During a three-day special legislative session in March, Arkansas Governor Asa Hutchinson (R) signed into law the first bill in the U.S. intended to address a lack of transparency among pharmacy benefit managers (PBMs) and their role in the high cost of prescription drugs.1
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The bill, H.B. 1010: Arkansas Pharmacy Benefits Manager Licensure Act, will require PBMs be licensed under the Arkansas Insurance Department and to provide “a reasonable, adequate and accessible pharmacy benefits manager network … that shall provide for convenient patient access to pharmacies within a reasonable distance from a patient’s residence.”2
After the bill’s passage, the ACR was joined by allies in the Alliance for Transparent and Affordable Prescriptions (ATAP) in a meeting the ACR coordinated with Gov. Hutchinson to discuss how “patients are hurt by PBMs through high drug prices and out-of-pocket costs, and our concerns that PBMs may prevent biosimilars from lowering drug prices or preventing savings from getting to patients,” says Angus Worthing, MD, FACP, FACR, rheumatologist and chair of the ACR Government Affairs Committee. ACR will continue to work with the state on implementation.
“Drug pricing and, similarly, access to medication are probably top on the radar screen of most Americans, many members of Congress and the ACR,” he adds.
A Significant Leap Forward
Advocates see the law as a significant leap forward with respect to transparency when it comes to PBM practices. It may also serve as a model for other states weighing similar legislation, says Joseph Cantrell, JD, the ACR’s senior manager of state affairs. The ACR and ATAP have established language available for other states to use.
“Now PBMs in Arkansas are going to have to provide the Insurance Commission with at least some explanation for the way they do things,” says rheumatologist Christopher Adams, MD, FACP, FACR, and chair of the ACR’s Affiliate Society Council. “The idea behind transparency is not only so patients and physicians can comprehend better what they’re paying for, but also so healthcare purchasers can make informed business decisions.”
How PBMs Work
PBMs negotiate drug prices with manufacturers and process claims on behalf of the insurers they represent. When a patient pays a copay at the pharmacy, the PBM reimburses the pharmacy. Sometimes reimbursement is at a much lower rate than the price the pharmacy paid to acquire the drug. Also, in some cases, the co-pay the patient pays is higher than the off formulary cost of the drug.3
Gag clauses prevent pharmacists from disclosing that a drug is cheaper to buy at its cash price, rather than with insurance. The Arkansas bill, like recent legislation in other states, will eliminate the gag clause. Also, three bills that would eliminate gag clauses at the federal level are currently circulating in Congress, says ACR Director of Regulatory Affairs Kayla Amodeo, PhD.
“Patients are affected by PBMs in multiple ways,” says Dr. Worthing. “The prescription that is best for them, which they and their rheumatologist have agreed upon, may not be covered because the drug didn’t garner enough rebate money for PBMs to place it on formulary. Or the co-payment a patient pays may be higher because it is based on the list price instead of the discounted price. When paying out of pocket is cheaper than obtaining a drug through insurance, patients often remain unaware, because pharmacists can’t inform them.”
Pharmacists Push Back
In Arkansas, pharmacists argued that these practices have also resulted in hardships for smaller pharmacies, particularly in rural parts of the state where patients may already have fewer options.
“It was evident from discussions with the governor that part of his motivation in signing the bill was to better understand the role of PBMs in the healthcare market and their impact on local pharmacies,” says Mr. Cantrell.
The ACR would like to see other states or the federal government pass legislation to address PBM practices that affect patient access to care. The ACR is also working at the federal level to educate members of Congress on the broad implications of PBM practices, says Dr. Amodeo.
In February, the ACR visited Capitol Hill with ATAP to meet with legislators to assure them that regulation of PBM practices would not violate the Centers for Medicare & Medicaid Services’ non-interference clause, which prohibits the Secretary of Health and Human Services from establishing a single formulary and from interfering in the negotiations between plans and manufacturers. Even with PBM regulation, insurers could still engage with manufacturers in establishing prices.
“People across the country are starting to understand the complex problems of consolidation, opacity and perverse incentives in the PBM system,” says Dr. Worthing. “We’re optimistic that more and more bills will become law at all levels and that our patients will benefit from lower prices and easier access to the high-quality treatments they deserve.”
Kelly April Tyrrell writes about health, science and health policy. She lives in Madison, Wis.
- Arkansas governor signs pharmacy manager bill into law. U.S. News & World Report. 2018 Mar 15.
- Hardy B. Committee approves bill to regulate pharmacy benefit managers over objections of conservative group. Arkansas Nonprofit News Network. 2018 Mar 13.
- Lupkin S. Patients overpay for prescriptions 23% of the time, analysis shows. Kaiser Health News. 2018 Mar 13.
- Lopez L. A startling lawsuit against CVS could blow up what you thought you knew about drug prices. Business Insider. 2017 Aug 8.