Time to Remove Texas' Drug Middlemen

By Jeff Carson, For the San Antonio Express-News

February 10, 2019

As an independent pharmacist, I see every day the burden that rising prescription drug costs are putting on patients. The people I serve express growing concern about the cost of the medicines they need today, and they're even more alarmed at how much those medications will cost in the future.

It is also my vantage point as a pharmacist that allows me to see why drug costs are rising: A handful of out-of-state companies known as pharmacy benefit managers, acting as middlemen between insurers and drug manufacturers, are driving up costs by manipulating the prescription drug market -- a market they largely control.

Pharmacy benefit managers, also known as PBMs, determine which drugs will be covered by a health plan as part of a formulary. Manufacturers who want their drugs covered by those plans pay so-called rebates to the PBMs. To offer the types of rebates that will keep their drugs in the formularies, manufacturers keep increasing the drug prices. The problem is that the PBMs largely pocket the rebates instead of passing them along to those patients who are facing higher and higher costs.

PBMs also reimburse pharmacies for dispensing a medication. But the amount of money they charge to the plan sponsor is often much higher than the reimbursement they provide to the pharmacist for the drug. This is called "spread pricing," because the spread is the difference between the amount charged to the plan and the amount reimbursed to the pharmacist. Plus, most large PBMs own their own mail-order pharmacies, and they financially penalize patients who choose to use their local pharmacist instead of the PBM-owned mail-order pharmacy.

The tactics employed by PBMs are anti-competitive. A few PBMs control almost the entire prescription drug market, which means pharmacists have no choice but to accept the ridiculous contracts PBMs offer. Individually owned pharmacies have zero ability to negotiate with these giant companies. PBMs use their monopolistic position to drive prescription drug costs higher, even as they pay pharmacists less and less. In this suppressed market, the focus is on PBM profits instead of cost-saving innovations.

Those of us who run community pharmacies have reached a breaking point: We are tired of PBMs driving up costs for our patients and reimbursing us at such low levels that it's difficult for us to compete with chain drugstores. We're also frustrated by the secrecy that surrounds rebates and other PBM business practices.

In fact, all Texas taxpayers are hurt by PBMs' predatory practices. A study commissioned by the Legislature in 2017 found the state could save up to $90 million per year in Medicaid and in the Children's Health Insurance Program by ceasing to use PBMs. These are scarce taxpayer dollars that could be invested in our schools or universities -- or they could be returned to taxpayers.

Other states have stepped up: West Virginia saved $30 million per year by cutting PBMs out of the state's Medicaid program. Ohio audited one of the largest PBMs, OptumRx, and found it kept $224 million through spread pricing.

The Trump administration has also sounded the alarm about the ways PBMs and their rebates are driving up the costs of prescription drugs. "Higher prices allow drug companies to make bigger rebate payments, which go to pharmacy benefit managers, insurance companies and employers, rather than to patients," Secretary of Health and Human Services Alex Azar recently wrote.

With the new legislative session underway, community pharmacists hope Texas joins those states that have acted to protect patients and small businesses. For starters, we hope legislators will closely consider the study they ordered and take the PBMs out of the Medicaid program.

We also hope the entire Legislature will support efforts by Rep. Tom Oliverson, R-Cypress, and other like-minded lawmakers who are pushing for PBM reforms that will increase oversight and accountability while giving pharmacists the opportunity to contest unnecessarily low reimbursements. We know Texas legislators say all the right things when it comes to supporting the small businesses in their communities. Now they can put those words into action.

Across the country, PBMs are on the run, and now it's time for Texas to join the chase. Our patients -- the people who often need to take several expensive medicines a day -- face enough challenges. They don't need out-of-state drug middlemen adding to their problems.

Jeff Carson is president of Oakdell Pharmacy in San Antonio and sits on the board of directors of the Alliance of Independent Pharmacists of Texas and the National Community Pharmacists Association.