Lawmakers began regulating pharmacy benefit managers in 2015, but the state has never issued an enforcement action
Every day pharmacist Kevin Russell goes to work, the payments he receives to fill patients’ prescriptions don’t cover his costs, and there’s not much he can do about it.
Russell described to The Lund Report how the Redmond-based pharmacy where he works as pharmacy director, Prescryptive Health, has struggled with pharmacy benefit managers — the middleman drug-supply companies known as PBMs that critics say are squeezing local pharmacies out of business with low payments.
He’s filed complaints, and so have other pharmacists. But in the more than seven years since the state began regulating pharmacy benefit managers, not a single complaint filed against the controversial companies in Oregon has led to enforcement action, according to a review by The Lund Report.
Now, after previous efforts to rein in the companies fell flat, Oregon lawmakers are considering a handful of bills intended to more robustly regulate pharmacy benefit managers.
But with about a month left in the current legislative session, several of those bills are hanging in limbo, in part because of the Republican-led walkout of the Oregon Senate that’s brought the Legislature to a standstill. Senate Republicans and two Independents issued a press release Tuesday morning stating that they will return on June 25 (the last scheduled day of the session) “to pass lawful, substantially bipartisan budgets and bills.” And pharmacy advocates are nervous.
“Until we hold PBMs accountable in our state, care in the pharmacy sector for patients is just going to keep spiraling down the drain.”
KEVIN RUSSELL, PHARMACIST & OREGON STATE PHARMACY ASSOCIATION BOARD
“Until we hold PBMs accountable in our state, care in the pharmacy sector for patients is just going to keep spiraling down the drain,” said Russell, who also serves on the board of the Oregon State Pharmacy Association.
The rise of PBMs, the fall of pharmacies Pharmacy benefit managers first emerged in the 1970s to administer health plans’ increasingly complex drug benefits. These companies work on behalf of health insurers, Medicare Part D drug plans and large employers. They act as intermediaries between drug manufacturers and pharmacies, using their purchasing power to negotiate better prices for prescription medications through rebates and discounts.
Pharmacy benefit managers use tiered lists of covered medications, giving them more influence on which are available and how much they cost.
As they’ve become an integral part of the health care system, they’ve drawn critics who say pharmacy benefit managers use their outsized position to get “kickbacks” from manufacturers while squeezing patients and pharmacies. Congress has launched investigations into their practices, and so has the Federal Trade Commission. Pharmacists say the tactics are thinning their ranks, hurting patients. They cite National Community Pharmacists Association figures showing that between 2008 and 2022, the number of Oregon pharmacies shrank from 681 to 499.
CVS Caremark spokesperson Phillip Blando declined to comment on behalf of the large pharmacy benefit manager, and referred questions to trade group Pharmaceutical Care Management Association.
Tonia Sorrell-Neal, the association’s senior director for state affairs, told The Lund Report in an email that “Oregon’s PBM regulations are considered to be among the most comprehensive in the nation.”
She said Oregon law requires pharmacy benefit managers to disclose business practices to the state while passing along rebates to patients and health plans. The association has tried to work with legislators on the bills to make them “more practical and less likely to cause unintended cost increases on working families, employers, and consumers.”
“Sometimes, perception is just about political points, not policy,” she added, while defending pharmacy benefit manager practices. “Tools that manage fraud, waste and abuse in the normal course of business — such as renegotiating contracts with pharmacies or auditing their work — are not retaliatory.”
Pharmacy benefit managers have also said they play a key role in keeping costs down. They dispute the pharmacy closure figures and argue they’ve been unfairly villainized.
Russell, for his part, says he knows the problems firsthand. He said that in December, he filed a complaint with the Oregon Department of Consumer and Business Services alleging CVS Caremark paid his pharmacy below cost for a prescription. But he said he received no response from the state agency.
Pharmacy benefit managers also create obstacles, Russell said. He said he previously convinced one to agree to fix an underpriced prescription — but it also demanded he file individual appeals on all previous identical claims.
Russell isn’t the only frustrated pharmacist. During an Oregon legislative committee hearing in January, lawmakers from both parties and pharmacists from across the state blasted pharmacy benefit managers for strong-arming pharmacies and leaving patients (particularly in rural areas) with fewer options. “It’s an issue for independent pharmacies and chain pharmacies and grocery store pharmacies,” said Brian Mayo, executive director of the Oregon State Pharmacy Association. “All have contracts with PBMs, and they are all struggling.” No penalties in seven years
It wasn’t supposed to be this way. A decade ago, Oregon lawmakers began adopting legislation intended to put pharmacy benefit managers under the scrutiny of state regulators and provide relief for pharmacies.
A bill passed in 2013 required the companies to make generic drugs more available and register with the state while restricting their ability to audit pharmacies. It also required pharmacy benefit managers to set up a process for pharmacies to appeal reimbursements that don’t cover the cost of certain medications. Many of the bill’s provisions went into effect in 2015. Oregon State Capitol in Salem.In 2019, lawmakers passed a bill prohibiting pharmacy benefit managers from penalizing pharmacies for telling customers about less-expensive drug options. It also restricted them from retroactively reducing reimbursement claims or requiring patients to use mail-order prescription services — which are often owned by pharmacy benefit managers.
Each of the bills tasked the Oregon Department of Consumer and Business Services with overseeing pharmacy benefit managers. More than 50 of the companies have registered. The agency adopted new PBM regulations again in 2021, but pharmacy benefit managers may not be following them, Numi Rehfield-Griffith, department senior policy advisor, told the Oregon House Committee on Health and Behavioral Health in January. Recent complaints suggest the companies are providing disconnected phone lines or unusable contact information to pharmacies, not adjusting reimbursement after an appeal and requiring patients to fill prescriptions by mail order.
The department received only four complaints over the last year, most of which the department couldn’t act on, she said.
“We haven’t done a comprehensive review of our PBM complaints recently because the volume, quite frankly, has been extremely low,” she said.
State officials provided The Lund Report with numbers showing no complaint to the state has ever led to enforcement action against a PBM. Indeed, although complaints are confidential under Oregon law, state officials provided The Lund Report with numbers showing no complaint to the state has ever led to enforcement action against a PBM.
Between January 2015 and July 2016, just four pharmacies submitted 117 complaints to the department alleging that pharmacy benefit managers had violated state law. In response, the department began investigating 22 pharmacy benefit managers, all of whom denied violating state law.
Oregon’s regulations of pharmacy benefit managers only cover the commercial market and the state’s prescription discount card program. That leaves out federal insurance programs self-insured plans, as well as plans that directly administer prescription drug benefits.
Gail Gage, compliance specialist with the department’s Division of Financial Regulation, wrote in an email that the complaints filed during this time period concerned medical markets not covered by Oregon’s pharmacy benefit manager law, so “DCBS closed all 22 files as inactive by January 2018.”
The department has no record of complaints regarding pharmacy benefit manager violations between August 2016 and January 2021, wrote Gage.
Since January 1, 2021 the department received 10 complaints concerning 1,243 alleged violations of Oregon’s pharmacy benefit manager laws, according to Gage. All of them are currently under investigation with the exception of several complaints not covered by the law.
Russell, who also serves on the board of the Oregon State Pharmacy Association, said it takes an enormous amount of resources for pharmacies to download reports, fill out forms, provide documentation and talk to regulators. He said it makes sense that the department received so few complaints in recent years.
“People stopped filing complaints because they weren’t getting anywhere.” KEVIN RUSSELL, OREGON STATE PHARMACY ASSOCIATION
“People stopped filing complaints because they weren’t getting anywhere,” he said. Mayo described it as a “broken system.”
Department spokesperson Jason Horton told The Lund Report that regulators welcome feedback on how it handles pharmacy benefit manager complaints and takes its enforcement responsibilities seriously.
“We currently have several people tasked with looking into PBM issues based upon the complaints we receive,” he said. “We are constantly looking at ways to improve our complaint processes, and we are part of several multistate groups that work on best practices in PBM regulation.”
Sorrell-Neal contended that the lack of enforcement means Oregon’s existing oversight system is “working as intended and that it provides an effective mechanism for addressing the concerns of pharmacists, patients and others in the health care industry.”
The bills Pharmacy representatives and others are backing several bills intended to provide better protections against PBM misconduct.
House Bill 2725 bans pharmacy benefit managers from charging fees to “rural pharmacies” on a prescription drug sale after it’s been completed. The bill is scheduled for vote in the House Rules Committee.
House Bill 3012 requires pharmacy benefit managers to file an annual report containing information on drug cost, rebates, fees and claims to the Department of Consumer and Business Services. The bill remains in the House Rules Committee where it has not been scheduled for a vote.
House Bill 3013 sets more rules intended to prevent pharmacy benefit managers from reimbursing smaller pharmacies at below cost for prescriptions. The bill sets up an appeals process through the Department of Consumer and Business Services for pharmacies that receive low reimbursements from the companies. It’s currently scheduled for vote in the House Rules Committee.
But some of these bills are caught up in gridlock the Senate Republicans’ walkout has caused as they protest of Democratic-sponsored legislation around abortion, gun control and gender-affirming care. As the walkout unfolded, the bills were sparking vigorous opposition.
During a hearing of the House Rules Committee earlier this month, lobbyists for pharmacy benefit managers and insurers said the H.B. 2725 and H.B. 3013 would result in higher costs for consumers and insurance companies.
“Instead of attacking drug prices at the source, these bills amend health plan benefit designs and impose new regulations on PBM activities that are used to keep costs low for consumers,” Kris Hathaway, AHIP vice president for state affairs, said in written testimony submitted to the committee. “These bills would impose extensive requirements and prohibitions on PBMs and insurers related to pharmacy networks, pharmacy reimbursement, and audits used to investigate fraud, waste, and abuse.”
Hathaway also wrote that H.B. 2725 and H.B. 3013 contain provisions that are preempted by a federal law that governs health and other benefits employers provide to workers. Kelsey Wilson, lobbyist for Pharmaceutical Care Management Association, told the House Rules Committee earlier this month her group has tried to “empathize with the pharmacists who are struggling” but “the goal posts keep moving” on legislation. She pointed to a proposed amendment to H.B. 2725 that would go further, banning pharmacy benefit managers from imposing fees on pharmacies after a point of sale.
Mayo said H.B. 3013 would have the most impact and is the biggest priority for his association. He said the state’s lack of staff dedicated to overseeing pharmacy benefit managers is central to its shortcomings in regulating the companies. H.B. 3013 requires pharmacy benefit managers to get a state license, and licensing fees would fund a full-time department staffer dedicated to regulating them.
Mayo said the bill would prevent pharmacy benefit managers from overcharging coordinated care organizations — state-contracted regional insurers that provide Medicaid-funded Oregon Health Plan services — which would save the state money.
One bill the walkout has not affected: Senate Bill 608 requires the Oregon Health Authority to survey retail pharmacies every three years on the costs of dispensing drugs. Proponents of the bill, which already passed the Senate, say it will highlight costs that are forcing pharmacies to close. The bill passed the Senate with bipartisan support and is awaiting a vote in the House.
Reporter: JAKE THOMAS