An upcoming court case will decide whether states can regulate pharmacy benefit managers.
Thousands of independent pharmacies could shut down if states are unable to regulate pharmacy benefit managers (PBMs), according to the National Community Pharmacists Association (NCPA).1
Whether states will be able to regulate PBMs will be decided by the United States Supreme Court in an upcoming ruling on Rutledge v. Pharmaceutical Care Management Association (PCMA).1
PBMs are intermediaries between health plans and pharmacies, providing services such as mail-order drug sales, benefit level calculations, claims processing, and making disbursements. PBMs create a maximum affordable cost list that sets reimbursement rates to pharmacies that dispense generic drugs. Because of the contracts many pharmacies agree to in order participate in a preferred network, pharmacies may choose to accept lower reimbursements for a dispensed prescription, thereby losing money on a transaction.2
The Supreme Court case follows a ruling by in favor of PCMA by the Eighth Circuit Court of Appeals, which covers Arkansas and 6 other states. However, Arkansas’ attorney general, Leslie Rutledge, is arguing that the circuit court erred in its judgment.
Arguments for the case are set to start October 6, 2020. The case will ultimately decide whether states can regulate PBMs, or if their ability to do so is preempted by the Employee Retirement Income Security act of 1974.3
“Our nonpartisan case against pharmacy benefit managers impacts a majority of states in our union,” Rutledge said during a remote press briefing. “In fact…45 states’ attorney generals and the District of Columbia have filed briefs, urging the Supreme Court to rule that states do have the authority to enact meaningful regulations on PBMs.”
Michael Hogue, PharmD, president of the American Pharmacists Association, said during the press briefing that PBMs are “out of control,” and need to be reeled in by the states. If left unchecked, thousands of small to medium-sized pharmacies will not be able to compete, according to Hogue. This can be especially devastating in areas where pharmacists are the only readily accessible health care providers, as 90% of Americans live within 5 miles of a pharmacy, Hogue added.
“As the COVID pandemic has shown, pharmacists are among the most trusted providers in America, and pharmacies are pillars of nearly every community in our nation. We are accessible and we are essential. But our profession and consumers’ access to their pharmacists is under attack by PBMs, causing thousands of pharmacies to close,” Hogue said, during the conference call. “The reason is that the economics don’t work anymore, and that PBMs are at the root cause of this crisis. They’ve been allowed to operate unchecked and unregulated for their entire existence. They are out of control and their practices are rapidly reducing access to care in local communities by driving pharmacies out of business.”
PCMA, however, maintains that PBMs benefit consumers because they keep the cost of prescriptions lower. In a statement on a recent House Committee on Oversight and Reform on pricing practices for prescription drugs, PCMA CEO JC Scott said, “We appreciate the House Oversight Committee keeping a spotlight on drug manufacturers’ pricing practices. While drug manufacturers are solely responsible for setting and increasing prescription drug prices, pharmacy benefit managers, PBMs, are the only entity reducing prescription drug costs. PBMs keep prescription drug costs and premiums in check by negotiating lower costs with drug makers and pharmacies.”4
Douglas Hoey, CEO of the NCPA, said that PBMs have too much power and are able to easily take out smaller to mid-sized competition, especially since they can direct customers to their own mail-order pharmacies.
“Just imagine if the New York Yankees had the power to make the rules and supply the umpires for their own gain. There would be nothing fair or competitive about that,” Hoey said. “But that is exactly the kind of power that the PBMs have over their competition. They are the price setter and the price taker.”
Rutledge emphasized that it’s the power of first-hand interaction with a local pharmacist that sets their services apart from the impersonal mail order pharmacy experience.
“It’s our local pharmacist who will show up on a Sunday night when a child is sick. You can’t get a mail order pharmacy to show up on a Sunday night when your young child is sick. You can’t get a big box store pharmacy to show up on a Sunday night when your child is sick,” Rutledge said. “But, you better believe that your local pharmacist, who buys adds in the local yearbook, who supports the local little league team, whose family has grown up in that community, he or she will be the one who will show up on a Sunday night to take care of your child. And that’s why this case is so important.”