Under pressure to rein in skyrocketing prescription drug costs, states are targeting companies that serve as conduits for drug manufacturers, health insurers and pharmacies.
More than 100 separate bills regulating those companies, known as pharmacy benefit managers, have been introduced in 42 states this year, according to the National Academy for State Health Policy, which crafts model legislation on the topic. The flood of bills comes after a U.S. Supreme Court ruling late last year backed Arkansas’ right to enforce rules on the companies. At least 12 of the states have adopted new oversight laws. But it’s not yet clear how much money consumers will save immediately, if at all.
The companies are powerful, together administering medication plans for more than 266 million Americans. A handful of the companies, CVS Caremark, Express Scripts and OptumRX, control the vast majority of the market while also operating national pharmacy chains. PBMs say they use all that power to negotiate lower prescription prices. But the inner workings of the deals — and how much of the savings the companies pocket — happen largely behind a curtain that lawmakers are trying to pull back.
Montana is one testing ground for whether more transparency leads to lower drug prices with a new law that places those businesses under state oversight. The legislature unanimously passed a measure in April that, beginning next year, requires pharmacy benefit managers to get a state license and publicly report how much money they receive. It also dictates what information PBMs must provide to other companies amid negotiations.
“This was kind of the low-hanging fruit in terms of something where we thought we could get some meaningful policy out there,” said Troy Downing, Montana’s Republican commissioner of securities and insurance. “At least turn the light on in that black box.”
New York lawmakers also passed legislation requiring PBMs to get a state license and submit an annual report that details the financial benefits they collect. Some efforts go broader, such as one in Wisconsin that brought PBMs under state oversight and required pharmacies to tell customers about less expensive generic prescription options.
PBMs pit drug manufacturers against one another to get lower drug prices on behalf of clients such as health insurers or large employers offering prescription drug benefits. They influence what prescription plans cover, and they help set pharmacy reimbursement rates for medications bought under PBM-managed plans. They can make money by pocketing some of the cash saved in negotiations and through the rebates that drug manufacturers offer for a sought-after spot on the list of prescriptions covered by health plans.
PBMs are accustomed to negative attention, though they often counter it’s pointed in the wrong direction.
“The main focus for state policymakers should be to examine brand drug manufacturers’ pricing strategies,” emailed Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, a national trade group. “Drug manufacturers are solely responsible for setting and raising drug prices.”
One in 10 U.S. adults ration prescriptions they can’t afford, according to the National Center for Health Statistics. And as prices climb, every industry touchpoint for pharmaceutical drugs — manufacturers, distributors, insurers and more — blames the others. Policymakers have said each plays a role, though PBMs have become easy targets for politicians across political parties.
While PBM regulation is often pitched as a way to lower drug costs, patients shouldn’t expect lower prices at pharmacy counters immediately, said Elizabeth Seeley, an expert in health care payment systems at the Harvard T.H. Chan School of Public Health.
“There’s really not a clear answer on what types of policies will necessarily bring down spending,” Seeley said. “Because you have to also ask the question of ‘spending for who?’”
The changes could mean savings for patients or savings for just another part of the health industry, such as insurers. Seeley said she welcomes the recent spate of legislation to get more transparency into the system. But to get more affordable prescriptions on a wide scale, she said, lawmakers need a broad set of policies that sweep in players such as drug manufacturers. That would most likely have to happen on a national level.
Last year, bills died in Congress that sought to penalize drugmakers for raising prices above inflation rates and to cap some Medicare enrollees’ out-of-pocket costs. Drug-pricing proposals are back on the table this year, with some zeroing in on specific industry players — including pharmacy benefit managers.