practices,” according to a statement from Yost’s office.
“Specifically, this step requires PBMs to provide pricing data to health plans and federal and state regulators in a standardized format. Such measures will allow health plans to negotiate more favorable agreements with PBMs and regulators to more effectively hold PBMs accountable for their actions.”
Each of the bills is currently pending in the House Energy and Commerce Committee. On Wednesday, Ohio’s Balderson joined two other Republican committee members in calling for reform.
“As a result of PBMs’ indecent practices, independent pharmacies around the country are closing,” he said during a Health Subcommittee hearing. “I am aware that this is not a new issue in my district. I’ve heard from friends, family, and constituents that their local pharmacies have closed after decades of service.
Pharmacy deserts have expanded, and patients no longer have access to the patient-pharmacist relationships that have helped them manage complex medication regimens and diseases.
It is estimated that the number of pharmacies in 41 states decreased between 2018 and 2021. So this isn’t just an Ohio issue. This isn’t a rural issue. This is a nationwide issue that must be addressed.”
