States Lead the Way in PBM Reforms: Will Congress Follow?


By Michael Rule, Associate Director of Public Affairs and Grassroots Advocacy

Independent Community Pharmacists are both small business owners and trusted healthcare providers. As such, they contribute to both the local economy through employment opportunities and taxes. In fact, studies have shown that for every dollar spent at a local small business, $.68 is reinvested in the local economy, this drops to $.43 for chain stores, and mail order purchases bring no economic benefit to communities. As healthcare providers, independent community pharmacists they promote proper medication adherence with patients, check the patient’s medication regimen for harmful interactions, and when appropriate work with the patient’s doctor to prescribe lower cost generic alternatives: all of which contribute to savings in the health system.

Since January 1, 2013—and thanks to the efforts of stakeholders in the states and grassroots communications from independent community pharmacists—legislatures across the country passed laws to ensure many more communities and many more patients will receive the benefits of small business independent pharmacy.

For example, Hawaii expanded patient access to pharmacies of their choice when it became the third state to enact anti-mandatory mail order (AMMO) legislation. This legislation is designed to ensure that patients have the right to choose pharmacies that best suit their needs instead of being forced to utilize a health plan’s mail order program, which is usually owned by the middleman known as the pharmacy benefit manager (PBM). Hawaii also passed separate legislation to protect patient information from being used to market certain PBM run networks.

Additionally, five states (KY, ND, AR, TX and OR) passed legislation to provide a modicum of transparency in how reimbursements to pharmacies for generic medications are determined. Generic reimbursement rates often are tied to maximum allowable costs (MAC), but how the PBMs determine MACs and how often PBMs update MACs to reflect price fluctuations are not disclosed in PBM contracts with pharmacies. In most instances, PBM contracts are offered to independent community pharmacies on a take it or leave it basis, and small pharmacies have no negotiating leverage to amend the language. By providing some transparency in how PBMs calculate MACs and how often they will update MACs, small business independent pharmacies can have better predictability in their monthly revenues and can make sound business decisions.

It is also worth noting, that in addition to MAC language, the OR legislation was a comprehensive PBM reform bill that also included provisions to set reasonable standards for pharmacy audits as well as requirements for PBMs to register with the Insurance Division of Oregon, an important step toward some level of regulatory oversight of the drug benefit management industry within the state.

Finally, eight states (including OR) passed new or strengthened PBM audit reforms. There are now 28 states that have some sort of audit reform on the books. While independent pharmacists recognize audits as a cost of doing business and tool to address true fraud and waste, the lack of audit standards has increasingly made them overly burdensome and abusive. Thanks to these legislatures, PBMs should no longer be able to recoup money based on a clerical error, unless there is some degree of evidence of fraud or abuse. Legislators in these states understood that if the right patient received the right medication on the correct date as prescribed by a doctor, the pharmacy should not be punished for that. Unjust PBM audit recoupments deprive communities of critical resources, and far too often serve as an additional revenue source for the PBM. Instead, states that have instituted audit reform ensure pharmacy audits are focused on their stated intent of uncovering cases of true fraud and abuse.

While these state level successes are encouraging, they does not eliminate the need for federal Congressional action. It is imperative that independent pharmacists, pharmacy staff and patients continue to remain engaged with their Representative and Senators to help move bills to reform Medicare Part D audits, expand MTM services under Medicare, and ensure that patient access to vital compounded medications is not jeopardized through Congressional action that could place burdensome regulations on this traditional pharmacy service. Through continued grassroots activity, outcomes at the federal level can begin to mirror the positive successes that have been achieved in the states.

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