States Go on Offensive against Pharmacy Benefit Managers

As the backlash against some pharmacy benefit managers (PBMs) continues to grow, some states are questioning whether the organizations yield the savings they tout.

If they are successful, there could be a shake-up looming for how drugs are priced for health plans, and how insurers and covered individuals pay for them.

PBMs make their money by contracting with health plans to reduce drug prices, and they then negotiate discounts with drugmakers. But the biggest complaint about some PBMs is that they jealously guard how much they pay for the drugs, since that’s their profit motive.

Consider:

  • West Virginia in 2017 stopped using PBMs altogether.
  • Kentucky is analyzing its expenses in its own PBM contracts, and a bill may be in the offing that would require PBMs that contract with Medicaid to report their costs to the state, and require them to pay pharmacies a fair price.

Most recent is the action in Ohio. In August 2018, the state’s Department of Medicaid cancelled the contracts it had with two PBMs, accusing them of gross overpricing.

Ohio’s five managed care plans were ordered to terminate the contracts immediately with Optum and CVS Caremark and start working on new ones. The plans have until Jan. 1 to move to a more transparent pass-through pricing model with the two PBMs.

The agency also released a report saying that the two PBMs charged nearly 9% more than they paid pharmacies to fill prescriptions, which helped them make more than $224 million under the arrangement. One of the biggest complaints by the department was that the plans were not transparent.

And sometimes the PBMs actually charge more than the wholesale price for drugs, the report stated.

According to the report that Ohio released, it was paying one of the PBMs $273.50 per unit for the generic version of Gleevec, which is used to treat various cancers. But according to pharmacies, the wholesale price of Gleevec was just $83.69 per dose.

Ohio was unable to release the full report and has been sued by CVS, which is seeking an injunction to stop its release. Later, the second PBM, Optum, joined the suit.

CVS for its part says that the company saved the state about $145 million by using its services.

 

Transparency pressure increases

These latest developments are adding to pressure on PBMs to start being more transparent in how much they pay for the drugs.

It’s still uncertain how the court case in Ohio will shake out, but one thing is clear: Ohio’s Department of Medicaid is now looking to contract with other PBMs that are more transparent in their pricing and cost structures.

There are smaller PBMs in the market that approach their work in a more transparent manner for the payers.