Missouri Lawmakers Propose Reforms to Distorted Pharmacy Reimbursement System That Endangers Patient Care

Published Online: Wednesday, March 19, 2014
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ALEXANDRIA, Va. (Mar. 19, 2014) – Missouri jobs, revenue and pharmacies are under attack by obscure, yet powerful, corporate middlemen – also known as pharmacy benefit managers (PBMs) – who are distorting the reimbursement system for generic prescription drugs, which comprise approximately 80 percent of the drugs dispensed by a pharmacy. In response State Senator David Sater (R – Cassville) recently introduced SB. 895, which creates greater fairness and transparency. A companion bill (HB. 2152) has also been introduced in the Missouri House by State Representative Lynn Morris (R – Ozark). Missouri’s independent community pharmacies, the Missouri Pharmacy Association, and the National Community Pharmacists Association (NCPA) all strongly support this common-sense legislative fix.

“The 541 independent community pharmacies in the ‘Show Me’ state operate under a reimbursement system that refuses to ‘Show Them’ vital information,” said NCPA CEO B. Douglas Hoey, RPh, MBA. “These small business health care providers acquire prescription drugs from wholesalers for a defined price, but are not privy to the reimbursement formula PBMs use to determine their rates, and get painfully slow updates to those rates even when the cost of the generic prescription drugs spike. As a result, independent community pharmacies can often lose substantial amounts of money through no fault of their own, which hinders their ability to continue serving patients.”

“Thankfully, State Senator David Sater and State Representative Lynn Morris are taking the lead in addressing this issue with their companion bills. Both of these elected officials are also independent community pharmacy owners who are all too well-versed in how broken the system has become. We hope the Missouri Senate and House work to pass their respective bills so that this important remedy can get to the Governor’s desk before the end of the year.”

The bills contain provisions that:
  • Requires the contracts between the PBMs and independent community pharmacies include data on the sources and methodology used to set the prices for maximum allows costs (MAC) lists for multi-source generic prescription drugs;
  • Provides a process ensuring that each pharmacy receive notification of an update to the MAC lists;
  • Ensure the MAC lists are updated at least every seven calendar days after any variable or methodology changes;
  • Creates a reasonable appeals process for any disputes that might occur between the PBM and independent community pharmacy on the basis of the MAC lists;
  • Instructs PBMs to provide more disclosures about the MAC lists to the health plan sponsors that hire them to administer their prescription drug benefits; and
  • Penalizes any PBM with an escalating fine for failing to comply with the aforementioned requirements.

“PBMs have been inconsistent in updating changes to MAC prices and it is financially harming many of our pharmacies,” said Sen. Sater. “My bill ensures MAC price increases are updated in a timely manner just as price decreases currently are. This is important not only to the industry as a whole but especially to our small, independent pharmacies who are suffering the most as a result of this.”

“As a pharmacist/legislator, I am proud to sponsor a PBM transparency House bill in the State of Missouri,” said Rep. Morris. “I will always work for fairness so that pharmacies may continue to serve their patients in a manner that is good for the patients and the viability of the pharmacy and our profession.”

“This legislation provides a much-needed fix to problems that are currently afflicting the pharmacies in Missouri. The lack of transparency with the pharmacy benefit managers causes many drugs to be sold to patients at a cost lower than the actual cost to the pharmacy. This spread then causes the pharmacies to lose money, and this is not good business and is not a fair practice. This legislation will help pharmacies to minimize or eliminate that pricing spread and to be more viable as a business within our state.”

"With the volatile marketplace for generic drugs right now, the consistent message we hear from pharmacists all across Missouri is that the delays in updating prices by third-party administrators (PBM's, etc.) is having a devastating impact on their stores,” said Missouri Pharmacy Association CEO Ron Fitzwater. “All pharmacists are asking for with this legislation is that they be reimbursed the fair cost for the prescription medications that they are purchasing. Price decreases get into the systems very quickly. The legislation would assure that all pricing changes are made on a timely basis. Third parties who are already making timely adjustments will not find any negative ramifications from the legislation. It will assure that their competitors operate under the same guidelines."

A pharmacy’s acquisition cost for scores of generic drugs are skyrocketing by as much as 600%, 1,000% or more, but the PBMs continue to reimburse community pharmacies at the outdated, lower price. Pharmacists report repeatedly being faced with loses of $40, $60, $100 or more per prescription as the PBM waits several months before updating its reimbursement rates – and never retroactively.

By reimbursing pharmacies at low rates and charging health plans at much higher rates – a practice known as “spread pricing” – the PBMs generate enormous profits while propping up insurance costs for employers, government agencies and consumers. The largest PBM generates approximately $100 billion in annual revenue and its CEO received over $100 million in compensation over five years, Forbes.com calculated. Legislation increasing transparency into pharmacy benefit management could reduce the cost of PBM spread pricing.

A recent Fortune magazine article documented inflated costs and other problems arising from the lack of transparency into drug benefit managers.
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