“Immediate action is needed to address these harmful practices by PBMs. Americans deserve and expect protection from inflated prescription drug costs, forced pharmacy closures, formulary manipulation, and barriers to their pharmacy of choice that result from harmful PBM tactics,” said multiple U.S. senators, including Sen. Sherrod Brown, D-Ohio, in a joint letter in March.
Business practices of PBMs can lead to anticompetitive behavior, the Centers for Medicare and Medicaid Services (CMS) says. CMS used the example of vertical integration among health plans, the PBMs and their own pharmacies, which is when all of those entities are owned by the same company.
This places independent pharmacies at a disadvantage, CMS says.
“We urge plans and PBMs to engage in sustainable and fair practices with all pharmacies — not just pharmacies owned by PBMs — and we are closely monitoring plan compliance with CMS network adequacy standards and other requirements,” said CMS administrators in a letter to providers in December.
The Federal Trade Commission provided an example of the consequences of vertical integration, which allows insurers to require patients use only their own pharmacies.
“A third-generation pharmacist in West Virginia told us that when she needed critical medication during her pregnancy, her health insurer would only provide coverage if she got the medicine from its PBM-affiliated specialty pharmacy — a process rife with so many bureaucratic hurdles and delays that the woman almost lost her pregnancy,” said FTC chair Lina M. Khan, during remarks at a White House roundtable on pharmacy benefit managers.
Opaque business practices vs. lower drug costs
If a pharmacy benefit manager is working in a positive manner, it could help with negotiations of contracts between pharmacies and insurers and encourage pharmacies to stay open in underserved areas, said Dr. Thad Franz, assistant dean of student affairs and professor of pharmacy practice in Cedarville University’s School of Pharmacy.
Challenges for pharmacies can occur when the reimbursement rates for the drugs they dispense aren’t sustainable, Franz said.
“PBMs can also cause complexity to the health care system and impact the reimbursement model hurting others (pharmacies) that are on the front lines,” Franz said.
Pharmacy benefit managers’ practices have been criticized for “spread pricing” tactics.
Spread pricing occurs when the PBM charges the insurance company a price for a prescription drug that exceeds the price paid to the pharmacy for the drug, so the pharmacy benefit manager could keep the difference paid, according to the federal Pharmacy Benefit Manager Reform Act, which would prohibit spread pricing.
Advocates for pharmacy benefit managers say they are under fire from drug companies and pharmacies for making drug prices lower, according to the Pharmaceutical Care Management Association.
“The core mission of PBMs is to ensure that patients have affordable access to the drugs they need, which means driving down costs for the health care system,” said JC Scott, president and CEO of the Pharmaceutical Care Management Association.
PBMs secure savings for patients and plan sponsors, including employers, labor unions and health insurers, Scott said.
“Pharmacy benefit companies are under attack simply because of the critically important role they play as the only stakeholder dedicated to lowering drug costs,” Scott said.
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