Florida lawmakers joined efforts in other states this year to curb questionable pricing practices of pharmacy benefit managers (PBMs), the increasingly controversial financial intermediaries between drug makers and drug takers.
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Health insurance companies hire PBMs to negotiate discounts and rebates with drug companies to lower prescription drug costs for their members. However, suspicion over who really benefits has led to calls for legislative action at both the state and federal levels.
Proponents of PBMs maintain they help lower the cost of prescription drugs and are an important player in the healthcare industry. Nevertheless, a 2020 Supreme Court ruling that gave states the right to regulate them may prompt greater examination of how they operate.
Recently, Florida legislators passed into law HB 357, which includes a $10,000 fine for PBMs that don’t register with the state Office of Insurance Regulation (OIR).1 The new law changed enforcement responsibility from the Florida Board of Pharmacy to the OIR, giving more teeth to the registration requirement, as well as protection for pharmacies when audited by a PBM or health plan.
“This bill is a step forward on PBM regulation and is especially beneficial for independent pharmacists,” says Robert Levin, MD, FACR, president of Alliance for Transparent and Affordable Prescriptions and past president of the Florida Society of Rheumatology. “The enforcement of registration with the OIR is a good thing as well.
“There is much more work to be done to benefit patient access, which was not included in this legislation,” Dr. Levin added in an email interview.
PBM Pricing Influence
Four years ago, the Florida Legislature banned gag clauses, meaning PBMs could no longer contractually forbid pharmacies from telling patients when a cash payment for a prescription is cheaper than their insurance copayment.2 Similar bans have passed at the federal level.
Other provisions of Florida’s new law apply mostly to pharmacy audits that won’t directly impact rheumatologists and their patients, says Joseph Cantrell, JD, ACR senior manager of state affairs. He views the law a positive development, but says more reform is needed to achieve greater transparency and reduce the drug pricing power of PBMs.
“I don’t want to undersell an improvement, but $10,000 isn’t even pocket change for PBMs,” Mr. Cantrell notes.
In the U.S., 66 PBMs manage the pharmacy benefits of about 270 million Americans, according to the National Association of Insurance Commissioners. Three of the largest of these companies—Express Scripts, CVS Caremark and OptumRx—hold a combined market share of almost 90%.3
Large PBMs increase their influence in the marketplace by taking rebates from drug companies eager to get their medications listed in prime position on health plan formularies. Despite calls for transparency in the public interest, companies generally keep negotiation details confidential, citing intellectual property protections.
It’s questionable whether those rebates ultimately lower prices for the patient at the pharmacy counter, notes Mr. Cantrell. Instead, it is suspected that rebate funds often get reclassified as income or administrative fees and added to the PBM revenue stream. The rebates “often don’t flow back to their intended source, which is supposed to be the patient and the health plan,” says Mr. Cantrell.
Patient advocates and lawmakers grappling with increasing costs of prescription drugs point to a highly controversial practice known as spread pricing. The term describes how a PBM may boost profits by charging health plans and payers more for a drug than the pharmacy reimbursement amount and pocketing the difference.
In Florida, additional scrutiny of PBM pricing practices could result from an executive order handed down by Gov. Ron DeSantis in July soon after he signed HB 357 into law. The order requires Florida state agencies to audit PBM contracts entered into with state Medicaid plans to ensure that costs to the state are justified.4
The governor’s order calls for state agencies to prohibit spread pricing and financial clawbacks in future contracts with PBMs. It also directs them to capture data on rebates and payments from drug companies, insurers and pharmacies.4
Clawback is a practice in which a PBM claws back the difference between what the prescription cost the pharmacy and the insurance copayment amount. Not only is it like penalizing someone for having health insurance, it’s also unclear if that fee gets returned the health plan in the form of lower costs, according to a 2018 article by Kaiser Health News.5
The executive order to capture data on rebates is in line with patient advocacy efforts to make information public about how drug companies use them to gain PBM formulary placement and market access, says Dr. Levin.
“Our advocacy organizations have been pushing for rebate transparency,” says Dr. Levin. “While this will not affect commercial insurance plans regulated by the state, it is an excellent start.”
For those wondering if the recent spotlight in Florida on PBM pricing practices and calls for greater industry transparency signals a turning point for Florida healthcare policymakers, Mr. Cantrell cautions, “not so fast.”
He sees recent actions more as a step in the right direction than any sort of sea change, adding that it’s no time to slack off advocating for patients in Florida and elsewhere. He hopes Gov. DeSantis will do more with PBM reform if he is reelected.
“There is a danger of people feeling like our work in Florida is done on the PBM issue,” says Mr. Cantrell.
Elizabeth “Blair” Solow, MD, assistant professor of medicine in the Division of Rheumatic Diseases at UT Southwestern Medical Center, Dallas, and chair of the ACR’s Government Affairs Committee, agrees and notes the Florida executive order has limitations. For example, it covers only state agency contracts, such as Medicaid and the state employee benefit plan. This means the order impacts only a portion of Florida’s population and “can easily be undone” by a new administration, she says.
“It is imperative that Florida enact legislation to codify these protections and expand them to all Floridians,” Dr. Solow says.
At the national level, the Federal Trade Commission (FTC) is seeking records from six of the biggest players in the industry as part of an investigation into PBM practices.
“Although many people have never heard of pharmacy benefit managers, these powerful middlemen have enormous influence over the U.S. prescription drug system,” FTC Chair Lina M. Khan said in a June 7 release. “This study will shine a light on these companies’ practices and their impact on pharmacies, payers, doctors and patients.”6
The probe will examine how vertically integrated PBMs affect access and affordability of prescription drugs, according to the release. Also on June 7, the ACR issued a statement in support of the FTC action.
“The FTC investigation announced today is a critical step toward greater transparency and oversight over PBMs’ opaque business practices, as well as the enactment of meaningful drug pricing reforms that will reduce costs and expand access to important therapies for our patients,” states the ACR release.7
Catherine Kolonko is a medical writer based in Oregon.
- HB 357—Pharmacies and pharmacy benefit managers. My Florida House.gov. Effective date: 2022 Jul 1. https://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=73589&SessionId=93.
- House of Representatives staff final bill analysis: Bill HB 357—Pharmacies and pharmacy benefit managers. 2022 Jun 21. https://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?FileName=h0357z1.FFS.DOCX&DocumentType=Analysis&BillNumber=0357&Session=2022.
- Pharmacy benefit managers. National Association of Insurance Commissioners. Last updated 2022 Apr 11. https://content.naic.org/cipr-topics/pharmacy-benefit-managers#:~:text=Today%2C%20there%20are%2066%20PBM,of%20UnitedHealth%20Group%20Insurance)%20%E2%80%93%20controlling.
- Governor Ron DeSantis takes additional actions to lower prescription drug prices for Floridians. News release. 2022 Jul 8. https://flgov.com/2022/07/08/governor-ron-desantis-takes-additional-actions-to-lower-prescription-drug-prices-for-floridians.
- Lupkin S. Patients overpay for prescriptions 23% of the time, analysis shows. Kaiser Health News. 2018 Mar 13. https://khn.org/news/paying-cash-for-prescriptions-could-save-you-money-23-of-the-time-analysis-shows.
- FTC launches inquiry into prescription drug middlemen industry. Federal Trade Commission. 2022 Jun 7. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-launches-inquiry-prescription-drug-middlemen-industry.
- ACR applauds FTC decision to investigate PBM business practices. Press release. 2022 Jun 7. https://www.rheumatology.org/About-Us/Newsroom/Press-Releases/IDs/1218.