SCOTUS Can Rein in Middlemen Who Are Gaming Local Pharmacies, Patients

Morning Consult– January 23, 2020 

By B. Douglas Hoey

Very few people know what pharmacy benefit managers do. The three biggest rival the largest corporations in the world in terms of market capitalization, revenue and profits. The CVS Health pharmacy service segment, for example, reported $134 billion in revenue last year.

The PBMs exert enormous influence on the health care system. They decide which prescription drugs your insurance will cover, how much you’ll pay, and, increasingly, which pharmacies you must use to get them.

While PBMs were created to manage costs, drug prices have exploded over the past 10 years, with a 30 percent increase in the last four years alone. From 1987 to 2017, patients’ actual out-of-pocket costs increased by 180 percent. And simultaneously, because of some manipulative business practices such as reimbursing pharmacies less than it costs them to dispense medicine, many local pharmacies are closing.

Higher prices. Fewer choices. It’s not supposed to be this way.

For its part, Washington hasn’t done much to rein in the PBMs despite bipartisan support on Capitol Hill to do so. In the meantime, the states are acting.

They’re developing and enacting their own policies to promote access to care, lower costs and rein in PBMs. But states are finding themselves hamstrung by the inconsistency in how courts have ruled on whether laws regulating PBMs relate to and are pre-empted by the Employee Retirement Income Security Act.

The Supreme Court will soon have the opportunity to provide clarity in a case where the PBM lobby challenged an Arkansas law that, among other things, required PBMs to reimburse pharmacies at or above what the pharmacy paid to acquire certain drugs and required that they not pay their competition in community pharmacies less than they reimburse their own PBM-owned pharmacies.

As it stands, community pharmacies are often reimbursed by PBMs at rates that leave pharmacies underwater on the medications they dispense, leading to not only negative effects on pharmacies but also on the vulnerable patients who rely on access to pharmacy services. From the summer of 2018 to the summer of 2019, 3.3 percent of all the community pharmacies and chain drugstores in the United States closed, leaving millions of patients without the pharmacy of their choice.

Sadly, we learn of more closures each week, harming patient adherence and worsening health outcomes. The Arkansas statute, which the PBMs are fighting tooth and nail, seeks to impose commonsense regulations on PBMs to bring more transparency to the industry and ensure that patients continue to have fair access to their prescription drug benefits.

The U.S. Solicitor General’s Office, which recently asked the Supreme Court to hear this case, takes the position that an appeals court ruling striking down the legislation was “incorrect” and “contrary to (the Supreme) Court’s precedent and the decisions of other courts of appeals.”

Thirty-two states and Washington, D.C., support Arkansas’s position in the case of “Rutledge v. Pharmaceutical Care Management Association,” writing that the “unbounded approach to ERISA preemption reflected in the (appeals) court’s opinion raises serious federalism concerns, making it more difficult for States to perform their traditional role as healthcare regulators. And the decision comes at a time when many States are grappling with how best to address the challenges presented by the conduct of PBMs and rising prescription drug costs.”

The National Community Pharmacists Association and our members agree. We’ve seen it time and time again, in Arkansas and in other states: PBMs are driving pharmacies out of business, leaving patients with fewer accessible health care options. They must be reined in.

We join with Arkansas Attorney General Leslie Rutledge and the Arkansas Pharmacists Association in urging the Supreme Court to support states’ ability to ensure access to care and lower health care costs.

B. Douglas Hoey is a pharmacist, MBA, and CEO of the National Community Pharmacists Association, which represents over 21,000 independent pharmacies across America.