Drug pricing battle: House and Senate both targeting pharmacy benefit managers

After the Senate passed its version of the plan last week, the House moved forward with a proposal that would increase regulations on pharmacy benefit managers.

The issue has drawn heavy lobbying as pharmacy benefit managers play a central — and big-dollar — role in the health care system. The legislation could affect a wide range of people and interests, including patients, pharmacies, health insurers, drug manufacturers and employers.

Pharmacy benefit managers, or PBMs, act as something of a middleman. They contract with health insurers, self-insured employers and governments to play such roles as negotiating drug prices with manufacturers, establishing pharmacy networks and paying claims.

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Critics, such as many independent pharmacies, have long blasted the PBMs, saying they have too much leverage in the market and have not reduced drug costs for patients.

The House Appropriations Committee on Friday approved a bill that would make a series of changes to regulate PBMs. The Senate unanimously passed its version on Wednesday.

“We’ve done it their [PBMs’] way,” House sponsor Linda Chaney, R-St. Pete Beach, said. “It hasn’t worked. It’s time for change.”

But lawmakers said the issue is extremely complicated, with some raising concerns that parts of the proposal could end up increasing costs. For example, they said they do not have an estimated financial impact of the proposed changes on the health-insurance program for state employees. That program contracts with a major pharmacy benefit manager, CVS Caremark, to administer its prescription-drug plan, according to a House staff analysis.

“There is no question that there are problems today. I’m not sure any of the stakeholders would disagree with that,” House Health & Human Services Chairman Randy Fine, R-Brevard County, said during the Appropriations Committee meeting. “But what we can’t do is, when we try to solve a problem, create a whole bunch of new ones.”

Under current law, PBMs are required to register with the state Office of Insurance Regulation (OIR), and contracts between PBMs and insurers and health-maintenance organizations need to include limits on patient cost-sharing for drugs, according to the House staff analysis.

But the House bill would significantly expand regulation of the industry. Examples of proposed changes in the bill include:

• Increasing the OIR’s authority over PBMs, making them subject to regulation as what are known as insurance “administrators.”
• Largely preventing a practice known as “spread pricing,” which involves PBMs getting reimbursed a certain price for a drug by an insurer or employer but paying pharmacies a lower price to dispense the drug. “In other words, the PBM retains some portion of the plan sponsor [insurer or employer] reimbursement as earned income,” the House staff analysis said.
• Placing restrictions on PBMs that have affiliated pharmacy businesses. The bill would prevent such PBMs from only having affiliated pharmacies in their pharmacy networks.
• Preventing PBMs from requiring patients to receive prescriptions by mail.

Melodie Shrader, vice president of state affairs for the Pharmaceutical Care Management Association, said her PMB-industry group appreciates that lawmakers are trying to address rising health care and drug costs.

But she said her group thinks the bill “will decrease access and will not increase affordability,” pointing to new requirements on PBMs and their customers.

But Chaney said she thinks the changes would increase competition and give consumers more choices, which would end up reducing costs.

“The issue here is this is such an opaque industry that we really cannot follow the money,” Chaney said. “We really have no idea where the PBMs are maximizing their profits at the detriment of patients. And what we know is that prices have gone up year over year. What we know is that this is a fully integrated industry … and that these businesses are charged with maximizing profits at every level of their business.”

The bill needs approval from the Health & Human Services Committee before it could go to the full House.