Pennsylvania Pharmacists Seek Legislative Relief from Abuses by Drug Plan Middlemen

Published Online: Thursday, December 19, 2013
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Alexandria, Va. Dec. 19, 2013 - Pennsylvania jobs, revenue and pharmacies are under attack by obscure, yet powerful, pharmaceutical corporate middlemen and the state's independent community pharmacists say the best hope for relief is enacting legislation during the 2014 legislative session, the National Community Pharmacists Association (NCPA) said today.

"Across the Keystone State 1,005 independent community pharmacies serve patients, employ 10,040 people and contribute greatly to local and state tax revenue," said NCPA CEO B. Douglas Hoey, RPh, MBA. "The viability of these small businesses is being undermined by the practices of billion-dollar companies known as pharmacy benefit managers (PBMs), hired by most health plans to administer prescription drug benefits. For Pennsylvanians, their communities and the future of these pharmacies, we encourage lawmakers to swiftly enact common-sense reforms to achieve a more balanced business relationship between PBMs and community pharmacies."

Hoey singled out three trends that are particularly in need of legislation and further oversight.
  • First, in order to care for Pennsylvania patients covered by a given health plan, community pharmacists must sign take-it-or-leave-it contracts from Fortune 500 PBMs. These non-transparent contracts give the PBMs full authority to determine how they will reimburse pharmacies, especially for generic drugs, which account for nearly 80 percent of drugs dispensed. Thus, these small business providers are "flying blind" in terms of taking into account the operating costs of their prescription drug inventory.
  • Second, 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are skyrocketing by as much as 600%, 1,000% or more, but the PBMs continue to reimburse community pharmacies at the outdated, lower price.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. Pennsylvania economic revenue is thus decreased for the benefit of out-of-state PBMs.
  • Third, 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, calculated. Legislation increasing transparency into pharmacy benefit management could reduce the cost of PBM spread pricing and keep more health care dollars within Pennsylvania.

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

NCPA is working on these issues in conjunction with the Pennsylvania Pharmacists Association, Value Drug Company, the Philadelphia Association of Retail Druggists (PARD) and the Keystone Pharmacy Purchasing Alliance and others.
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