User:Cthant/Pharmacy benefit management

Pharmacy benefit management Draft

In the United States, a pharmacy benefit manager (PBM) is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. PBMs operate inside of integrated healthcare systems (e.g., Kaiser Permanente or Veterans Health Administration), as part of retail pharmacies (e.g., CVS Pharmacy), and as part of insurance companies (e.g., UnitedHealth Group).

The role of pharmacy benefit managers includes managing formularies, maintaining a pharmacy network, setting up rebate payments to pharmacies, processing prescription drug claims, and managing drug use. PBMs play a role as the middlemen between pharmacies, drug manufacturers, wholesalers, and health insurance plan companies.

As of 2023, PBMs managed pharmacy benefits for 275 million Americans. As of 2023, The three largest PBMs in the US, CVS Caremark, Cigna Express Scripts, and UnitedHealth Group’s Optum Rx, make up about 80% of the market share and cover approximately 270 million people.

The logo for CVS Caremark

This consolidation and concentration has led to lawsuits and bipartisan criticism for unfair business practices. By 2024, reporters Rebecca Robbins and Reed Abelson fromThe New York Times and The Federal Trade Commission, have reported pharmacy benefit managers of artificially inflating drug prices.

Additionally, several state attorney general have rallied together to support stricter regulation of PBMs.

Net effect on consumers

[edit] The New York Times, Federal Trade Commission, and many state Attorneys General argue pharmacy benefit managers unfairly raise prices on drugs.

A report by House Committee on Oversight and Accountability chairman, Kentucky Rep. James Comer, found that PBMs use utilization schemes to increase pricing for payers and health plans.

Effects on Independent Pharmacies

PBMs regulate how much community pharmacies are reimbursed by drug companies and health insurance plans for the drugs that they sell. PBMs are not required to share how these rebate rates are calculated and this can result in local pharmacies being paid back less or the same as the sticker prices of the drugs themselves.

Clint Hopkins, joint owner of Pucci's Pharmacy in Sacramento, reports regularly turning away customers rather than lose money on high-end prescriptions. Another

PBM Regulation

More recently, federal lawmakers have become more critical of the business practices in the PBM industry. For example, gag clauses between PBMs and pharmacies regarding pricing plans were banned on a nationwide scale following the enactment of both the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act in 2018.

Much of the controversy surrounding PBM practices has to do with how PBMs are incentivized by profits to raise drug costs. Due to this, regulators are mainly concerned with managing drug costs and pharmacy reimbursement rates.

State Level Regulation

Many states have their own way of regulating PBM activities. These relate to different areas of PBM practice from managing reimbursement rates to increasing transparency about PBM business practices. In a 2022 web search conducted by Mattingly et al. it was found that "A total of 45 states implemented policies on pharmacy operations, 41 states on pricing and reimbursement, 36 states on licensure and registration, 26 on reporting requirements, and 25 on pharmacy networks".

These are some ways in which states regulate drug pricing and pharmacy reimbursement funds: maximum allowable cost (MAC) lists, timely payment for pharmacy services, prevention of spread pricing, adjudication fee limit, and calculations for drug price reimbursement.

National Regulation

S.127 - Pharmacy Benefit Manager Transparency Act of 2023

The Pharmacy Benefit Manager Transparency Act of 2023, Introduced on January 26, 2023, states that pharmacy benefit managers cannot unfairly lower rebate payments to pharmacies, claw back reimbursement payments, or charge arbitrary fees. If PBMs pass all discounts to the health plan and provide them with pricing information about their services, they will be exempt from these prohibitions. Under this act, PBMs would also need to disclose information about payments from health plans to the Federal Trade Commission (FTC) through annual reports.

Knox-Keene Health Care Service Plan Act of 1975

The Knox-Keene Health Care Service Plan Act of 1975 is a set of Californian laws that regulate Healthcare Service Plans. Under these laws, pharmacy benefit managers with contracts to Health care service plans are required by law to be registered with the Department of Managed Health Care to disclose information.

SB 966: Pharmacy benefits

SB 966: Pharmacy benefits is a California state bill written by state senators Aisha Wahab and Scott Weiner. It is currently in the process of becoming law. Adding on to the Knox Knee Act, SB 966 requires all PBMs to acquire licensure under the California Department of Insurance and file annual business reports disclosing information about revenue and purchaser-specific benefits. SB 966 also prohibits pharmacy benefit managers from discriminating against nonaffiliated pharmacies and requiring customers to purchase from affiliated pharmacies.

According to Assemblymember Devon Mathis, one of two Republican co-authors of the bill, this would effectively reduce drug prices for consumers. Additionally, the National Community Pharmacists Assn. reported that health insurance premiums increased by a nationwide average of 16.66% between 2015 and 2019. In states with licensing regulations, the increase in premiums was 0.3% lower than the national average, while in states without these regulations, it was 0.4% above the average.

However, PBMs argue that enforcing this regulation will only drive up drug costs and increase coverage premiums for all parties. The Pharmaceutical Care Management Assn. believes that this bill only favors community pharmacies over chain pharmacies and that all it will do is make it harder for PBMs to effectively negotiate lover drug prices with manufacturing companies.

Controversies and litigation

[edit] Anti-PBM

In 1998, PBMs were under investigation by Assistant U.S. Attorney James Sheehan of the federal Justice Department, and their effectiveness in reducing prescription costs and saving clients money was questioned.^{[non-primary source needed]}

In 2004, litigation added to the uncertainty about PBM practices. In 2015, there were seven lawsuits against PBMs involving fraud, deception, or antitrust claims.

State legislatures have been using "transparency," "fiduciary," and "disclosure" provisions to improve the business practices of PBMs.

A 2013 Centers for Medicare & Medicaid Services study found negotiated prices at mail-order pharmacies to be up to 83% higher than the negotiated prices at community pharmacies.^{[non-primary source needed]}

A 2014 ERISA (Employee Retirement Income Security Act of 1974) hearing noted that vertically integrated PBMs may pose conflicts of interest, and that PBMs' health plan sponsors "face considerable obstacles in...determin[ing] compliance with PBM contracts including direct and indirect PBM compensation contract terms".^{[non-primary source needed]}

In 2017, the Los Angeles Times wrote that PBMs cause an inflation in drug costs, especially within the area of diabetes drugs.

United States Secretary of Health and Human Services Alex Azar stated regarding PBMs, "Everybody wins when list prices rise, except for the patient. It’s rather a startling and perverse system that has evolved over time."

On January 31, 2019, Health and Human Services released a proposed rule to remove Anti-kickback Statute, safe harbor protections for PBMs and other plan sponsors, that previously allowed PBMs to seek rebates from drug manufacturers.^{[needs update][non-primary source needed]}

Ron Wyden stated in April 2019 that they were as “clear a middleman rip-off as you are going to find”, because they make more money when they pick a higher-priced drug over a lower-priced drug.

In June 2024, the New York Times released its first article in a series critiquing pharmacy benefit managers for artificially raising drug prices.

In July 2024, the Federal Trade Commission released an interim report on its 2-year investigation into pharmacy benefit managers, many of which it accuses of raising drug prices due to conflicts of interest, consolidation and other factors. It looks likely to sue as soon as August 2024. As of July 2024, states that have already filed suits against PBMs include Vermont, California, Kentucky, Ohio and Hawaii.

Pro-PBM

Bill Head, assistant vice president at the Pharmaceutical Care Management Association, claims that “[Pharmacy benefits managers] are the only entity in the drug-supply chain that exert downward pressure on drug prices by negotiating rebates and discounts with manufacturers".