Empower Wisconsin | Jan. 16, 2020
By M.D. Kittle
MADISON — Prescription drug middlemen are killing competition and costing consumers a fortune, according to health care watchdogs and lawmakers.
Bi-partisan legislation aims to hold these middlemen — known as Pharmacy Benefit Managers (PBMs) — accountable while shining light on prescription drug pricing.
PBMs are third-party administrators of prescription drug coverage for insurers and employers. They pay a fee to the pharmacy benefit managers for the services PBM provide, including developing and maintaining prescription drug lists (formularies), processing claims and negotiating discounts and rebates.
Assembly Bill 114 and Senate Bill 100, requires pricing transparency from PBMs, the end of “gag clauses” that have led to higher prices for patients, and more oversight in general.
“What this legislation does is to finally hold the whole PBM industry accountable for their secretive actions that have hurt our state’s most vulnerable patients by forcing them to unknowingly pay high prices for prescriptions,” Rob Gundermann, chair of the Wisconsin Pharmacy Patient Protection Coalition, said in a statement.
WPPPC represents patients, health groups, pharmacists, all “negatively impacted” by the medicine middlemen.
It’s in the negotiations where prescription consumers get clobbered, according to Gundermann, who also serves as president and executive director of the Coalition of Wisconsin Aging and Health Groups.
“PBMs have done everything possible to keep their actions secret as they pocket savings meant for patients,” he said.
A representative from the Pharmaceutical Care Management Association, which represents the nation’s PBMs, did not return a call seeking comment Wednesday.
The federal Centers for Medicare and Medicaid Services, however, found that benefit managers’ power to negotiate larger rebates from manufacturers has helped drive drug price costs down and slowed the growth of drug spending in recent years, the Commonwealth Fund notes. But they also have an “incentive to favor high-priced drugs over drugs that are more cost-effective.”
In other words, Gundermann said, they got greedy.
There’s a lot of money in play. Pharmacy benefits management is a $300 billion-a-year industry, much of that money goes to a small group of big-time players in the market. The largest PBMs — ExpressScripts, CVS Caremark and OptumRX — control over 70 percent of the market, according to the Drug Channel Institute.
Dan Stause, president of Wisconsin-based pharmacy chain Hometown Pharmacies, says the mega PBMs, owned by some of the nation’s largest health insurers and a top pharmacy chain, are limiting patient choice by “driving up out-of-pocket drug expenses by driving out competition from local pharmacies.”
In some cases, the drug middlemen put “gag clauses” on pharmacists, contractually prohibiting them from telling customers that the prescription they need could cost less if they pay out of pocket rather than through their insurance plans.
“Today, PBMs work against the interest of patients and health plans by finding subtle ways to squeeze the drug supply chain for revenue,” Stause wrote in a recent op-ed.
Several states, including neighbors Minnesota, Iowa, Illinois, and Michigan have reported PBMs collectively overbilling patients by at least $300 million.
Assembly Bill 114 and Senate Bill 100, authored by state Rep. Michael Schraa (R-Oshkosh) and Sen. John Erpenbach (D-West Point) would end the use of the “gag clauses,” bringing greater transparency to consumers. Federal legislation signed last year by President Trump also took aim at the non-disclosure contracts.
The legislation would prevent PBMs from paying higher reimbursement rates to affiliated insurers than to independent pharmacies, and demand disclosures of conflicts of interest. The measure cuts the fees PBMs charge, often depleting guaranteed drug maker rebates they’re supposed to receive.
And the bills require every pharmacy benefit manager to submit annual transparency reports to the state.
Assembly Bill 114 and Senate Bill 100 have 99 co-sponsors and broad bi-partisan support. As one legislative staffer said, “every lawmaker serves people who take medicine.” The Wisconsin Pharmacy Patient Protection Coalition has collected thousands of signatures from Wisconsin patients in support of reforming the current system.
At least 33 state legislatures have enacted laws prohibiting the non-disclosure clauses, as well as other transparency measures.
Schraa said an Assembly committee hearing on the legislation could be scheduled for as soon as the end of the month. He said he’s confident that compromise legislation will make it to the floor by the end of the session.
“I know the Speaker (Robin Vos-R-Rochester) is very passionate about this issue,” the lawmaker said.
But lobbyists for the PBMs have been applying pressure, hoping for a stall that will sink passage this session.
Stause contends the middlemen don’t want to defend their practices in a public hearing.
“People need to know what is happening and this legislation works to correct many of the problems our customers and pharmacists are experiencing,” he wrote.