As CMS Curtails PBM “Spread Pricing” in Medicaid, SCPC Says Similar Medicare Abuses Require Scrutiny and Transparent Data Release

DATE: June 12, 2019

Washington, DC –In praising the Centers for Medicare and Medicaid Services’ (CMS) recently released guidance mitigating pharmacy benefit managers’ (PBMs) “spread pricing” practices in state Medicaid managed care programs, the Senior Care Pharmacy Coalition (SCPC) suggested similar PBM abuses are occurring in the Medicare program — requiring a comparable level of scrutiny, public accountability and data release.

“Spread pricing” in the Medicaid context refers to PBMs paying pharmacies substantially less than they receive from state Medicaid programs to administer prescription drug benefits — with PBM’s pocketing the difference. A growing number of states have investigated spread pricing and concluded that by using spread pricing, PBMs and Medicaid Managed Care Organizations (MCOs) are overcharging state governments and paying pharmacies — including LTC pharmacies — inadequately.  Kentucky, Ohio, Pennsylvania and New York are among the states to have completed such analyses.

“SCPC applauds Senate Finance Committee (SFC) Chairman Charles Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) for introducing legislation to address the Medicaid spread pricing issue, and efforts by their Committee colleagues — Senators James Lankford (R-OK) and Robert Casey (D-PA) — for raising questions concerning the practice during a recent hearing”  stated Alan G. Rosenbloom, President and CEO of SCPC. “We also thank CMS Administrator Seema Verma for acting decisively to curtail this wanton abuse of taxpayers in general and low-income consumers in particular. Having done so, it now is time to direct scrutiny at the Medicare side of PBMs’ spread pricing ledger.”

Under current statute, PBMs are required to report Medicare spread pricing data to CMS — but the law prevents the agency from sharing details with the public.  SCPC urges policymakers to require CMS to release this information publicly to help optimize transparency and to determine the true extent of PBMs’ spread pricing abuse across all federal health care payment programs.

“There is little question that the same spread pricing practices we’ve seen in Medicaid are pervasive throughout the commercial and Medicare markets,” Rosenbloom continued. “This results in increased costs for consumers, and hinders the ability of independent pharmacies — including independent LTC pharmacies — to compete in the pharmacy marketplace,” Rosenbloom said. “This has the potential to create access and cost problems for consumers, undermine free and fair competition, and jeopardize small and local business owners’ ongoing viability.”

More broadly from a business standpoint, Rosenbloom said, PDP/PBM conglomerates also pay affiliated (commonly owned) pharmacies differently from unaffiliated (independent) pharmacies. Payment differentials, Rosenbloom noted, vary based on the corporate objectives of the PDP/PBMs and exploit undue concentration across other related health markets like insurance, benefits management and pharmacies – retail, mail-order, specialty and LTC. Policymakers have yet to address the anti-consumer and anti-competitive impact across the Medicare, Medicaid, and commercial markets.

“Any comprehensive ‘spread pricing’ solution requires disclosure and evaluation across all markets — and the need to implement policies to rein in excessive spread pricing and undue use of disproportionate market power to benefit pharmacies that share common ownership with PBMs — to the detriment of independent competitors,” Rosenbloom concluded.

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The Senior Care Pharmacy Coalition (SCPC) is the only national organization exclusively representing the interests of LTC pharmacies. Its members operate in all 50 states and serve 850,000 patients daily in skilled nursing and assisted living facilities across the country. Visit seniorcarepharmacies.org to learn more.