At first blush, it seems basic. After a doctor writes a prescription, a patient gets it filled at a pharmacy. But the pharmacy isn’t in full control. There’s a go-between: a pharmacy benefit manager, or PBM, which negotiates prices with wholesalers, sets reimbursement rates on drugs and compiles the lists of which medicines an insurer will cover (known as formularies).
Thanks to our sponsors:
The industry can secure discounts, and the national association for PBMs describes their efforts as working to achieve savings and access to prescriptions. But critics, including Gov. J.B. Pritzker, who took specific aim at PBMs last month during his state of the state address, describe the industry as focused on self-enrichment and in need of regulation. He said “one of the great ironies of our modern age” is the concurrent breakthroughs that have developed life-saving medicines that end up being so expensive that they’re out of reach. “What’s causing that? Patients, health care providers, and independent pharmacists will all tell you that pharmacy benefit managers — or PBMs — are driving up prices,” Pritzker
said in his speech . “They extract extra profit from patients through opaque and often predatory tactics. They are not doctors, but they work with insurance companies to deny people the drugs and treatments doctors prescribe.” It’s a descriptor often applied to PBMs. “They are the Webster’s Dictionary definition of a middleman,” said Chad Kodiak, a pharmacist and owner of Kodocare Pharmacy in Joliet. “So the PBM sits between the insurance company and the pharmacy, and they determine what reimbursement is, how (prescriptions) gets reimbursed, and most importantly and most frustratingly, is what patients pay and what they can and cannot get when they go to the pharmacy.” Kodiak said PBM practices have nearly driven him out of business. Even as he’s trying to stay afloat, Kodiak said he has had to turn away patients, because PBMs won’t fully cover the costs of the patients’ medicines. One that tugs at his heartstrings is a patient he worked with to secure coverage of an attention deficit disorder medicine their child needed. He was able to order the drug from a wholesaler, but the PBM didn’t reimburse his pharmacy the whole amount. “The PBM has cut the reimbursement for those kinds of medications and others so severely and so deeply, every time we were filing the prescription, we were losing $50,” he said. He said in that instance and others, the PBM also didn’t pay the regular dispensing fee, intended to cover the pharmacy’s labor and materials, like the pill bottle and label. What’s going on and why, Kodiak said, is a “billion-dollar question” that he can’t answer. “Not only is there no regulation for these PBMs, they are completely protected by all kinds of secrecy,” Kodiak said. “There’s no way to know.” But Kodiak has his suspicions, like that the major PBMs give a better deal to the pharmacies they own. The big three PBMs are Caremark Rx, which is owned by the company that owns the CVS drug store chain, Express Scripts and Optum Rx. That behavior is backed by reports from the Federal Trade Commission with headlines that describe “
how prescription drug middleman profit at the expense of patients by inflating drug costs and squeezing Main Street pharmacies ” and findings that “
PBMs charge significant markups for cancer, HIV and other critical specialty generic drugs .” Last week, the
FTC filed a lawsuit against the big three PBMs for “anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs.”
Illinois Looks to Take Action
Like Kodiak, Pritzker is calling on the federal government to do more to rein in PBMs, but the Democratic governor said in the meantime Illinois should take action. Negotiations are ongoing, but initial measures have been filed by state Rep. Natalie Manley (D-Romeoville) (
HB3705 ) and state Sen. Dave Koehler (D-Peoria) (
SB2385 ). Other lawmakers from both sides of the aisle have also filed plans to regulate PBMs that are not directly aligned with Pritzker’s administration’s plans. Manley suspects a tough fight from PBMs. “They’re spending an awful lot of money to keep us from looking behind the curtain,” Manley said. The goals of the measures include requiring PBMs to open their books to the state insurance department for annual reviews; banning PBMs from steering consumers to pharmacies in which the PBM has a financial stake; and limiting PBMs from being able to classify certain medicines as “specialty drugs” and so could lead to limited access. “Pharmacy benefit managers probably started out with good intentions, and that is to lower the price by negotiating discounts with the manufacturers and then passing those on to the plan sponsor or consumers,” Koehler said. “That just hasn’t happened. We’ve seen that that’s the case. What has in fact happened is that those discounts have amounted to enormous profit to PBMs.” Koehler said it’s leaving consumers hanging, with patients either forgoing medicine or stretching the doses to save money. Residents of rural areas and other pharmacy deserts increasingly have to travel long distances to get to a physical pharmacy, as independent stores close. “We also want to protect our mom-and-pop pharmacies,” Manley said. The governor’s proposed package would also expand what’s considered a “Critical Access Pharmacy” in law so that 33 additional pharmacies could receive state financial support.
In a statement reacting to Pritzker’s February comments , the Pharmaceutical Care Management Association said that it supports “community pharmacies in rural areas through programs that increase reimbursements.” The association said it shares Pritzker’s goals of lowering prescription drug prices, but that the governor “missed the mark” on how PBMs help fulfil that mission. “To be clear, the core mission of PBMs is to lower prescription drug costs and increase access to medications,” the statement said. “PBMs are working on behalf of Illinois employers, unions and patients in the fight against high drug costs and are the only stakeholder in the prescription drug supply chain dedicated to lowering drug costs,” the statement continues. “In fact, PBMs save patients and employers $1,040 per person per year in the state and will save Illinois patients and health plans $39.9 billion over ten years.” If the objective is to reduce drug costs, the PBM group said politicians should look to “Big Pharma.” In 2019, Illinois passed a law seeking to regulate PBMs, including lifting a gag that prevented pharmacists from telling patients if paying upfront would be cheaper than using insurance, and a requirement that insurers apply discounts and vouchers to deductibles. But Kodiak, who is active with the Illinois Pharmacists Association, said thus far, Illinois’ approach has been piecemeal. “Every time something happens here, they just figure out a way to make it up over here,” Kodiak said, including after the 2019 measure, when he said PBMs began to claw back money from pharmacies by reducing future reimbursements, with the justification they’d paid too much originally, and because pharmacies don’t contract with PBMs they have no recourse. Kodiak said one way Illinois can directly make a difference is through state-run Medicaid, a health care program for low-income residents. Nearly all Medicaid patients get their coverage via a Managed Care Organization (an MCO could be considered a variation of an HMO), and Kodiak said in Illinois all of the MCOs administer prescription benefits through PBMs. “So when a PBM prescription is reimbursed for a managed Medicaid patient, they reimburse less than the cost of the drug and then in almost every single instance that we have record of it’s a zero-dollar dispensing fee,” Kodiak said. As pharmacists seek to be paid the dispensing fee, Kodiak said he suspects the PBM industry will claim it to be a “pharmacy tax” that will increase consumer costs. Kodiak said he’s fearful of what will happen if Illinois doesn’t take action, both for patients who look to community pharmacists for health support — he points to the role pharmacies played during the COVID-19 pandemic when they provided testing and vaccines — and for businesses like his own. “We are in a pretty bad spot,” Kodiak said. “We had a line of credit with our bank that they said they can’t extend anymore. I’ve exhausted most of my personal finances into this business and if something doesn’t change, I don’t see how this can continue.”
Thanks to our sponsors:
Thanks to our sponsors:
