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
Richmond Register: Kentucky Health News
by Melissa Patrick
Kentucky legislators were assured at a July 8 meeting that the state is committed to resolving the payment issues that the states' independent pharmacies have with pharmacy benefit managers in Medicaid, issues that the pharmacies have said are so bad they threaten their survival.
"We are not going to tolerate it, and we will do whatever we have to do to ensure that the taxpayers of the commonwealth and the beneficiaries of the Medicaid program are treated the way they should be treated," Medicaid Commissioner Carol Steckel told the Medicaid Oversight and Advisory Committee.
Pharmacy benefit managers, or PBMs, are the middlemen between insurance companies and drug companies. They determine what drugs are offered, how much someone pays for the drug and the payments to pharmacists.
Steckel said her agency had a "new-found spine" when it comes to how much control it has over PBMs, and will build on that "power and control" in the updated contracts it is negotiating with managed-care organizations, which will take effect in July 2020. The MCOs subcontract with PBMs.
Steckel, who has worked with Medicaid for 30 years, later referred to the PBMs as "predators" and said, "It makes me angry to have this kind of player in the Medicaid program."
A few days later, Attorney General Andy Beshear announced his office would be submitting a request for more legal help to further its investigation of PBMs' pricing practices.
Beshear, the Democratic nominee for governor, launched an investigation in March to find out whether PBMs have overcharged the state and discriminated against independent pharmacies. "We all want to know if the actions of these companies have resulted in all of us paying too much for prescription drugs -- and we're going to find out," Beshear said in a news release.
Lawmakers have been working on this issue for years. Sen. Ralph Alvarado, a Winchester physician who is Gov. Matt Bevin's running mate for lieutenant governor, reminded the group that it once again felt like "Groundhog Day" -- which Senate Democratic Leader Morgan McGarvey has said before.
Senate Bill 5 of the 2018 legislative session put the Department of Medicaid Services, rather than the managed-care companies, in charge of setting pharmacists' reimbursement rates. It allows the department to regulate contracts between the companies, PBMs and pharmacists; requires more transparency in how PBMs spend the $1.7 billion a year they get for processing prescriptions; and gives the state authority to penalize the companies and PBMs for noncompliance.
In a report earlier this year, "Medicaid Pharmacy Pricing: Opening the Black Box," the state said two PBMs kept $123.5 million last year from the Medicaid program by paying pharmacies a lower rate to fill prescriptions, while charging the state more for the same drug. Much of the discussion at the July 8 meeting was around SB 5 and the MCO contracts now being negotiated.
Trevor Ray, an independent pharmacist and co-owner of Midway Pharmacy, which has four locations in Grayson County, praised the efforts behind SB 5, but said many issues still need to be addressed to ensure "fair, transparent and adequate reimbursement" for community pharmacies.
Ray said low dispensing fees are still an issue, even though the Medicaid department increased this fee to $2 per prescription after SB 5 became law. The Centers for Medicare and Medicaid Services says this amount should be around $10,64, plus the cost of the drug being dispensed.
Mark Glasper, executive director and CEO of the Kentucky Pharmacists Association, told Kentucky Health News in an e-mail that while the new fee helps, the amount barely scratches the surface of what is needed. "Independents are scratching to stay in business," he said. "The $2 dispensing fee afforded by SB 5 is merely a Band-Aid."
Ray questioned "backdoor fees" and "spread pricing," in which a PBM keeps the difference between what it bills Medicaid for medications and what it pays the pharmacy to dispense the drugs. The Medicaid department said the 2019 spread pricing in Kentucky through May was 12.9%. This number doesn't include data from WellCare because it does not use this model.
Ray also explained a process in which pharmacies are paid one price for a drug, only to have a chunk of it taken back several months later, which he said is a problem with both spread pricing and "pass-through pricing," which is what WellCare does. In pass-through pricing, an MCO is paid the actual discounted pharmacy price that the PBM negotiated with the retail pharmacy network.
The Medicaid department went over the changes proposed in the MCO contracts, including new language from SB 5; requirements that all PBMs use a "pass-through model;" language banning "take-back" fees; and language to remove any barriers to claims data. The new contracts will take effect July 1, 2020.
Steckel also told the lawmakers that DMS was using Kentucky data to replicate a West Virginia study showing the impact of removing pharmacy services from MCOs, which is what the pharmacists' lobby and many legislators would like to see happen. The West Virginia study found that the state saved $54 million by removing prescription drugs from Medicaid managed care.
Ray concluded, "We're not asking for more money just to get paid more, we just want to be paid fairly."
In 2016, Kentucky passed a law that allows the state Department of Insurance to regulate PBMs much like insurance companies are regulated, and to provide an appeal mechanism to resolve pricing disputes between pharmacies and PBMs.
The law has resulted in CVS Caremark, a PBM for all but one of the Medicaid management companies in Kentucky, being issued a $1.5 million fine in July 2018 for hundreds of reimbursement violations involving individual pharmacies, and for giving the department 'inaccurate or inconsistent" information. It also resulted in Caremark PCS Health being put on probation for one year.
Kentucky Health News is an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Media at the University of Kentucky, with support from the Foundation for a Healthy Kentucky.
by Robert W. Levin
ORLANDO — The current role of pharmacy benefit managers as “controllers” in the center of the prescription drug market has been detrimental to both patients and physicians, according to Robert. W. Levin, MD, president of the Alliance for Transparent and Affordable Prescriptions, who likened manufacturer rebates to “kickbacks” and “organized crime.”
“The PBMs are in the center: they are the controllers, and they interact with the manufacturers and decide placement on formulary, deciding which drugs we can prescribe first, leading to step therapy and nonmedical switching, and all the other horrible utilization management things for our patients,” Levin, who practices at Bay Area Rheumatology, in Clearwater, Florida, told attendees at the 2019 Rheumatology Nurses Society Annual Conference. “The PBMs are the cause of it. They create formularies, and the manufacturers have to pay to get that formulary placement.”
“Formulary placement is not rational,” he added. “It is not rational based on what works for our patients, or what is efficacious or safe, or well-tolerated. None of that really counts. The only thing that counts is how much money — how big of a truck they can pull up, filled with cash — they can give to the PBMs. That is really what all of this is about.”
According to Levin, Express Scripts, CVS and United Health capture more than 75% to 85% of the PBM market share, with Express Scripts’ revenue totaling $101.85 billion in 2015. He added that recent consolidation and vertical integration has seen Express Scripts purchased by Cigna and CVS/Caremark bought by Aetna. United Healthcare owns Optum Rx, Levin noted.
“These three largest PBMs are in the top 25 of the Fortune 500, and they are larger than any pharmaceutical company,” Levin said. “When you think about how gargantuan they are, the top pharmaceutical companies are below the revenues and profits some of these PBM companies make.”
According to Levin, PBMs claim to drive down drug costs by negotiating discounts for health plans and patients, as well as by designing formularies and obtaining rebates. Other arguments in favor of PBMs are that they increase the use of mail-order and specialty pharmacies, offering more affordable channels for purchasing medications, and also that they encourage the use of generics and affordable brands, he added.
However, such arguments and claims are not rooted in reality, Levin said.
Not only are medication costs “skyrocketing,” with patients paying more at the pharmacy counter, but access has also grown more restricted, he argued. Rather than help decrease costs, Levin said PBMs use their position to instead negotiate contracts with manufacturers, health plans and pharmacies that maximize profits at the expense of patients and physicians. These sources of PBM revenue and profit included spread pricing, manufacturer rebates, their own mail-order pharmacies and administrative and service fees, he said.
Regarding rebates in particular, Levin said drug manufacturers pay these lump sums to PBMs in exchange for preferred placement on formularies. The rebate amount is a negotiated percentage off the list price, with the manufacturer promising to pay the PBM a percentage rebate of that price for every prescription filled for that drug, he added.
According to Levin, this motivates PBMs to base drug use on rebate profits rather than patient care or the need to reduce costs.
“The best way to describe these pharmacy benefit managers, and what they do, is they provide this really important thing, called ‘middle-man services,’” Levin told attendees. “They basically sit there in the middle and act as the toll booth. They really do nothing in terms of innovation, they do nothing in terms of lowering costs. They claim to lower costs, but the question is, ‘To whose benefit?’ That is really the crux of the matter.”
The rebate system, in addition to creating strong financial incentives when managing formularies, has had “profoundly negative” effects on patient access to affordable treatment, according to Levin. In addition to step therapy and nonmedical switching, it has led to increased list prices, forcing patients to pay an “inflated out-of-pocket amount.”
“PBMs are only contractually obligated to pass on rebates as specifically defined in the health plan contract, but health plans do not know the amount of rebates actually collected from manufacturers,” Levin said. “PBMs exploit this nontransparency to reclassify rebates in the manufacturer contract as ‘fees,’ or as ‘payment for services.’ This allows PBMs to keep a large part of the rebate has profit.”
“A lot of the problems with all of this could be alleviated if we got rid of this secrecy and create transparency,” he added. “If the amount of money paid by the manufacturer to the PBM was disclosed, we could have a better system. We could actually have our patients paying based on what the real price is, which was negotiated by the PBM, and actually take advantage of that for our patients. That would improve access tremendously.” – by Jason Laday
Levin RW. Confronting the barriers of access to care. Presented at: Rheumatology Nurses Society Annual Conference; Aug. 7-10, 2019; Orlando, Florida.
Disclosure: Levin reports speaking fees from AbbVie, Bristol-Myers Squibb, Exagen, Regeneron and Sanofi, as well as consulting fees from Crescendo.
Seema Verma, Administrator, Centers for Medicare & Medicaid Services
The Medicaid program has grown from $456 billion in 2013 to an estimated $576 billion in 2016, largely fueled by a mostly federally financed expansion of the program to more than 15 million new working age adults. For these adults, the estimated cost per enrollee grew about 7 percent from FY2017 to 2018, compared to about 0.9 percent for other enrollees. With this historic growth comes a commensurate and urgent responsibility by CMS on behalf of the American taxpayers to ensure sound stewardship and oversight of our program resources. While the primary responsibility for ensuring proper payments in Medicaid lies with states, CMS plays a significant role in supporting states’ efforts and holding them accountable through appropriate oversight and increased transparency.
That’s why the Trump Administration has proposed numerous changes to the Medicaid program such as improving overpayment collection when states pay for ineligible beneficiaries, streamlining provider terminations to remove bad actors, and consolidating provider enrollments in Medicaid and the Children's Health Insurance Program (CHIP) to improve efficiency.
One year ago we took a significant step to address these challenges when we released a Medicaid Program Integrity Strategy based on the three pillars of flexibility, accountability and integrity. Our strategy seeks to reduce Medicaid improper payments across states to protect taxpayer dollars. To do so, the strategy includes stronger audit and oversight functions, increased beneficiary eligibility oversight, and enhanced enforcement of state compliance with federal rules. As we mark the first anniversary, we can point to several initiatives that are improving transparency and accountability for the Medicaid program, enabling increased data sharing and more robust analytic tools, and reducing Medicaid improper payments across states.
CMS Information Bulletin: Oversight of State Medicaid Claiming and Program Integrity Expectations. This bulletin, issued last week, sets out CMS’ higher expectations for states to ensure the accuracy of eligibility determinations and federal funding at the appropriate matching rate to improve accountability for Medicaid program integrity performance. The bulletin is particularly important for states that have expanded or may be considering expanding their Medicaid programs to the new adult group, which is financed with 90% or more in federal funding. CMS will issue additional guidance to help states improve their program integrity performance.
Disallowing Unallowable Claims of Federal Funding. CMS closely monitors how states draw down and expend federal Medicaid funding to ensure it complies with all applicable laws and regulations. When states do not voluntarily return federal funds associated with unallowable claims, CMS can recover them by issuing a disallowance. Over the last 18 months, the Trump Administration has worked through an inherited backlog of potential disallowances where CMS, Office of Inspector General (OIG), or state oversight activities identified potentially unallowable state claims. We are taking action to resolve a number of these potential disallowances. Since 2017 we issued approximately $900 million in disallowances. We are committed to achieving more expeditious resolution of these issues to prevent new backlogs from developing in the future, thereby ensuring federal funds are repaid in a timely manner.
Increased Audits and Oversight. We are conducting eligibility audits of state beneficiary eligibility determinations in states identified as high risk by previous OIG and state audit findings (beginning in California, New York, Kentucky, and Louisiana) to hold states accountable for more accurate beneficiary eligibility determinations. In addition, we are working with all states to implement the revised Medicaid Eligibility Quality Control (MEQC) program, which allows for continuous oversight of states’ eligibility determinations during their off-cycle Payment Error Rate Measurement (PERM) years. We are also auditing Medicaid managed care plans’ financial reporting and Medical Loss Ratios (MLRs) to ensure plans aren’t being overpaid, including reviews of high-risk vulnerabilities identified by the Government Accountability Office (GAO) and OIG. As of December 31, 2018, prior CMS efforts led to CMS recovering $9.63 billion from California in relation to our efforts to ensure appropriate payments to managed care plans specific to the new adult group.
Data Sharing and Partnerships. Strong data collection and analysis will enable smarter efforts to tackle fraud, waste, and abuse. We are enhancing data sharing and collaboration to tackle program integrity efforts in both the Medicare and Medicaid programs. We are now collecting and optimizing enhanced Medicaid data from all states and two territories through the Transformed Medicaid Statistical Information System (T-MSIS). New efforts to use this data to detect fraud, waste, and abuse represent the first use of T-MSIS data for program integrity purposes, moving CMS closer to its goal of comprehensive, timely, national analytic data for Medicaid.
Education, Technical Assistance and Collaboration. The best way to manage improper payments is to help states avoid them at the outset. As part of CMS’ work to provide guidance and assistance for state implementation of the Medicaid Managed Care Final Rule from 2016, CMS released guidance in 2018 regarding Medicaid provider screening and enrollment for Medicaid managed care organization network providers. To further educate and collaborate with states, CMS engages in the following activities:
Reducing Improper Payments
The Payment Error Rate Measurement (PERM) program measures improper payments in Medicaid and CHIP and produces error rates for each program. In 2019, for the first time since 2014, we will be reporting the improper payment rate for people who are improperly enrolled in Medicaid and CHIP.
CMS continues to collaborate with states in implementing the new and enhanced program integrity initiatives from the Medicaid Program Integrity Strategy, as well as look for new areas of vulnerability and opportunity to support state efforts to meet high program standards. Our upcoming efforts will include:
As we give states the flexibility they need to make Medicaid work best in their communities, integrity and oversight must be at the forefront of our role. Beneficiaries depend on Medicaid and the Trump Administration is committed to the program’s long-term viability. We are using the tools we have to hold states accountable as we work with them to keep Medicaid sound and safeguarded for beneficiaries. These initiatives are the vital steps necessary to respond to Medicaid’s evolving landscape and fulfill our responsibility to beneficiaries and taxpayers.
Agency joins chorus seeking greater pricing transparency
by Andy Metzger, Commonwealth Magazine
A QUASI-INDEPENDENT state agency tasked with monitoring the health care marketplace has made a foray into the debate over pharmacy benefits managers, calling for more transparency about the role the companies play in setting the cost of drugs.
Pharmacy benefits managers act as a broker between insurers or government on the one side, and drug manufacturers on the other. The insurance industry sees them as a crucial check on the pharmaceutical industry, using their market clout and expertise to negotiate cheaper drug prices and facilitate their delivery. Independent pharmacists and the drug makers themselves contend that pharmacy benefits managers – or PBMs – add little value and a lot of cost, which is mostly borne by patients.
State officials have taken an interest in this esoteric corner of the health care marketplace. Gov. Charlie Baker proposed limitations on PBM margins and transparency measures projected to save millions of dollars. The Senate budget includes a measure directing Auditor Suzanne Bump to investigate PBMs.
On Wednesday, the Health Policy Commission unveiled research suggesting that one method of compensating PBMs – through something called spread pricing – tends to be costlier than another where the companies collect a fixed fee. The commission also joined calls for shedding light on the “black box” of PBMs.
“These findings reinforce the urgent need for policy action to enhance the transparency and accountability of the prescription drug market,” said Health Policy Commission Executive Director David Seltz in a statement. “Increased oversight on pharmacy benefit managers is necessary to ensure that their pricing strategies are not used to inflate profits at the expense of Massachusetts residents and employers. Private and public health plans – along with employers and patients – need more information to make better informed spending decisions that will hopefully lead to an overall reduction in spending on pharmaceuticals.”
The Health Policy Commission examined differences between two ways that PBMs are paid. With spread pricing, which is how Medicaid managed care organizations compensate PBMs, the PBM keeps the difference between what the company charges an insurer and what it reimburses a pharmacy. Under that model, the revenue is “opaque,” according to the commission. With “pass through” pricing, which is what Medicaid fee-for-service programs use, the PBMs are paid a set dispensing fee per prescription, which is $10.02 in Massachusetts, according to the commission.
The difference in price is particularly marked in the case of Buprenorphine-Naloxone, which is used to treat opioid addiction. Late last year, Medicaid managed care organizations paid an average of $159 per prescription of Buprenorphine while the average fee-for-service price was less than half that at $75, according to the commission.
“The fact that the pharmacy benefit managers have increased the prices charged for this drug in the MassHealth managed care program, at the same time that the acquisition cost of the drug has decreased significantly, raises particular concerns and questions regarding the appropriateness of these pricing practices,” said Martin Cohen, president and CEO of MetroWest Health Foundation, who is on the board of the Health Policy Commission.
There has been a wave of scrutiny around the nation into PBMs and criticism of the revenue that the companies keep for themselves, but their clients in the insurance industry appear satisfied with the arrangement.
“Our perspective is that health insurance providers and their PBM partners are fighting for lower prices, and we use the bargaining power that we have to negotiate savings for millions of patients every single day,” said Kristine Grow, senior vice president for communication at America’s Health Insurance Plans.
Grow is critical of the recent attention on PBMs. “We think this is a distraction from the real issue of drug prices, which – you want to talk about a black box? There is no insight into how big pharma companies land on the prices that they launch their drugs with, and what causes those prices to go up year after year.”
Zach Stanley, vice president of public affairs for the Massachusetts Biotechnology Council, which is already battling legislation on Beacon Hill that places restrictions on the prices set by drug manufacturers, sees PBMs as the bigger problem. Stanley says the savings that PBMs achieve through rebates accrue more for their clients the insurance companies than patients.
“The way PBMs operate – by passing along some of the savings they generate directly to insurers instead of patients – creates a perverse system where drug rebates are used to lower premiums instead of lowering out-of-pocket costs for patients who use the drugs,” Stanley said. “In this system, the sick are subsidizing the healthy.”
While their role is somewhat obscure to the general public, PBMs are run by some of the biggest players in the health care industry – Express Scripts, CVS Caremark, and Optum. Seltz and others want more visibility into PBM operations. But the Pharmaceutical Care Management Association, a PBM industry group, says secrecy is a key ingredient to lowering the cost of drugs.
“The goal here is to get the best possible price from manufacturers, and they’re not going to give you their best possible price if they know what their competitor is giving. They’re only going to give slightly below or somewhere very close to what their competitor is giving,” said April Alexander, assistant vice president of state affairs for the Pharmaceutical Care Management Association.
Todd Brown, who is on the faculty of Northeastern University College of Pharmacy and executive director of the Massachusetts Independent Pharmacists Association, sees things differently. To Brown, the secrecy is a way for PBMs to hide their “excessive profits.”
“They set themselves up so there’s a lack of transparency,” Brown said. “They’re the only ones that have this data and they keep it that way under the guise of, ‘Well if we don’t tell everyone, we can get a better deal.’ There’s no evidence to support that and every economist will tell you that transparency actually increases discounts.”
After this story was published, Tiffany Haverly, a spokesperson for the Pharmaceutical Research and Manufacturers of America, said the group welcomes transparency.
“We support efforts to bring meaningful transparency to the process that determines what patients pay at the pharmacy counter. There are a variety of stakeholders involved in determining what consumers ultimately pay for a medicine – including insurers, PBMs, wholesalers and government entities like Medicaid,” Haverly said. “On average, 40 percent of a medicine’s list price is given as rebates or discounts to supply chain stakeholders who often require large rebates for a medicine to be covered. These rebates exceeded $166 billion in 2018 alone. While we’re still reviewing the report, we commend the HPC for undertaking this important review.”