Reflecting how a previously obscure part of the prescription drug supply chain is increasingly in the crosshairs, nearly two-thirds of the bills introduced in U.S. state legislatures this year to rein in drug prices target pharmacy benefit managers.
PBMs such as Express Scripts Holding Co., CVS Health Corp. unit CVS CareMark and UnitedHealth Group Inc.'s OptumRx negotiate prices with drug companies and pharmacies. Although the industry says it has arranged for lower drug prices, the benefit managers have also been criticized for a variety of practices, including allegations that they pocket too much of the rebates offered by drug companies instead of passing them on to consumers.
Lawmakers in states including New York and Florida have already introduced 45 drug pricing bills in 2018, and 28 of them would rein in the practices of PBMs or require greater transparency and regulation of the industry, according to a tally by the National Academy of State Health Policy.
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State bills, such as proposals in Vermont and Utah headed for preliminary floor votes as early as late this week, deal with a range of issues.
PBMs are becoming the focus of attention as "legislatures are digging into the details about what drives costs," the academy's executive director, Trish Riley, said in an interview with S&P Global Market Intelligence.
"Increasingly, consumers are also complaining about the PBMs," she added.
It is unclear how many of the bills will pass. Of the 103 drug pricing bills introduced last year, only 27 were approved by both houses of their legislatures.
Gag orders on pharmacists
Lawmakers are paying particular attention to complaints from pharmacists that confidentiality clauses keep them from telling customers about cheaper options to the drugs being negotiated by PBMs.
The clauses can deter pharmacists from informing consumers about other, less expensive medications that can treat their conditions, said Scott Brunner, senior vice president for communications and state legislative affairs at the Community Pharmacists Association.
In other cases, pharmacists cannot tell customers that what they pay in their insurance copay is higher than the negotiated price of the drug and that they would save money by not using their insurance, Brunner said in an interview.
Michael Jackson, executive vice president and CEO of the Florida Pharmacy Association, said, "It's extremely frustrating."
The association is supporting a bill in the state barring restrictions on communications.
"Sometimes [the customers] can't afford the copay. But there's a gag order on us," Jackson said in an interview.
"If a pharmacist who a lot of people have a lot of trust in has the skill and the knowledge, he should be able to tell consumers about a brand that can accomplish the same thing at a lower price," said state Sen. Joseph Griffo, a Republican who is sponsoring a similar bill in New York.
Brunner said that often the amount that PBMs reimburse to the pharmacy is less than what it pays to buy the drug, resulting in pharmacists losing money.
According to a Los Angeles Times report, a California woman in one federal lawsuit alleged that she was not told that her copay was higher than the rebated price of her medication and that the additional money she had to pay went to the PBMs.
In 2017, four states — Connecticut, Georgia, Maine and North Carolina — passed bills barring pharmacists from being able to tell customers about cheaper options.
Another 10 states are considering similar bills this year, according to the National Academy of State Health Policy.
Express Scripts, CVS CareMark and Optum did not reply to questions asked by S&P Global Market Intelligence and referred queries to the Pharmaceutical Care Management Association, or PCMA, and the Coalition for Affordable Prescription Drugs.
The three companies had denied in August 2017 that they require pharmacies to charge a higher rate than the rebated price of drugs, the Los Angeles Times report said.
PBMs help lower drug costs
Testifying before the Senate Health, Education, Labor and Pensions Committee in October 2017, however, PCMA president and CEO Mark Merritt insisted that the industry is helping to lower prices.
Merritt denied the claims of drug companies that they have to raise prices to pay for rebates demanded by PBMs.
"Drugmakers set and raise prices regardless of rebates they negotiate with PBMs," Merritt said.
Instead, prices negotiated by the benefit managers lowered drug costs by about 30%, he added.
"PBMs have played a key role in restraining the rise of overall drug costs to low single-digit increases over the past few years," the PCMA said in a release at the time.
Some lawmakers are trying to get a better handle on what, if any, role the benefit managers play in high drug prices.
A number of bills would require PBMs to disclose confidential information such as the difference between the rebated price of drugs and how much PBMs reimburse pharmacists for the same drug.
"Healthcare policy experts and regulators need to have accurate information to be able to gauge the reasons for increasing healthcare costs, and patients deserve to have more information when making decisions around health plans and treatment," state Rep. Jennifer Benson, D-Mass., a sponsor of one of the bills, said in a statement.

