Legislation Sharpens Divide Between PBMs and Pharmacies

Author: Kate H. Gamble, Senior Editor

The practice of requiring patients to purchase prescriptions through retail pharmacies or mail order companies is being called out by government officials and professional organizations as being unfair. On April 7, legislation was introduced to make pharmacists and other health care professionals exempt from federal antitrust laws for the purpose of contract negotiations with health plans, and create what some believe will be a more level playing field.

The bipartisan Quality Health Care Coalition Act of 2011 (H.R. 1409), introduced by House Judiciary Committee Ranking Member John Conyers, Jr. (D, MI) and Congressman Ron Paul (R, TX), would allow health care providers the ability to collectively bargain contractual terms with insurers.

“Currently, the insurance industry is immune from federal antitrust laws under the McCarran-Ferguson Act,” said Conyers in a statement. “As a result, the playing field is woefully unbalanced.” The bill, he said, “is designed to “strengthen patient safety and quality of care by clarifying the application of the antitrust laws to negotiations between groups of health care professionals and health plans and health care insurance issuers.”

Douglas Hoey, RPh, executive vice president and Chief Executive Officer of the National Community Pharmacists Association (NCPA), voiced support for the proposal, adding that it “would help extend to millions of Americans the fruits of a more competitive pharmacy marketplace.” Major insurance companies and pharmacy benefit managers (PBMs), he said, “have implemented policies to grow their profits while stacking the deck against patients, pharmacists and other health care providers.” These groups “benefit from an antitrust exemption and have opposed efforts to grant the same status to doctors, pharmacists and others.”

Hoey believes the competitive landscape is particularly one-sided in the pharmacy marketplace, where the major PBMs administer drug plans and operate rival mail order pharmacies. “This inherent conflict of interest creates an even greater incentive for benefit managers to restrict patient choice of pharmacy and impose unfair audit and reimbursement practices,” he said, adding that as major PBMs’ profits have increased significantly over the past decade, reimbursement rates for community pharmacies have been declining.

The NCPA urges community pharmacists, pharmacy employees, and patients to contact their US Senators and Representatives to urge their support of the bill.

However, while independent pharmacists believe that PBMs have developed a business model that eliminates competition by forcing customers to rely on them, PBMs see the issue differently. The Pharmaceutical Care Management Association contends that the “unprecedented collective bargaining rights” being sought by independents drugstores will result in higher costs for consumers. “Prescription drug prices will soar if competing independent drugstores are given a license to collude,” said president and CEO Mark Merritt in a statement.

Meanwhile, just over a week after the Quality Health Care Coalition Act was introduced, PBMs took another hit when the Federal Trade Commission (FTC) received a letter from 5 groups requesting the divestiture of CVS Caremark.

In a letter sent to Jon Leibowitz, chairman of the Commission, the Consumer Federation of America, Community Catalyst, Consumer Union, National Legislative Association on Prescription Drug Prices, and U.S. PIRG called for breaking up the $27 billion CVS Caremark merger, claiming “there is strong evidence” that the union “has harmed consumers,” and that its practices gave the company an unfair advantage over other pharmacies by reducing competition and limiting consumer choice, according to a Boston Globe article.

Carolyn Castel, a CVS Caremark spokesperson, stated that the company is “cooperating fully” with the inquiries. “We remain confident that our business practices and service offerings are being conducted in compliance with antitrust laws,’’ she said.

The FTC will continue to investigate the matter, according to a New York Times report, which stated that attorneys general in 24 states are conducting a similar inquiry ().
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