Public officials seek greater oversight of prescription drug middlemen
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[May 09, 2024]
By DILPREET RAJU
Capitol News Illinois
draju@capitolnewsillinois.com
As state lawmakers hold hearings targeting the role of pharmacy benefit
managers – an influential arm in how the health insurance industry
prices prescription drugs – multiple state agencies are considering how
to better regulate the industry.
Often referred to as pharmaceutical “middlemen,” PBMs act as third-party
intermediaries who negotiate the availability and price insurance
companies or pharmacies pay for prescription drugs from pharmaceutical
manufacturers. In determining the drugs covered by a given employer
insurance plan, the companies can ultimately dictate what drugs are
available to patients and pharmacies alike.
PBMs have received growing scrutiny on both a state and national level
for the effect many claim they have on driving up drug prices. Local
pharmacy owners testified at recent committee hearings that they are
being squeezed by PBMs through the price of acquiring drugs wholesale
and dispensing them, often at no profit or even at a loss. Over 40
percent of local pharmacies in Illinois – about 300 locations – have
closed since 2013, according to the National Community Pharmacists
Association.
“On almost every brand name medication that you fill, you lose money,”
Michelle Dyer, pharmacist and owner of Michelle’s Pharmacy in Macoupin
County, told the House Health Care Availability and Access Committee
this week.
It was one of multiple recent hearings on the companies, and it followed
last week’s review of a scathing audit of the state’s oversight of the
industry. In part, the audit from 2023 found state regulators had scant
documentation required for effective oversight of PBMs.
Joe Butcher, of the auditor general’s office, told lawmakers on the
Legislative Audit Commission that the Illinois Department of Healthcare
and Family Services failed to collect documents relevant to state
Medicaid spending, which it is responsible for overseeing. Without
necessary documents, Butcher said, the state cannot adequately exercise
oversight authority.
“HFS was not engaging in monitoring practices of PBMs as mandated by the
Illinois Public Aid Code, which establishes several provisions for
monitoring PBMs,” he said.
HFS Director Elizabeth Whitehorn, who was appointed in January, said she
was not sure how HFS failed to obtain documentation from entities under
its watch.
“I don't want to speak for what the department did or did not do before
I was here,” she said. “I don't know if the department ever asked for
the contracts and they were not provided, or if the department simply
didn't ask for them.”
Whitehorn told lawmakers the department will soon file a new rule to
help the department supervise PBMs, in part by requiring PBMs to divulge
more information about their potential conflicts of interest. That will
kick off a rulemaking process through which the department plans to
submit the rule by June to the Joint Committee on Administrative Rules.
Corporate consolidation
Many PBMs, part of an industry that launched in the 1960s as
prescription drugs became a consistent part of health plans, started as
independent companies but were purchased by drug manufacturers in the
1990s.
Three publicly traded PBMs – CVS Caremark, Express Scripts and Optum RX
– control about 80 percent of the U.S. PBM market, and the top six
companies have over 95 percent, according to the Journal of the American
Medical Association.
The state’s newly appointed insurance director, meanwhile, indicated her
willingness to help regulate the industry, citing the consolidation of
ownership as detrimental to patients. Ann Gillespie, a former CVS
Caremark employee, was elevated to insurance director from the Illinois
Senate by Gov. JB Pritzker last month.
“Corporate consolidation has exacerbated the situation, turning the
existence of independent pharmacies from just a competitive market issue
into a health care access issue,” Gillespie said at the House committee
hearing Tuesday.
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State Rep. Natalie Manley, D-Joliet, oversees a House committee
hearing into the practices of pharmacy benefit managers, an opaque
but powerful arm of the health insurance industry. (Capitol News
Illinois photo by Cole Longcor)
Gillespie also said the Department of Insurance is willing to “design
and implement additional regulatory tools” with the General Assembly.
“PBMs have continually sought to evade scrutiny and accountability,” she
said. “As legislators and regulators across the country have sought
greater transparency, PBMs have also challenged state regulatory
authority in the courts, creating additional barriers to stall
regulatory efforts.”
Attendees at recent committee hearings referenced House Bill 4548, which
aims to change Illinois’ insurance law so state government can better
regulate PBMs. Proposed changes include having PBMs disclose the net
cost of drugs covered by a health benefit plan, and restricting PBMs
from ushering patients toward using pharmacies owned by associated
companies.
Last year’s audit recommended consistent monitoring of PBMs, including
requiring an annual report, which is outlined in HB 4548. The bill also
outlines measures requiring PBMs to pay pharmacies a dispensing fee and
reimburse them at a rate equal to the national average drug acquisition
cost dictated by Medicaid.
The bill remains in a procedural committee in the House, making it
unlikely to pass by the General Assembly’s end-of-May adjournment.
The Federal Trade Commission is also in the midst of an ongoing
antitrust probe of six of the largest PBMs, five of which are owned by
insurance companies themselves. Last year, the FTC withdrew prior
statements of support for PBMs. And at a White House event in March, FTC
chair Lina Khan said companies are not cooperating with the probe.
CVS Health, which has the largest share of the market, disputed the
claim, according to news reports; but Rep. Natalie Manley, a Joliet
Democrat who chairs the Illinois House committee that’s probing PBMs,
criticized the lack of attendance by PBM executives at her committee’s
first hearing on the industry last month.
“If there were 10 people here from the PBMs, I would put them right here
and give you some backup,” Manley told a lobbyist from the
Pharmaceutical Care Management Association, a national trade association
representing a vast majority of PBMs.
“We need these questions answered, I'm not sure why they're not here,”
she added. “This was their opportunity to answer some of the accusations
that are being lobbed at them.”
Only one PBM lobbyist and the president of Vivid Clear RX, a PBM
subsidiary of Hy-Vee supermarkets, joined last month’s House committee
hearing. One employee from the Blue Cross Blue Shield-owned PBM Prime
Therapeutics also eventually testified.
The number of PBMs represented increased at this week’s hearing as
another Prime Therapeutics representative and general counsel from
Express Scripts joined a trade association lobbyist.
Jennifer Halsey, professor and director of ambulatory pharmacy services
at the University of Illinois Chicago, said at last month’s hearing
insurance companies are making billions while people in need are unsure
if they can afford their prescriptions.
“We continue to see that insurance companies and PBMs make billions of
dollars in profit alone every single year, and those profits increase
year after year,” Halsey said. “I understand they have shareholders, but
how do we make sure that patients have access to care? If we don't get
to the point where the pharmacies are being reimbursed at a reasonable
rate, there will no longer be pharmacies for patients to go to.”
Manley said she expects “many more months” of hearings regarding PBMs.
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