Arkansas PBM Reform Law Targeting Generic Drug Pricing Abuses Good Model for Other States

DATE: September 17, 2015

Senior Care Pharmacy Coalition (SCPC) Slams Federal PBM Lawsuit to Reverse Arkansas’s Pro-Consumer, Pro-Taxpayer Reform Law Signed by Gov. Hutchinson

Washington, DC – Continuing the discussion surrounding the growing number of bipartisan state-based laws to reform secretive, opaque pricing policies practiced by the pharmacy benefit manager (PBM) industry, the Senior Care Pharmacy Coalition (SCPC) today praised Arkansas Gov. Asa Hutchinson (R-AR) for signing Act 900 into law earlier this year — ending PBMs’ ability to reimburse independent long-term care (LTC) pharmacies and others dramatically less than the actual cost of acquiring and dispensing generic drugs. PBMs are third party entities that oversee the administration of seniors’ Medicare Part D prescription drug benefits.

Act 900 first requires independent LTC pharmacies and others to be paid at least as much as PBMs’ wholly-owned affiliated entities and, second, requires PBMs to update their maximum allowable cost (MAC) drug pricing lists weekly. MAC lists are used to determine LTC pharmacy reimbursement levels. The issue of rapidly escalating generic prices coupled with unduly slow adjustments to MAC lists is a primary causal factor driving reform efforts in a number of states, including Arkansas.

“Act 900, the most sweeping of several state reform bills, not only ensures PBMs pay LTC pharmacies at least as much as their affiliated entities – thus leveling the reimbursement playing field – but also makes PBMs more accountable to elderly consumers and taxpayers,” said Alan G. Rosenbloom, President of SCPC. “Act 900 is aggressive in its intent to ensure marketplace fairness and transparency, and is an optimal legislative model that should be emulated by other states.”

Noting the national PBM industry has sued the state of Arkansas for its aggressive effort to curtail predatory PBM practices, Rosenbloom predicted the heavy-handed tactic would backfire. “Misguided efforts by the national PBM industry to intimidate reform-minded states like Arkansas with federal lawsuits will backfire — as it simply draws more attention to their egregious, unchecked abuses,” he said. “SCPC will continue to spotlight state PBM reforms as we develop and promote parallel federal reform legislation.” Rosenbloom also said such lawsuits, which argue that federal law prevents states from taking action, underscores the need for a federal solution in addition to state approaches.

Rosenbloom noted that LTC pharmacies, different from retail pharmacies due both the mandatory services they must provide on an ongoing basis and the resultant higher cost structure, “are an increasingly important part of our broader care continuum, as medically compromised seniors and patients facing rehabilitation in skilled nursing, assisted living and other settings significantly benefit from their clinical oversight.” Unfortunately, he observed, “PBM pricing abuses undermining independent LTC pharmacy financial stability ultimately threaten quality patient care, and negatively affect taxpayers as added costs accrue to Medicare.”

National, bipartisan PBM reform efforts are well underway, with the latest major “sunshine laws” signed into law by Governors Jerry Brown (D-CA) and John Kasich (R-OH). Specifically, Brown signed AB 627, requiring PBMs to update their MAC lists weekly, provide in-network pharmacies with the current MAC list upon request, and disclose the sources used in establishing MAC lists. Governor Kasich signed a similar measure, which cracks down on anti-consumer PBM pricing activities in Ohio.

The SCPC represents companies that own and operate independent long-term care pharmacies (LTCPs) in more than 40 states, including Arkansas, serving more than 400,000 residents in skilled nursing facilities (SNFs) and assisted living facilities (ALFs) daily.

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