Role of PBMs with pharmacies and patients

The West Virginia Legislature will be taking up legislation in 2016 — as it did in 2015 with Senate Bill 84 — to regulate pharmacy benefit managers (PBMs).   Because there is no regulatory authority over these entities or transparency to purchasers of prescription drugs required, some PBMs are reimbursing pharmacies less that the cost of prescription drugs pharmacists dispense their patients.   Patients are also being directed by some PBMs to change drugs just so the PBM can obtain rebates by manufacturers — which they do not pass on to purchasers.  Some PBMs direct consumers to purchase their prescriptions from out-of-state mail order operations owned by the PBM.

PBMs are middlemen originally designed to process prescription drug claims for insurance companies.   Basically, they were compensated by insurers and government plans for their administrative services only.   However, over time PBMs have  taken advantage of their strategic position between insurers, patients and pharmacies to assert control over most aspects of prescription drug transactions among all parties.

Today, PBMs are complex business entities with multiple, extremely profitable, revenue streams.   The nation’s three largest PBMs now manage drug benefits for 80% of Americans as reported during a November 17, 2015, hearing in the United States House of Representatives.   PBMs Express Scripts and OptumRx — two of the country’s largest BPMs — were brought before the Congressional Committee to explain their operations and respond to questions.   One PBM admitted to different prices for different plans and consumers.  Congressional inquiries of the PBM industry is ongoing.

Some PBMs also generate profits by negotiating two types of contracts — one with pharmacies and one with plan sponsors — and reimburse pharmacies one rate for dispensing medications but charge the plan sponsor a higher rate than they pay pharmacies — then “pocket” the spread between the two rates.  Additional revenues and profits are generated by some PBMs who own their own out-of-state mail order pharmacy or contract with a mail order operations.  PBMs often financially penalize patients who chose to use their local community pharmacy rather than using the out-of-state mail order pharmacy.

There are inherent conflicts of interest in the current PBM system.  Because PBMs typically receive rebates from manufacturers, they have no incentive to encourage the use of lower-cost drugs which would benefit the patient, plan sponsor and government programs.  And, PBMs typically do not pass the rebated savings back to the plan sponsor or consumers.

In large part, plan sponsors have no knowledge about the rebate deals some PBMs have negotiated with manufacturers and no knowledge of the “spread” — the difference between what the PBM pays the pharmacy and when the PBM charges them for the same drug.

Among other provisions, WVPA will request legislation that will: (1) require PBMs to adjust prices they pay pharmacy every seven days; (2) require PBMs to disclose to pharmacies current lists of sources used to determine the prices they pay pharmacies; (3) require PBMs to pay pharmacies prices of prescription drugs available in West Virginia; (4) recouping claims by PBMs is to be limited to the dispensing fee paid pharmacy and NOT the product cost when a claim is found to have clerical error; and (5) place PBMs under regulation of the West Virginia Insurance Commission.