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HEARING HELD ON HB 2303
Backers say it could help local pharmacies keep their doors open
January 27, 2012
 Rep. Kirk Pearson, R-Monroe, a five-term lawmaker serving the 39th legislative district. CLICK TO ENLARGE
And PBM’s for all their clout in the health care field are “Middlemen in our health care system (that) are the only group that is unregulated,” says Rep. Kirk Pearson, R-Monroe who has sponsored a bill, HB 2303, that he says would create greater transparency for Pharmacy Benefit Managers (PBM), perhaps lower prescription drug costs to consumers and ensure locally-owned pharmacies can keep their doors open.
PBMs are “middlemen” that design, negotiate and manage prescription drug benefits for a variety of health insurance plans. In other words, they are subcontractors to the health plan and are sometimes called a third party administrator (TPA) of prescription drug programs.
They are primarily responsible for processing and paying prescription drug claims and are also responsible for developing and maintaining the formulary, contracting with pharmacies, and negotiating discounts and rebates with drug manufacturers.
Today, more than 210 million Americans nationwide receive drug benefits administered by PBMs.
The bulk of income PBMs generate is derived from pharmaceutical manufacturers; manufacturers that provide rebates and discounts to the PBMs as a type of “reward system” for promoting their particular brand-name drugs to drive usage in health insurance plans.
It is not unlike the record business of days gone by. Record companies would contract with independent promoters (“indie promo” men they were called) who would then concentrate on pushing certain records to radio stations so the stations would play the records and thereby help drive sales.
Some critics say PBM’s have evolved into a system where the consumer is forced to purchase more costly brand-name drugs, which then benefits PBMs financially.
HEARING IN OLYMPIA
Pearson’s House Bill 2303 on PBM’s received a hearing Jan. 25 in the House Health Care and Wellness Committee at which Pearson testified.
“As with most issues surrounding our health care system, PBMs are complicated,” Pearson explained.
“I normally don’t wade into health care issues, but because several local pharmacists brought the issue to my attention, I began to look into it further. My concern is two-fold. First, are consumers getting the best deal possible on their prescription drugs, and second these middlemen in our health care system are the only group that is unregulated,” said Pearson.
“I’m not asking that we dismantle the entire system, but consumers need to know their interests are being looked after.”
Pearson is also concerned that PBMs are taking the personal connection out of the pharmacist-patient relationship and adding to job losses in the community.
“There are some instances where these benefit managers contract with local pharmacies to provide services, but the payments made to the pharmacy are significantly lower than the cost of the service,” Pearson said.
According to January 2003 GAO report examining cost savings with mail-order pharmacies under FEHBP (Federal Employees Health Benefits Program) the average mail-order pharmacy price for prescription drugs was 27 percent lower for brand name drugs and 53 percent lower for generic drugs than the price paid to retail pharmacies by cash-paying customers.
Pearson notes that in addition, PBMs mandate mail-order prescriptions for many patients, which hurts local pharmacies. Not only do those pharmacies serve a vital community service, Pearson says those local pharmacists are often times the people who can tell if a patient is having trouble with a medication, spots a dosage issue or a deadly drug combination. This is critical for patients, particularly those who are taking medications for complex health conditions.”
The Federal Trade Commission is currently looking at PBM operations and a possible merger of two of only three PBM mail-order drug companies.
Pearson says some big drug manufacturers object to his bill because they claim it would reveal their trade secrets to the rest of the industry, but he claism it is simply a “transparency bill” that would give consumers more information to make good financial choices with their health care options.
“There’s nothing controversial in the bill and more than twenty other states have put in place the same, or even stricter, oversight of PBMs into law,”notes Pearson.
Some PBMs have been involved in multiple lawsuits throughout the years.
· October 2006: Medco Health Solutions agreed to a $155 million, plus interest, fraud settlement with the Justice Department. The charges included inappropriately canceling government employees' prescriptions, falsely claiming it had called physicians to warn them of potential bad-drug interactions, changing prescriptions without a doctor's consent, taking longer to fill prescriptions than it claimed, and under filling pill bottles.
· December 2005: An Ohio court in a jury trial ordered Medco Health Solutions to pay $7.8 million for defrauding the State Teachers Retirement System of Ohio (“STRS Ohio”). The jury found that Medco owed a fiduciary duty to STRS Ohio and breached that duty.
· September 2005: Caremark/AdvancePCS agreed with the U.S. Attorney’s Office in Philadelphia to pay $137.5 million to resolve civil fraud and kickback allegations involving the Federal Employee Health Benefits Program and Medicare+Choice program. The company also signed an extensive consent order as part of the agreement.
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