Pharmacy benefit managers vs. firefighters: Crack down on middlemen who drive up the cost of prescription drugs
New York Daily News
Firefighters put their lives on the line daily to run into burning buildings and limit property damage.
The 18,000 hardworking men and women represented by the New York Professional Fire Fighters Association work in departments across New York State and respond to more than a million calls each year, ranging from structure fires to multi-vehicle accidents and medical emergencies.
Like all workers, these brave men and women feel the squeeze of rising health-care costs and the dangerous spike in prescription drugs. Every day, news reports reveal new horror stories of people struggling to stay alive because they cannot afford their desperately needed medication.
That’s why we urge Gov. Cuomo to immediately sign a bill that has passed both houses of the state Legislature that would prevent pharmacy benefit managers (PBMs) from using “utilization management” tools, such as step therapy (often called “fail first”) and non-medical switching, to deny or delay access to prescription drugs for things like pain management and cancer treatment.
In some cases, these bad practices on the part of PBMs can even be fatal. These life-and-death decisions should be left to doctors — not profit-oriented corporations.
Pharmacy benefit managers are middlemen who make money by pushing certain drugs and treatments — often favoring policies that delay access to necessary and prescribed drugs in order to favor experimental options that cost the PBMs less.
The protections in the just-passed legislation would ensure that hard-earned health benefits are preserved for all workers, empowering doctors, not profit-motivated middlemen, to make medication decisions. A recent state Senate committee investigation found that a “lack of transparency” and weak oversight allowed PBMs to “engage in self-dealing to the detriment of consumers across New York State” without transparency or proper oversight.
This bill would ban PBM policies that restrict patient choice and devalue New Yorkers’ health plans. The problems are most acutely felt by the working men and women who support families on good union wages and benefits. All too often, they encounter roadblocks to getting the drugs they need despite having good health plans through years of collective bargaining.
The legislation requires PBMs to register with the Department of Financial Services by April 1, 2020 and be licensed by Jan. 1, 2021. DFS would regulate PBMs and monitor them for conflicts of interest and deceptive practices and anti-competitive practices.
PBMs’ most insidious “utilization tools” are step therapy — also known as “fail first” — and non-medical switching. These policies ignore the advice of doctors and put medical decisions in the hands of bureaucrats whose major aim is to make money.
The Community Oncology Alliance, a non-profit that advocates for affordable care for cancer patients and want to get PBMs “out of the loop,” cites countless “horror” stories of patient interactions with PBMs that are needlessly dragged out and occasional lead to more serious illness or even death.
We have all have endured years of attacks on organized labor. Workers must not be forced to suffer further reductions in quality and affordable care foisted upon them by corporations who put profits before protection.
Fresina is president of the New York State Professional Firefighters Association.
The Washington Examiner
Washington is consumed with wall-to-wall coverage of impeachment, Ukraine, and transcripts. Every question we receive from the D.C. press corps is about that. But do you know who isn’t obsessed with this? Our constituents.
Every day, we hear from people across North Dakota and Iowa. Most of them are not talking to us about impeachment. They are coming to us because they worry about being able to afford the medications they need to live. They face heartbreaking calculations, trying to figure out if they can pick up their prescriptions and still afford to put food on the table or pay for their housing.
This is reality for people living outside the Washington bubble. It’s the reality for many of our constituents and people all across the country. It’s the reality we’re determined to fix through bipartisan and thoughtful legislation.
There are a lot of factors that keep the cost of prescription drugs high. One of them is pharmacy benefit managers or PBMs. These middlemen in the drug supply chain act as a go-between for pharmacies and insurers. Under Medicare Part D, PBMs negotiate the price of prescription drugs. In a perfect world, they would use the savings to lower the amount the patient pays at the pharmacy counter; unfortunately, that rarely happens.
Prescription drug middlemen, as well as drug manufacturers, too often respond to the current incentives in the system by putting their financial gain ahead of patients. A pointed example is the egregious increase in the cost of insulin. Though this drug has been available for nearly a century, its list price has recently skyrocketed. In Medicare alone, out-of-pocket costs for insulin have more than quadrupled since 2007. It’s been estimated that the price of a 40-day supply of this diabetes treatment rose from $344 in 2012 to more than $660 just four years later.
Though manufacturers set the list price for insulin, PBMs play a critical role in pricing as the primary negotiators. The American Diabetes Association found that as PBMs have secured increased rebates as a percentage of the list price, the heightened rebates have contributed to the higher cost of insulin for too many patients. Patients who have to pay out-of-pocket or pay a percentage of the list price instead of a lower flat co-payment can face financial challenges that can have devastating consequences. Earlier this year, the Senate Finance Committee held a hearing on drug pricing. At that hearing, one witness testified that her son, worried about the financial burden his monthly $1,700 insulin prescription was putting on his parents, began rationing his treatments. Tragically, that can have life-threatening consequences.
Bipartisan legislation, on top of aggressive oversight of insulin manufacturers and PBMs, are the steps we’ve already taken to help bring down costs of insulin and other prescription drugs. But other factors contribute to high prices at the pharmacy counter.
Other PBM practices also keep drug prices high so that patients pay more at the pharmacy counter. PBMs use direct and indirect remuneration fees, also called “clawback” fees, that pharmacies must pay back months after a prescription is filled. This practice not only puts a strain on pharmacies’ ability to serve their communities, it requires patients to pay based on an amount that is higher than the true cost of the drug. Another way is through spread-pricing. PBMs buy drugs from wholesalers at one price and sell them to pharmacies at a much higher price. The discrepancy between prices is often significant, particularly for generics. The inflated prices are good for PBMs, but bad for patients and taxpayers.
Increased transparency in the drug pricing system is critical to lowering costs for patients and taxpayers. That’s why we’ve been working on legislation that shines a light on manipulative practices by drug makers and PBMs, including the Prescription Drug Pricing Reduction Act.
This legislation not only increases transparency into the opaque practices of PBMs but also addresses the lack of transparency in manufacturer drug pricing decisions. Further, it improves incentives to increase negotiation between prescription drug plans and manufacturers in order to help reduce costs at the front end of the process and provide true savings to patients at the pharmacy counter.
The Congressional Budget Office estimates that our bill would save taxpayers more than $100 billion — including $90 billion in Medicare and more than $15 billion in Medicaid. Medicare beneficiaries would also save $25 billion in out-of-pocket costs and $6 billion in premiums. Americans in the commercial market would also see savings due to a provision in the bill that would reduce Medicare costs for prescription drug benefits also offered by commercial insurance plans.
The day-to-day political dramas that shroud “Beltway Insiders” don’t represent the wants and needs of most Americans. It’s the kitchen table issues, such as the high cost of prescription drugs, that folks in North Dakota, Iowa, and other states want and need solutions for. With leaders on both sides of the aisle recognizing this problem, we have an opportunity to pass meaningful, bipartisan legislation to help those we serve. While no legislation is ever perfect, we urge our colleagues to join our efforts and work with us to pass real reforms.
Chuck Grassley, Iowa's senior U.S. senator, is chairman of the Senate Finance Committee. Kevin Cramer is North Dakota's junior U.S. senator. Both are Republicans.
Healthpayer Intelligence, Xtelligent Healthcare Media
Employers Rx Will Lobby Against PBMs and Drug Manufacturers Over Price Transparency, Fair Business Practices, Rebates, and a Drug Price Increase Cap
When it comes to lowering skyrocketing drug prices, employers are making their voices heard on drug price transparency, drug price increase caps, and other price reducing strategies through the new coalition Employers' Prescription for Affordable Drugs(EmployersRx).
The coalition comprises health advocate groups including the Pacific Business Group on Health (PBGH), the ERISA Industry Committee (ERIC), and the National Alliance of Healthcare Purchaser Coalitions (National Alliance). Together, the organizations plan to advocate for lowering drug prices and promoting price transparency.
“As the largest collective purchaser of health care, businesses have a responsibility to employees and their families to tackle this important issue,” said Elizabeth Mitchell, president and chief executive officer of PBGH. “Employers and patients are tired of bearing the brunt of high costs caused by a gamed system set up by drug manufacturers and pharmacy benefit managers. Employers are doing everything they can to contain costs, but this problem is too big to fix without action from the government.”
To the coalition, drug manufacturers and middlemen like pharmacy benefit managers are the source of high drug costs. Thus, their four-pronged legislative approach to de-escalating drug prices focuses exclusively on those stakeholders.
courtesy of Axios
Michigan's Medicaid program is proposing to fire the pharmacy benefit managers that handle its prescription drug claims and negotiate prices. The state would manage drug coverage itself, starting Dec. 1.
The big picture: More state Medicaid agencies have determined that outsourcing all negotiations and operations of prescription drugs to PBMs has not produced the dramatic savings they were promised.
Details: Michigan officials said in a bulletin the state could extract bigger rebates from pharmaceutical companies and cut administrative costs if the state handled all Medicaid medication benefits, instead of the current private contractors.
Between the lines: State governments, along with pharmacists, continue to lead the crusadesagainst PBMs.
Reining in the Maleficent Middlemen: Governor Cuomo Should Sign America's Toughest Prescription Drug Legislation
Gotham Gazette, September 30, 2019
Like the rest of America, New York State is ensnared in the stranglehold of our byzantine healthcare system, which today is best known for skyrocketing pharmaceutical drug prices and a rapid decline in quality of care. One of the most vicious, insidious, and disingenuous tentacles of that system choking the life out of us is the group of corporations known as Pharmacy Benefit Managers (PBMs).
While just three Fortune 25 companies – CVS, Express Scripts, and OptumRx – control nearly 80% of the pharmacy benefits market, most Americans are unaware of the outsized role PBMs play in their healthcare. And PBMs want to keep it that way.
Hired by insurance companies as their prescription drug middlemen, PBMs claim they play an important role in making prescription drugs accessible and affordable for consumers – including in New York’s Medicaid program – by negotiating prices with manufacturers.
In reality, however, PBMs control which medications are covered by insurance, what patients pay out-of-pocket and the amount pharmacies get reimbursed for dispensing them. PBMs are unregulated thieves who are not required to — and therefore don’t — disclose how much money they take in, how much they pay out, or the savings they achieve through this process.
When challenged to provide more transparency about their business practices, PBMs flat-out refuse. Why? Because a lack of oversight is their key source of power. And it’s the consumers, and the pharmacies that dispense medications, who pay the price.
The Columbus Dispatch
Millions of U.S. soldiers, sailors, Marines and veterans are among a group that some say is being ill-served by one of the three huge pharmacy middlemen that dominate America’s drug marketplace.
Millions of U.S. service members and veterans are among a group that some say is being ill-served by one of the three huge pharmacy middlemen that dominate America’s drug marketplace.
Patients, providers and pharmacists across the country complain that those middlemen, known as pharmacy benefit managers, have used their market dominance to drive up prices and drive out competition and force patients into the PBMs’ own — some contend inferior — mail-order pharmacies.
In Ohio, PBMs have been accused of overbilling taxpayers, anti-competitive practices and interfering with cancer patients’ access to medication. Now, similar complaints are surfacing about the exclusive contract that one of them, Express Scripts, has with Tricare, the program that provides health care to active-duty military and to veterans.
Since 2009, Express Scripts has held the exclusive right to serve as pharmacy benefit manager to 9.5 million active-duty troops and veterans as well as their dependents, who together received $7.7 billion worth of drugs in 2018, according to statistics from the Defense Health Agency, which runs Tricare. That contract makes the program one of the biggest clients of St. Louis-based Express Scripts, the nation’s largest pharmacy benefit manager.
Managed Care Magazine
After Ohio uncovered huge spreads, other states have taken a hard look at spread pricing in their Medicaid programs. U.S. senators and CMS are also getting into the act.
If some lawmakers have their way, PBMs will no longer be able to play the spread. A small but growing number of states are scrutinizing the role that PBMs play in their Medicaid programs amid reports that these middlemen are unfairly siphoning off profits. More recently, U.S. senators have taken up what seems to be a bipartisan cause. The ranking members of the Senate Finance Com-mittee have introduced a bill that would put an end to what is known as spread pricing in Medicaid programs throughout the country.
“Drug payments should focus on the beneficiary, not the PBMs,” Sen. Charles Grassley, the Iowa Republican who chairs the committee, said last month. “Medicaid funding should go to patients, not the pockets of health care middlemen.”
Read the full article
by Charlie Harper
Georgia makes few apologies about being a “business friendly” state. In fact, it promotes the concept as the “No. 1 state to do business” as publicly as possible. Thus, when powerful organizations popular with Georgia’s governing majority party announce opposition to a proposed merger, it is worth some time understanding why.
Last week, the Medical Association of Georgia, the Georgia Pharmacy Association, and the Georgia Society of Clinical Oncology sent a letter to Insurance Commissioner John F. King asking him to block the merger between Centene Corporation and Wellcare of Georgia Inc. Both companies are major providers of managed care services for Georgia’s Medicaid patients, which serves as the crux of the organizations’ arguments. The implications are wide and deep.
The width of this merger is explicit in the letter of protest. The groups claim that the merger would create the largest Medicaid provider in the country, and would give the company 61% of Georgia’s patients on Medicaid’s managed care program.
To help put the magnitude of the stakes in perspective, the letter claims that there are over 1.3 million Georgians served by Medicaid in managed care programs, with nearly 815,000 served by the two companies proposing to merge. In a state of 10 million, we’re talking about a system that directly involves 13% of all Georgians.
Looking deeper, there are a number of other hands involved in the process before a dollar paid by the state on behalf of the patient reaches the medical provider. Key to the argument against the merger is the rake taken by Pharmacy Benefit Managers (PBMs), at least two of which Centene has an ownership interest according to the letter.
A 2018 legislative report indicates that Georgia spent $120 million on pharmacy benefits under the program, but only $90 million was actually disbursed for drug reimbursement. The remaining $30 million was retained by PBMs. To quote the letter, “25% of the prescription drug spend was not spent on patients’ drugs, but rather, was spent paying a third party administrator.”
While the PBM’s management of prescription drug benefits are highlighted as central to a system seemingly designed to obscure who is actually being paid for what, the letter also notes other large and increasing management fees going to corporate overhead rather than patient care. “Peach State has a management agreement with affiliate Centene Management Company, in which the affiliate is paid 11.5% on net revenue up to 1 billion dollars and 10.5% in excess of 1 billion dollars. In 2017 this amounted to $116,496,970 paid to Centene Management Company. Centene paid $146,476,367 in general administrative expenses in 2018.”
If numbers here are causing your eyes to glaze over, let’s try to bring this back to why these organizations composed of front-line health care providers are objecting to the growth of managed care plans.
Years ago during the farm aid era, it became popular to raise awareness of the farmers’ plight by pointing out that from a $3.49 box of cereal, the farmer received six cents. (Those are current numbers courtesy of the National Farmers Union.) With agri-business specialized and vertically integrated, mom and pop farmers are removed from most of their customers by layers of processors, shippers, and retailers –each taking their own cut.
Today, doctors and pharmacists still talk directly to their patients. The money that patients pay for health care, however, goes through a web of insurance companies, PBMs, managed care companies, and/or hospitals – each setting their own policies and contracting with each other over how much they will charge for their services.
We patients continue to pay more. The providers – especially those in rural Georgia – continue to lose money on Medicaid patients. Doctors and pharmacists are using this opportunity to ensure the money taxpayers are investing for healthcare actually reaches the patient and their healthcare providers, and not just building an ever expanding monopolistic bureaucracy.
Charlie Harper is publisher of GeorgiaPol.com and executive director of PolicyBEST, which focuses on policy issues of business climate, education, science and medicine, and transportation.
Grassley, Wyden, Bipartisan Senators Push HHS for Pharmacy DIR Reforms in Medicare Part D
WASHINGTON - Senate Finance Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) sent a letter to Department of Health and Human Services (HHS) Secretary Alex Azar and Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma requesting they use regulatory authority to reform direct and indirect remuneration (DIR) with respect to pharmacies under the Medicare Part D program. Specifically, the senators are asking HHS to move forward with the pharmacy DIR reforms that were included in the CMS November 30, 2018 proposed rule "Modernizing Part D and Medicare Advantage to Lower Drug Prices and Reduce Out-of-Pocket Expenses," and finalize them for the plan year 2021. Implementing these reforms would provide payment certainty that enables pharmacies to continue to serve beneficiaries and help them get the best outcomes from their prescribed medications.
Read more on the Congressional Finance Committee Website
New York Daily News
by PARTHIV SHAH
I proudly represent hundreds of neighborhood-based pharmacists who stand at the front line of health care for families in their communities. Patients depend on their pharmacists for advice on medications, to ask general questions about their health and of course to get the medicine they need, when they need it.
Across New York State, neighborhood pharmacies play a big role in our economy. The National Community Pharmacists Association reported that the Empire State was home to some 2,400 community-based pharmacies in 2017. They generated approximately $8.4 billion in outlet-wide sales and employed more than 22,000 people that year.
But today, independent neighborhood pharmacies face a serious competitive threat. You may assume I’m referring to chain pharmacies, but I’m not. You might think chain drug stores pose challenges to us, but we’re happy to go head-to-head with them when it comes to the quality and intimacy of our services.
In fact, the primary threat to our survival comes from a cadre of greedy middlemen who occupy an obscure and exploitative stratum of the prescription drug supply chain. Called Pharmacy Benefit Managers, they’re a powerful force wreaking havoc on local drug stores.
The stealthy, all-but-extortionate impact of PBMs has surged in the past few years.
Not only can PBMs determine what drugs a patient uses; they can also determine where a patient gets their drugs. PBMs will frequently self-refer patients to mail order or chain pharmacies that are in their network, resulting in a greater return for the PBM even though this may not be the most affordable option for the patient.
Last January, a survey of more than 500 New York City neighborhood pharmacy owners conducted by the New York City Pharmacists Society showed how deeply PBM abuses are jeopardizing the viability of “mom-and-pop” pharmacies. Seventy percent of the owners were forced to reduce store hours or lay off employees last year because of PBM abuses. Ninety-two percent have contemplated similar curtailments this year for the same reason.
One nefarious PBM practice is called “spread pricing,” which usually pertains to the pricing of generic drugs. Under spread pricing, PBMs charge their sponsor-client one price for a drug, then most often pay the dispensing pharmacy a much lesser amount (frequently below the pharmacy’s cost), pocketing the difference for themselves.
This is contributing to the closure of family pharmacies. And it cost the state’s Medicaid managed care organizations at least $300 million in overcharges in 2018, according to the Pharmacists Society of the State of New York.
PBMs often force neighborhood pharmacies to sign onerous, take-it-or-leave-it contracts that dictate reimbursement rates. As small mom-and-pop businesses, we’re in no position to go up against some of the country’s largest corporations.
A recent state Senate report found that PBMs often demand patients to fill prescriptions using PBM-owned mail order pharmacies, further impairing the viability of local pharmacies.
Fortunately, lawmakers are now recognizing the damage caused by PBM misconduct and are starting to reel in their power. For example, while “spread pricing” continues in the private sector, Albany recently banned its use in the state’s Medicaid program. And, taking a cue from several other states, both houses of the state Legislature recently passed a PBM reform package that will help protect patients, taxpayers and neighborhood pharmacists from our broken prescription drug system.
The bill would mandate the licensing and regulation of PBMs, require disclosure of the details of “spread pricing” in both private and public insurance plans, and require disclosure of information on discounts, rebates and other kick-backs they receive from drug manufacturers — and make sure those savings are passed on to consumers.
Now, it’s up to Gov. Cuomo to sign this bill. The time has come to neuter the deleterious impact of this industry.
Shah is chairman of the New York City Pharmacists Society & a member of PSSNY