PBM’s Topic of Legislature’s Hearing

The WV Legislature’s Joint Committee on Health will meet Monday, October 19, in the
House of Delegates Chamber to hear testimony on the need to regulate pharmacy benefit
managers (PBMs) and require them to disclose their source of pricing products and update
reimbursement to pharmacies to compensate for the prices they pay for product. WVPA
Pharmacist Ken Reed and Executive Director Richard Stevens will testify at the hearing,
which begins at 9:00 a.m. WVPA members are encouraged to attend. Pharmacists unable
to attend the October 19 meeting, are encouraged to visit legislators Sunday, October 18,
between 1:00 and 7:00 p.m. during Interim Committee meetings at the Capitol.

PMBs are middlemen originally designed to process prescription drug claims for insurance
companies. Over time, PBMs have taken advantage of their strategic position between
insurers and pharmacies to assert control over most aspects of Rx drug transactions.

Today;, PBMs are complex business entities with multiple, extremely profitable, revenue
streams. The three largest PBMs now manage drug benefits for almost 90% of Americans
with prescription drug coverage and each of these PBMs has annual revenues exceeding
$15 billion. In spite of these facts, PBMs are virtually unregulated at the state or federal
level — even though they manage numerous prescription plans funded by taxpayer dollars.

PBMs generate excessive profits by receiving rebates from pharmaceutical manufacturers
for favoring certain drugs because PBMs create formularies or preferred drug lists (PDL)
that will be covered by the health plan.

PBMs also generate profits by negotiating two types of contracts — one with pharmacies
and one with plan sponsors. The PBM reimburses pharmacies one rate for dispensing
a medication but charges a higher rate to the plan sponsor for the same medication, and
pockets the “spread” between the two prices.

Additional revenues and profit are generated by PBMs which own their own mail order
out-of-state pharmacy. PBMs often financially penalize those patients that chose to
use their community pharmacy rather than the PBM-owned mail order operations.

There are inherent conflicts of interest in the current PBM system. Because PBMs
typically receive rebates from pharmaceutical manufacturers they have no incentive to
encourage the use of less-expensive products — more often the generic version. And,
PBMs typically do not pass the rebated savings back to the plan sponsor.

PBMs frequently require patients to switch drugs — so that they have to take a drug
for which the PBM has negotiated a greater rebate — increasing the profit to the PBM.
Changing a patient’s medication can sometimes impede upon their drug therapy.

In large part, the plan sponsor has no knowledge about the rebate deals the PBM has
negotiated with the manufacturers and has no knowledge of the “spread” — the difference
between what the PBM pays the pharmacy and when the PBM charges them for the
same drug.

What law should the Legislature pass to remedy the current PBM system?
Require PBMs adjust payment for product every 7 days as Medicare Part D will in 2016
Prohibit PBMs recouping product cost from pharmacies for clinical errors after an audit.
Require PBMs disclose to pharmacies their source of pricing for prescription drugs.
Prohibit PBMs using prices of drugs NOT available to WV pharmacies.
Prohibit PBMs from “steering” patients to out-of-state mail order pharmacies.

These and other provisions of a law are contained in Senate Bill 84 introduced in the
2015 WV Legislature at the request of WVPA. Pharmacists are encouraged to contact
their Senators and Delegates on the Joint Committee on Health and request they support
Senate Bill 84 during the forthcoming 2016 Legislature.