Wall Street Journal
Several states are investigating pharmacy benefit managers, with some saying they are focused on whether the companies fully disclosed details about their business and potentially received overpayments under state contracts, according to state officials and documents.
States including Ohio, Oklahoma, Georgia, New Mexico, Kansas, Arkansas and Mississippi, as well as the District of Columbia, are scrutinizing PBMs, according to the offices of state attorneys general and auditors, as well as public documents including state contracts and securities filings.
Details about the investigations’ focus are typically not public. Officials with some states said they were looking at companies in their Medicaid programs and state-employee plans. Among the companies under scrutiny are units of Centene Corp. , UnitedHealth Group Inc. and CVS Health Corp.
“I’m aware of many states that are looking at this,” said Ohio Attorney General Dave Yost, a Republican, whose office recently sued Centene, alleging it had misled the state’s Medicaid program about its pharmacy-related costs, resulting in overpayments by the state. States are at various stages of examining PBMs, he said, but he expects a couple of new suits to be filed this summer, and “before this is all done, I will be surprised if we don’t have a dozen or more states” bringing complaints against PBMs.
A Centene spokeswoman said it “provides pharmacy benefit programs for Medicaid and Medicare according to the regulations, laws and contractual guidelines issued by state agencies.” The Ohio suit’s claims are “unfounded and will be vigorously defended in court,” she said. Continue Reading
Newswires: The Daily Inter Lake
A bill that would give Montana officials the power to license and regulate pharmacy benefit managers — the middlemen that negotiate drug prices and determine which medications are covered by health insurers — is headed to Gov. Greg Gianforte's desk.
Proponents say the measure would shine a light on a powerful yet obscure part of the health-care industry and create opportunities to address skyrocketing drug prices.
Troy Downing, Montana's state auditor and commissioner of securities and insurance, held lengthy discussions and led the drafting of Senate Bill 395 after the U.S. Supreme Court clarified late last year that states can regulate pharmacy benefit managers. The proposal had unanimous support in the Senate and cleared the House on a 98-2 vote.
In an interview with the Daily Inter Lake, Downing said the Supreme Court decision, which stemmed from a similar legislative proposal in Arkansas, "opened a floodgate of possibilities" for Montana to pursue its own regulations.
Pharmacy benefit managers develop the "formularies" that list which drugs health plans will cover; they also negotiate wholesale prices and facilitate reimbursements to pharmacies for drugs they dispense. Those formularies can have huge implications for a drug's profitability, so manufacturers offer rebates and other incentives to pharmacy benefit managers to include their products on the lists.
But without financial data, regulators can't know how much money is being exchanged in the middle ground between drug makers and pharmacies — or if any of those cost savings are being passed on to consumers.
"For the most part, it's a black box and we're trying to peer inside of it," said Downing, a Republican.
Cautionary tale: Plan sponsors losing manufacturer rebate dollars to PBMs through rebate aggregators
Pharmacy benefit managers (PBMs) have created opaque manufacturer rebate arrangements, either directly or through wholly owned subsidiaries. These subsidiaries, known as “rebate aggregators,” cost plan sponsors, beneficiaries and taxpayers staggering sums of money. A growing number of examples of PBMs causing economic harm to plan sponsors through rebate aggregators is publicly emerging.
Related: Vetting your contract: How to know what your PBM is really offering
In one such example, Lehigh County’s audit report revealed a typical one-sided PBM contract term that has caused many plans to lose rebate revenue. Information asymmetry is to the advantage of PBM Rebate Aggregators and to the detriment of plan sponsors. Plans should be aware of rebate arrangements and learn from Lehigh’s audit experience. PBMs generally offer two manufacturer rebate models. In a “pass-through” model, PBMs purport to relay 100% of rebates PBMs received back to the Plan, but in reality, PBM-owned rebate aggregators are known to retain a significant amount of manufacturer rebates.
Under a “fixed model,” PBMs pay plans a guaranteed fixed-dollar amount per brand claim regardless of the actual amount of manufacturer rebates PBMs collect. While the fixed rebate model provides minimum rebate guarantees, it may also cap manufacturer rebates that could have significantly lowered a plan sponsor’s drug spend. Well-educated plan sponsors can avoid unfair contract terms by actively negotiating the rebate provision of the PBM Agreement.
Lehigh County’s contract was opaque and strongly favorable to the PBM. The Lehigh County’s audit report concluded, among other things, that the county could have received in excess of $700,000 in manufacturer rebates during the calendar year (“CY”) 2019, had it not chosen the “fixed rebate” model. The report further notes that if the County had been allowed the option of receiving the higher of actual rebates earned versus a fixed rebate, the total rebate savings for CYs 2017 through 2020 would have been $1.6 million. Also, the County identified 200 cheaper prescription drugs for a total potential savings of over $650,000.
Plan sponsors can learn a great deal from Lehigh County’s losses.
Why would the county agree to a fixed rebate arrangement? One likely scenario is that a non-fiduciary benefits broker “facilitated” the PBM favored terms and conditions. When a broker that is not a “fiduciary” represents a plan sponsor in a Request For Proposal (RFP) process, the resulting contract will likely advantage the PBM, and disfavor the plan. Continue Reading
Pharmacy benefit managers (PBMs) should consider the implications of a model law making its way through the National Association of Insurance Commissioners (NAIC) that would establish a licensure requirement and rules of conduct for these participants in the health care marketplace. A number of states have already adopted their own PBM laws, and an NAIC model would be likely to motivate others to do so.
On April 12, 2021, the NAIC’s Health Insurance and Managed Care Committee, meeting by videoconference at the NAIC’s Spring National Meeting, briefly discussed the PBM Model Act, agreeing to defer action until further consideration of additional features of PBM activities. This alert summarizes the principal features of the Model Act in its current form, minfdul that the NAIC may impose additional requirements on PBM conduct as the Model Act undergoes further consideration.
The Model Act defines “pharmacy benefit manager” as an entity, “including a wholly or partially owned or controlled subsidiary” of a PBM, that provides “claims processing services” or “other prescription drug or device services” (each defined below) to covered persons (generally, health plan enrollees or dependents) who are residents of the adopting state, for health benefit plans.
For purposes of this definition:
Federal officials want a second look at UnitedHealth Group's $13 billion plan to acquire data analytics and revenue cycle management company Change Healthcare.
The Department of Justice requested more information from both companies about the transaction, according to an SEC filing submitted by Change Healthcare on Friday. The so-called second request will give regulators more time to review the buyout beyond the standard 30-day period.
UnitedHealth Group announced in January that its fastest-growing subsidiary, Optum, would pay approximately $8 billion to acquire Change Healthcare. Optum also said it would pay off $5 billion in debt owed by the Nashville, Tenn.-based company. At the time, analysts predicted the acquisition would allow Optum to expand its OptumInsight provider business, inform its value-based care initiatives and increase patient engagement.
But the American Hospital Association called for antitrust regulators to investigate the merger, saying the buyout could reduce competition in health IT services and result in higher prices for providers and lower quality for patients.
In a letter sent to the DOJ on March 18, AHA said that UnitedHealth Group and Change Healthcare sold off hundreds of millions of dollars worth of assets to ward off scrutiny from antitrust regulators. An SEC filing from early March said the companies may sell assets if required for antitrust approval, although divestitures worth more than $650 million in annual revenue from UnitedHealth Group would represent a "burdensome condition" for the Minnetonka, Minn.-based healthcare giant.
UnitedHealth Group, which owns the largest insurance company in the nation and is reportedly also the nation's largest employer of physicians, could consolidate much of the country's healthcare data and use it to process and deny claims if the acquisition is approved, AHA said. Hospitals are particularly concerned about a loss of competition in claims clearinghouse, payment accuracy, revenue cycle management and clinical decision support services.
"Post-merger, Optum will have strong financial incentives to use competitive payers' data to inform its reimbursement rates and set its competitive clinical strategy, which will reduce competition among payers and harm hospitals and other providers," the AHA wrote.
The Biden administration has recently said that it plans to take a more critical eye toward corporate mergers, including in the healthcare industry.
UnitedHealth Group did not immediately respond to an interview request over the matter. The SEC filing notes the healthcare giant and Change Healthcare "have been working cooperatively with the DOJ and will continue to do so."
From the moment Marilyn Jerominski walks into her pharmacy every morning, her time is in demand. As pharmacy manager of a busy 24-hour Walgreens in Palm Desert, California, she is responsible for the safety and accuracy of the thousands of prescriptions the store dispenses every week.
"There's so much stress," Jerominski said. "You're not only running to the drive-thru but to the front, to the vaccination station to give a vaccination, then to the phone. ... It's almost impossible for any human to keep that momentum day in and out."
It wasn't always that way. When she began working as a pharmacist 13 years ago, it was a very different environment, Jerominski said. There were more staff members and more time to counsel patients about their medications. These days, she is exhausted and often overwhelmed, worried about making a mistake when someone's health is on the line. She is far from alone.
Jerominski is one of an estimated 155,000 pharmacists working at chain drugstores who, over the past decade, have found themselves pushed to do more with less. They're working faster, filling more orders and juggling a wider range of tasks with fewer staff members at a pace that many say is unsustainable and jeopardizes patient safety. Now Covid-19 vaccinations are raising new concerns about what will happen if they aren't given enough additional support for yet another responsibility.
NBC News spoke to 31 retail pharmacists and pharmacy technicians in 15 states. From 12-hour shifts so busy they don't have time to go to the bathroom or eat to crying in their cars every day after work or lying awake at night worrying about mistakes they might have made while rushing, they described an industry of health care professionals at the breaking point.
"The expectations they're having and the resources they're giving us just aren't matching up," said a CVS pharmacy technician in New York state. "We're going to have a fatal error somewhere because we're doing too many things at once."
Most pharmacists spoke anonymously out of fear of losing their jobs. Declining profit margins for pharmacies, corporate consolidation and an influx of new pharmacy school graduates in the past decade have led to stagnant or falling wages and fewer employment options, according to pharmacists, experts and recent studies.
The pressure and understaffing issues aren't new, as The New York Times reported last year. But they've worsened during the pandemic, pharmacists said, with new duties like Covid-19 testing, deep cleaning and now vaccinations stretching them even further.
"Pharmacists are being asked to do additional tasks and aren't necessarily receiving the assistance that they need from their employer," said Al Carter, executive director of the National Association of Boards of Pharmacy, a nonprofit that represents state pharmacy regulators. "That's a huge concern for pharmacists' well-being but also, more importantly, for patient safety."
The more overworked they are, the more likely they are to make errors, he said. Pharmacy errors can range from smaller mistakes, like miscounting the number of pills in a bottle, to potentially deadly ones, like missing a dangerous drug interaction. Working conditions and workplace pressures have led to "growing concerns from many state boards of pharmacy" about prescription errors, Carter said.
Walgreens and CVS, the country's largest pharmacy chains, were early government partners in the vaccine rollout. In statements to NBC News, they said that they are grateful for the work their pharmacy staffs have done during the pandemic and that they are hiring thousands of additional staff members to ensure that pharmacies have the support and resources to administer Covid-19 vaccine shots and provide the best care for patients. They and the trade group representing all chain drugstores also said technology improvements have freed pharmacists from many routine tasks in recent years, allowing them to focus on the safety and health of patients — their top priority.
CVS said the majority of stores giving Covid-19 vaccinations will do so through a dedicated team of pharmacists working only on vaccinations. In stores that don't, the company will provide additional staff support and limit the numbers of appointments.
Pharmacies have already begun to vaccinate around the country, but many pharmacists said they're worried about how much additional staffing they'll get to give vaccinations.
Jerominski's pharmacy began vaccinating last month. The vaccinations are going well, she said, but other work has been piling up as she struggles to find time to do it all.
"Right now, it's just so crazy," she said during a shift break on her third day vaccinating. "Like, it's 1 o'clock, and I've done 14 Covid vaccines this morning, in between filling prescriptions. ... It's wonderful that we're doing this, and this is our duty. This is what we're supposed to be doing. But we need more help."
'Timed to the minute'
A pharmacist's job is far more than putting pills in bottles. Experts in drugs and medication management, they work everywhere from hospitals to cancer treatment centers and drugstores. They are among the best-educated health care professionals — they earn four-year clinical doctorates, which include rotations and often postgraduate residencies — and make median salaries of $128,000 a year. They are also some of the most trusted and accessible health care professionals in the country, according to the National Association of Chain Drug Stores.
The person who actually hands you your filled prescription at the counter may be a technician, not a pharmacist. Technicians are support staffers who run the cash register; fill, count and bag prescriptions; and unload inventory. They're entry-level employees who typically get on-the-job training or attend certificate programs and are paid a median $16 an hour.
Medication management services for customers can save billions in annual health care expenses, pharmacy groups estimate. Pharmacists said providing that advice is why many got into the business, yet they now have less opportunity to use those skills. Continue Reading or Watch the Full Interview on NBC
Yost sues health-care giant Centene, saying it charged Ohio taxpayers millions for duplicate Medicaid pharmacy benefits services
Ohio Attorney General Dave Yost is going after a $101 billion corporation that used $20 million in taxpayer money to hire a pharmacy benefits manager to provide services for Medicaid recipients that essentially already were covered by another PBM paid by the state.
In a deal reported by The Dispatch in October 2018 as part of its Side Effects series, Centene Corp's Buckeye Community Health Plan hired two other Centene companies, Envolve and Health Net, to handle pharmacy benefits — even though Buckeye already had hired CVS Caremark as a pharmacy benefits manager.
Officials said at the time that the "administrator" and "manager" were paid for basically doing the same job.
The duplication by Buckeye — one of five managed-care organizations hired by the state to deliver health-care services to the 3 million Ohioans on Medicaid — was the main reason it was charging the state more than twice the per-prescription costs of the other four, a state consultant found.
“Corporate greed has led Centene and its wholly owned subsidiaries to fleece taxpayers out of millions. This conspiracy to obtain Medicaid payments through deceptive means stops now,” Yost said in an emailed statement.
“My office has worked tirelessly to untangle this complex scheme, and we are confident that Centene and its affiliates have materially breached their obligations both to the Department of Medicaid and the state of Ohio.” Continue Reading
The Free Lance-Star
You’re probably sick of reading about COVID-19, and all the ways it can stress you out. So, instead, let me bring to your attention a different health care issue for you to fret about.
It’s an issue that epitomizes the way health care is being taken over by business entities whose priority is to make money more than to provide effective affordable health care to the people it is serving.
I’m talking about pharmacy benefit managers—PBMs.
I have been aware of these third-party administrators of prescription drug programs for awhile. I had heard rumors they were driving up drug prices. But my vague notions were solidified by reading “The Price We Pay: What Broke American Healthcare—and How We Fix it” by Dr. Marty Makary.
Makary is a surgeon at Johns Hopkins, and was the lead author of a report in JAMA in 2017 about hospitals suing patients for outstanding medical bills. You may have read about him when he came to Fredericksburg and advised patients being taken to court by Mary Washington Healthcare in 2019.
Pharmacy benefits managers started off innocently enough, administering the complex formularies of insurance companies and self-insured employers. They negotiate with drug companies, decide what tier a medicine should be in, and determine how much someone insured through that company would pay. They have great potential to keep drug prices down by negotiating bulk-buy discounts, or rebates from the drug manufacturers.
Medications are a large and profitable part of health care, and now PBMs seem to have taken on a life of their own—but by using devious practices to make massive profits.
Makary says, “It is now overwhelmingly apparent that PBMs are operating the biggest shell game in modern history, and we are all paying for it.”
How it Works
PBMs buy medicines at a discounted price, then “sell” them (actually they arrange the price at which they will be sold) at a markup, which they get paid by the insurance company or employer whose formulary they are managing—what is called “the spread” rather than profit, in this industry.
NPR The Pulse
NPR Editor’s note: Many independent pharmacies say their business model is threatened by pharmacy benefit managers. To see the impact on one business, reporter Liz Tung interviewed a pharmacist over the course of many months to better understand the issues facing him. In the end, he said he wanted to share what happened to him, but only under the condition of anonymity — he was afraid of backlash from PBMs. We have verified and fact-checked his story, and decided to tell it without using his real name. We’re calling him Bill.
The story of how Bill opened his own pharmacy is about as small-town wholesome as it gets. He first got interested while working at one in high school. And from the beginning, it just felt like a good fit.
“I felt like I wanted to go into health care, and wanted to be able to help patients,” he said. “But I didn’t want to go through a medical school or be a nurse, and I thought that pharmacy would be a good choice for me. The chemistry interested me, and of course the patient interaction was always a good thing as well.”
So Bill went to pharmacy school, and spent the next decade or so working for someone else. Finally, around 15 years ago, he worked up the nerve to open his own business.
“It’s something I’ve always wanted to do — I just never had the gumption,” Bill said. “It’s probably the best decision I made.”It seemed like a good move.
Shortly after opening his own pharmacy, the shop he’d worked at previously shut down, and Bill inherited many of his old customers. “The money wasn’t great, but it was decent.”
Like a lot of community pharmacies, Bill’s business offered personal service — they knew their patients by name, would call them on their birthdays, and even deliver prescriptions right to their doors.
Trouble Begins - Enter PBMs
It’s hard to pinpoint when exactly things started going south. Bill estimates it was around 2013 when business earnings began to fall.
“There was a drastic decline,” Bill said. After a slight recovery, the pharmacy’s income continued into steady decline.
Bill said the majority of the pharmacy’s earnings come from reimbursements — the money it gets for dispensing prescriptions.
Reimbursements are a lot of pharmacies’ bread and butter, which has become a problem in recent years because pharmacy benefit managers, or PBMs, play a major role in how they work.
PBMs arose in the late 1960s to help insurance companies process prescription claims. Before that, patients had to mail their own prescription claims to their insurance companies and wait to get reimbursed.
With PBMs, the process was streamlined and digitized, easing the burden on insurance companies, and becoming an important link between pharmacies and health plans.
Over the coming years, PBMs’ responsibilities expanded to include reimbursements — the money health plans pay pharmacies to reimburse them for the cost of the medications they dispense. Insurance companies empowered PBMs not only to pay pharmacies, but to decide how much money they should receive.
The problem, pharmacies say, is that over the years, reimbursements have been shrinking, to the point that some aren’t even receiving enough to cover the original cost of the drugs they buy.
What PBMs bring to the table
Pharmacy benefit managers can do this for a few reasons. For one thing, there’s a huge amount of secrecy that surrounds how they operate. The details of the contracts they write, of the formulas they use to calculate reimbursements, are often insanely complicated — or hidden, or both. And that leads to situations such as pharmacies actually losing money on prescriptions they dispense.
Another reason PBMs can get away with lowering reimbursements is that pharmacies need them. Three PBMs control around 75% of the market, so if pharmacies want access to all those customers, they have to accept the PBMs’ terms.
PBMs, however, say they’re justified by their role in the health care world — lowing costs.
“There’s sometimes a lack of understanding as to just how much value and savings PBMs provide in our health care system,” said Greg Lopes, spokesman for the Pharmaceutical Care Management Association, the PBMs’ trade association.
“Over the next 10 years, PBMs are going to save health plan sponsors and consumers more than $1 trillion on prescription drug costs. PBMs are hired by employers, unions, and government programs to negotiate with drug manufacturers on their behalf because of their expertise in lowering drug costs. There’s no requirement to hire a PBM, but health care plan sponsors and employers choose to work with PBMs because we lower drug costs and increase quality of care.”
Pharmacists dispute that characterization, among them Mel Brodsky, executive director of the Philadelphia Association of Retail Druggists, a group that represents about 200 stores in Southeastern Pennsylvania.
The Washington Post
Americans think large enterprises are invariably more efficient. They aren’t.
More than a month into the coronavirus vaccine rollout, only about 60 percent of the doses distributed across the country have actually made it into people’s arms, according to federal data — a discouraging display of inefficiency. But a handful of states are far ahead of the pack. At the top of the list are West Virginia, which had given out 84 percent of its doses as of Friday, and North Dakota, at 81 percent.
Many factors are slowing distribution, including some Americans’ hesitance to take the vaccine and policies that hold back some doses for the second round of shots. But one key element appears to be the type of pharmacy states choose to work with. While the federal government partnered with CVS and Walgreens to handle vaccinations at long-term care facilities in the first phase of the rollout, North Dakota and West Virginia have instead turned to independent, locally owned pharmacies. Small drugstores are prevalent in West Virginia, and in North Dakota they’re just about the only game around: A 1963 law mandates that only pharmacies owned by pharmacists may operate in the state (save for a few grandfathered CVS locations).
These small providers have proved remarkably nimble. Meanwhile, CVS and Walgreens have stumbled. In late January, Oklahoma officials expressed fury that the two chains were sitting on more than 62,000 of the state’s allotted doses — and the state suspended allocations of more doses to them. In Maine, officials eager to hurry things along have begun transferring doses meant for the chains to local pharmacies instead.
The vaccination results in West Virginia and North Dakota have prompted a wave of national news stories, noting how startling it is that two rural states relying on local drugstores — the epitome of the old-timey “mom and pop” stereotype — have rocketed far ahead of states like Massachusetts and Virginia, with their networks of supposedly sophisticated chain pharmacies that have largely replaced the independents.
For decades, Americans have been steeped in the idea that big businesses naturally outperform small ones. Indeed, much public policy is predicated on this belief. Our antitrust rules bless most corporate mergers on the grounds that larger companies are more efficient. Our financial regulations grease the flow of capital to the biggest firms. And in unstable times, the federal government almost invariably steps in to ensure their survival, while treating small businesses, local banks and family farms as expendable.
So ingrained is this ideology of bigness that we routinely overlook evidence to the contrary. The fact is, independent pharmacies have been outperforming their larger rivals all along. According to research by Consumer Reports, for instance, local pharmacies generally offer lower prices than the chains. The two cheapest sources for prescription drugs, the nonprofit magazine found, were the online firm HealthWarehouse.com and Costco, but independents came in third — with average prices that beat Walgreens, Rite Aid and CVS/Target by a wide margin. (Of course, independents varied in price, and there were some expensive outliers.) Independents also have shorter wait times and provide better care, including more one-on-one consultations with patients, Consumer Reports found. And while the major chains only recently began offering one- or two-day home delivery, most independents have been providing same-day delivery for more than a decade (and most do it free).