State Efforts to Reform Secretive Pharmacy Benefit Manager (PBM) Pricing Policies Gain National Momentum

DATE: September 2, 2015

Americans today rightly demand more transparency in their governmental, financial and educational institutions. It is the foundation upon which to assess accountability, performance and trust. The same must hold true for our complex, sprawling health care system, which continues to struggle under a jumble of bureaucratic inertia, antiquated payment systems and opaque pricing structures for both medical services and prescription drug medications.

To that end, the Senior Care Pharmacy Coalition — a coalition dedicated to representing the exclusive legislative and regulatory interests of independent Long Term Care pharmacies and the vulnerable patients they serve — hopes to work with Congress on reforms that both increase transparency in drug pricing practices and ensure protection against Medicare Part D pricing policies that hinder LTC pharmacies’ ability to delivery quality pharmaceutical care and services to American seniors.

This is especially true when it comes to the pricing practices of Pharmacy Benefit Managers — the third party entities that oversee the administration of seniors’ Medicare Part D prescription drug benefits. Prescription drug plans and the PBMs they utilize to determine both covered drugs and medication payment rates set the cost for generic drugs using a formula known as “Maximum Allowable Cost”  pricing.

How are the prices and covered pharmaceutical product lists determined? It is a mystery, and antithetical to the fundamental need for more open, transparent marketplace transactions — especially in instances when billions in government health funds are tangentially involved. The MAC pricing process allows PBMs to change prices for generic drugs at will — without advance notice to independent long term care pharmacies and others, and devoid of any disclosure as to how and why prices are established and changed. Thus, the issue of rapidly escalating generic prices coupled with slow adjustments to MAC price lists is a primary causal factor driving reform efforts.

Independent LTC pharmacies and patients under their care require adequate protection against Medicare Part D pricing policies affording no recourse to address practices that inappropriately shift dollars from providers to intermediaries such as PBMs. LTC pharmacies, different from retail pharmacies, 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, PBM pricing abuses undermining LTC pharmacy financial stability ultimately threaten quality patient care, and negatively affect taxpayers as added costs accrue to Medicare.

The good news is that a national, bipartisan reform effort is well underway, led by our Governors, with the latest major “sunshine laws” signed into law by California Governor Jerry Brown and Ohio Governor John R. Kasich. 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 somewhat similar bill, which cracks down on anti-consumer PBM pricing activities in Ohio.

Govs. Brown and Kasich deserve praise for aggressively reforming heretofore-unaccountable PBM pricing policies that have left taxpayers and patients in the dark regarding costs, and these back-to-back reform victories — in major states — represent bipartisan momentum for pulling back the curtain on PBMs. Similar federal efforts are warranted to bring about more accountability and less secrecy. The bipartisan “MAC Transparency Act” (HR 244), introduced by Reps. Doug Collins (R-Ga.) and Dave Loebsack (D-Iowa) is a good first step towards actually ensuring MAC pricing fairly and reasonably reflects the costs independent LTC pharmacies must incur in providing medications and services to some of America’s most vulnerable seniors. The federal legislation primarily requires MAC lists to be updated every seven days, and will put an end to the current practice of going weeks, and even months, without straightforward pricing information being made available to LTC pharmacies and patients under their care.

Despite the cascade of problems plaguing our national and state healthcare systems, our state and federal lawmakers are still able to assess, identify, prioritize and begin remedying egregious drug pricing abuses negatively affecting elderly patients, taxpayers, and the public at-large. This is clearly the case regarding PBM reform, which we urge Congress to advance on the federal level for the right reason: It is good public policy.

Alan G. Rosenbloom is president/CEO of the Senior Care Pharmacy Coalition in Washington, DC.

Click here to see the original article on the Roll Call website.