The Alliance

States Examine Pharmacy Benefit Managers’ Role In Rising Health Care Prices

January 10, 2019 9:46 am

“Thumbs up,” said the Greenwich Time editorial board just before the holiday. The editors were pleased the Connecticut state comptroller had decided to examine “the profits made by insurers that serve as a middle man between doctors and patients.”


Connecticut is not the only state looking into these middlemen, called pharmacy benefit managers (PBMs). At least 11 states launched PBM investigations in 2018.


The states are right to be concerned. As this blog noted in October, while drug companies offer generous rebates to make medicine more affordable, the savings often don’t make it into patients’ pockets. Insurers and PBMs have pocketed at least $89 billion, but that figure could be far higher since PBMs are not required to disclose their savings.


States want answers because if PBMs are stockpiling discounts it would mean taxpayers are paying more for Medicaid. In fact, last August, Axios noted data analyses from 46brooklyn Research revealed “states are getting bad deals on prescription drugs” because PBMs “manipulate the current drug pricing system for their own gains.” A June report by the Ohio Department of Medicaid found the state’s two PBMs pocketed a $224 million “spread” in 2017. (The “spread” is “the difference between what PBMs billed the state’s health insurers for pharmacy services and what PBMs paid to pharmacies that dispensed drugs to Ohio’s poor and disabled.”)


These practices also keep patients in the dark. Chicago officials also are investigating and, in a letter sent last May to local PBMs, alleged the managers had “place[d] limitations in their contracts with pharmacists that prevent a pharmacist from disclosing when a customer’s prescription would cost less if purchased outside their insurer or pharmacy benefit manager’s plan.”


In New York, according to Modern Healthcare, independent pharmacists have asked state officials to investigate PBMs. The sole proprietors believe PBMs are the reason many mom and pop pharmacies are closing. Pharmacist Ray Macioci, who has been in business in the Bronx for more than 40 years, said, “When your competition controls the flow of dollars, and they can turn it off and on at will, you really have a problem.”


Findings like these have caused at least one state – West Virginia – to do away with PBMs altogether. Additionally, in December, as The Associated Press reported, Pennsylvania’s nonpartisan state auditor asked state lawmakers “to rein in pharmacy benefit managers, saying the companies are allowed to operate in secrecy in ways that let them profit while driving up health care costs.” The auditor believes the state should fire the PBMs, just like West Virginia did.


An Illinois pharmacist working with state officials there to investigate PBMs told The Columbus Dispatch, “You will be hard-pressed to find a state that now isn’t looking into this …”


As they consider the cost of lifesaving medicines, perhaps federal lawmakers and regulators should follow this lead.