Ohio Attorney General Dave Yost. (Photo by Morgan Trau, WEWS.)
In the past two weeks, Ohio leaders have been out front in a bipartisan effort to impose the strictest rules yet on pharmacy middlemen said to be using anticompetitive practices to drive up the price of drugs and to drive pharmacies out of business.
State Attorney General Dave Yost and U.S. Rep. Troy Balderson, R-Zanesville, are calling for continued efforts at reform.
The middlemen, known as pharmacy benefit managers or PBMs, facilitate prescription drug transactions covered by insurance. Each of the biggest three is part of one of the 15 largest corporations in the United States — UnitedHealth Group, CVS Health and Cigna-Express Scripts — and each of those also owns a top-10 insurer.
The big-three PBMs control almost 80% of the marketplace and they decide which drugs are covered by insurance and which will have low copayments or none at all. That enables them to negotiate huge rebates and fees from drugmakers in exchange for insuring their products.
PBMs say that allows them to achieve savings for consumers. But the deals are not transparent and it’s unclear how much of what they get from drugmakers makes ends up in the PBMs’ bottom lines.
Academic research has found that as rebates rise, so do list prices and out-of-pocket costs for consumers. And the Federal Trade Commission is suing the big PBMs, accusing them of excluding cheaper forms of insulin from their lists of covered drugs because more expensive ones generate greater rebates.
Meanwhile, PBMs also decide how much to reimburse pharmacies for the drugs they dispense. Each of their parent companies owns a mail-order pharmacy and CVS also owns the largest retail chain. So that puts the PBMs in the position of deciding how much to pay themselves and their competitors.
For nearly a decade, independent pharmacies and small chains have said the big PBMs’ reimbursements are so low that they’re driving them out of business.
There might be something to those claims. According to a data tool released this month by the Ohio Board of Pharmacy, the number of retail pharmacies in the state dropped below 2,000 for the first time in at least a decade despite modest population growth.
It was against this backdrop that the U.S. House of Representatives in December nearly passed the most sweeping federal PBM reforms yet as part of a deal to keep the government open. With then-President-elect Trump expressing support, the reforms made it into what seemed like the final deal.
Among the measures in the continuing resolution was one that would stop PBMs from paying hundreds of different, non-transparent prices for the same drug in state Medicaid programs. Instead, all reimbursements would be based on the same, publicly available list, and PBMs would be paid a flat administrative fee. That measure would save taxpayers an estimated $1 billion over 10 years.
Another measure would stop PBMs from imposing take-it-or-leave-it contacts on pharmacies in Medicare Part D programs.
But then billionaires Elon Musk and Vivek Ramaswamy tanked the deal by claiming it spent too much. Despite their expected savings, the PBM reforms didn’t make their way into the massive spending plan that passed with Trump’s backing.
Rep. Jake Auchincloss, D-Mass., called it “an embarrassing capitulation to the health insurance lobby.”
But Yost, the Ohio attorney general, is trying to make any “capitulation” a brief one. After scrutinizing the drug middlemen as state auditor and suing them as attorney general, he led a bipartisan group of 39 state attorneys general last week in calling on Congress for action.
“Our offices and other state attorneys general are very concerned about actions taken by PBMs that have unduly raised drug prices for consumers, and we are engaging on the issue on a number of fronts, including investigation, litigation, and advocating for legislative and policy reforms,” their letter said. They added, however, that there can be no substitute for federal action.
The attorneys general are pushing for passage of three bills.
One would delink PBM charges from drug prices, thereby removing any incentive to favor more expensive drugs over cheaper ones. Another would require that PBMs serving Medicare Part D only charge flat fees set forth in a written agreement, and that aren’t related to drug prices or rebates.
The third, the Lower Costs, More Transparency Act, is intended to shine a light into all manner of health transactions, including hospitalization. For drugs, it would require disclosure of what drugs are dispensed, what their net prices are and patients’ out-of-pocket costs.
“Together, the legislation is intended to limit PBMs from unjustifiably increasing drug prices and to mandate steps that increase transparency of their practices,” Yost’s office said in a statement. “Specifically, this step encompasses the obligation for PBMs to furnish pricing data to health plans and federal and state regulators in a standardized format. Such measures will empower health plans to negotiate more advantageous agreements with PBMs and enable regulators to more effectively hold PBMs accountable for their actions.”
Each of the bills is pending in the House Energy and Commerce Committee. On Wednesday, Ohio’s Balderson joined two other Republican committee members in saying it’s high time for reform.
“As a result of PBMs’ indecent practices, independent pharmacies around the country are closing,” he said during a hearing of the Health Subcommittee. “I know that in my district we are not strangers to this issue. I hear from my friends, family, and constituents alike that their trusted pharmacies have closed after decades of serving their communities. Pharmacy deserts have continued to grow and patients no longer have access to patient pharmacist relationships that has helped them manage complex medication regimes and diseases. It’s estimated that between 2018 and 2021 alone, the number of pharmacies has declined in 41 states. So, this is not just an Ohio problem. This is not a rural problem. This is a countrywide issue that needs addressed.”
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