Ohio Capital Journal
In the first test of a 2020 U.S. Supreme Court ruling, drug middlemen last week argued that federal law gives them a crucial right to limit what pharmacies patients with health insurance can use — or at least make it more expensive if patients get their medicine at a shop that isn’t preferred by the powerful corporations.
A lawyer for an industry group argued that the right to limit pharmacy networks is important to ensure quality. But he failed to note that the three biggest middlemen are owned by health care giants that own pharmacies themselves.
The argument is likely to add grist for those who claim that the Fortune 15 corporations are engaged in practices that are driving up costs and driving out competitors.
The industry group, the Pharmaceutical Care Management Association, made the arguments last Wednesday before the 8th U.S. Circuit Court of Appeals in St. Louis. It was a rehearing of a 2020 ruling that struck down North Dakota’s attempts to regulate businesses known as pharmacy benefit managers.
In the earlier ruling, the appellate court held that the federal Employment Income Security Act of 1974 severely limited state governments’ ability to regulate the benefit managers, which are also known as PBMs.
But last year, the U.S. Supreme Court heard a similar case also emanating from the Eighth Circuit and unanimously ruled in October that the federal law applied to health plan design and administration — and didn’t apply to many of the limitations that states were trying to put on the PBMs hired by the plans.
The high court then ordered the Eighth Circuit to rehear the North Dakota case.
Lots of power
Insurers hire pharmacy benefit managers to administer drug benefits. Often, they’re hiring their corporate siblings because since 2014, each of the big three has either bought or been bought by a major insurer.
Among their functions, PBMs control lists of which drugs are covered and whether medicines on them get preferential treatment in the form of lower deductibles or by not needing prior authorization.
The three biggest PBMs — CVS Caremark, OptumRX and Express Scripts — are estimated to represent more than 70% of all insured Americans. So they have great leverage when they negotiate with drugmakers for rebates, fees and discounts in exchange for drugmakers getting their products covered.
Groups of large employers and pharmacy groups suspect the big PBMs are using a lack of transparency to pocket a healthy slice of the money they’re getting through these transactions. That’s helping to drive up the cost of drug benefits, they say.
The PBM’s insist they’re saving money for consumers, but last month they sued to stop a federal rule that would require the industry to report the discounts and fees it gets from drugmakers.
In addition, each of the big-three PBMs is standing up a “group-purchasing organization” — two of which are offshore — to handle transactions with drugmakers on the PBMs’ behalf. That’s sparked great fear that the industry is introducing yet another curtain between the people who pay for health care and the true cost of the drugs they’re paying for.
“Now they’re creating #GPOs (really!!!) to further obscure what they’re doing in driving up drug costs,” tweeted Ted Okon, executive director of the Community Oncology Alliance. “The PBM middlemen creating another layer of middlemen.”
Then before the Eighth Circuit last week, the PBMs argued for the right to control pharmacy networks in ways that would allow them to give advantage to their own companies.
Among their other powers, PBMs create pharmacy networks and determine how much to reimburse them for drugs.
They have that power even though each of the big PBMs is in some fashion operating pharmacies of their own. CVS owns the nation’s largest retail chain and all three own mail-order pharmacies for specialty drugs — the most expensive class.
The PBMs insist they don’t give special treatment to affiliated pharmacies, but apparent evidence to the contrary has emerged. Continue Reading