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States are increasingly taking aim at an obscure but important player in the pricing chain when it comes to prescription drugs: pharmacy benefit managers (PBMs).
President Trump decried PBMs as “dishonest, double-dealing” middlemen during his speech on drug costs this month. And they’re becoming more of a target of policymakers and federal officials as public anger increases at skyrocketing prescription drug prices.
Here’s why they’re being villainized: PBMs act as a negotiator between drug companies and insurers to determine which drugs are covered by a given health plan. The PBM negotiates a discount and drug companies pay the PBM a rebate to make sure their drug is listed by insurance companies. But that rebate is not always passed on to consumers -- instead, it's mainly being pocketed by the insurers and the PBMs, a dynamic that prompts drugmakers to push prices even higher. Many policymakers complain that PBMs aren’t acting transparently, making it nearly impossible to figure out the fair price of a given medicine.
State lawmakers have introduced at least 83 bills targeting PBMs across 33 states either being considered or tha thave been enacted, according to the National Academy for State Health Policy. They range from bills requiring disclosure about PBMs's business relationships to measures that outlaw “gag clauses” preventing pharmacists from telling consumers about cheaper drug options. And more are probably on the way.
This month, the Connecticut legislature unanimously passed a first-in-the-nation bill calling for more transparency about PBMs’s transactions with drug companies. The bill requires PBMs disclose the rebates they receive from drug companies, the amount passed on to consumers and the amount they pocket themselves
“This whole system, the prescription drug system, is super confusing, but the most confusing part of it is the PBM piece,” said Connecticut State Rep. Sean Scanlon, a Democrat who co-sponsored the bill. “That’s because A, most people don’t even know what a PBM is and B, if they do know what it is, there is zero public information being shared about what’s happening with the rebates.”
“That exchange of money that happens from the PBM to the insurer is literally life or death to somebody who is taking a prescription drug,” Scanlon said.
BIG NEWS: my prescription drug price transparency bill that holds drug companies accountable for large increases just unanimously passed the State Senate and is heading to the Governor's desk! 🤜🏼@ComptrolLembo— Sean Scanlon (@SeanScanlonCT) May 9, 2018
The Pharmaceutical Care Management Association (PCMA), the lobbying group for PBMs, says it typically reduces costs of prescription drugs by 30 percent through negotiations.
But Lindsay Bealor Greenleaf, director at health-care consulting firm ADVI, said PBMs are under a spotlight because they largely operate within a “black box.” For example, even groups hiring PBMs to negotiate drug prices on their behalf — such as states, unions and other employers — don’t know what PBMs receive in rebates, she said.
Tom Bulleit, a health-care partner at Ropes & Gray, said another reason PBMs are a target is that drug companies are on the defense. “The drug manufacturers have been successful in pointing fingers at PBMs for their contribution to steer the debate away from whether there should be federal government negotiation on list prices or other kinds of government-imposed price control,” he said.
There are four main categories of legislation at the state level that target these middlemen, Bulleit told The Health 202. Some states are aiming to adopt more than one:
1. Blocking gag clauses, which are included in PBMs's contracts and prevent pharmacists from telling patients about cheaper drug options. Such a bill would allow pharmacists to tell consumers, for example, when paying cash would cost less than using their insurance.
2. Requiring PBMs to obtain a specific license from the state to operate legitimately.
3. Regulating PBMs’s use of maximum allowable cost lists, which they generate specifying the maximum price an insurance plan will pay for drugs when there is a generic or competitor available. Some states want PBMs to be transparent about how they came up with this list and provide the pharmacy the ability to appeal the maximum reimbursement rate.
4. Requiring the intermediaries to post information about what they earn in rebates from drug manufacturers. This is in the bill Connecticut just passed.
“With a simple calculator, every consumer in Connecticut is going to be able to know exactly how much money was passed on to them or what percentage was passed on to them versus how much was pocketed,” Scanlon said about his bill, which is now awaiting Gov. Dannel Malloy’s (D) signature.
In Alaska, another bill targeting PBMs passed the legislature two weeks ago and is headed to the governor’s desk. The bill looks to create more transparency in the appeals process for when pharmacies dispute the reimbursement they receive from PBMs for medication, and also restricts the gag clauses in contracts between PBMs and pharmacies, according to local radio station KFSK.
For its part, PCMA says regulations from states will raise drug prices.
In a statement to The Health 202, the group said the Connecticut bill would “undermine” the negotiation process and prevent groups hiring PBMs from getting the lowest possible drug cost for their enrollees.
“This bill takes those contract decisions away from employers by forcing the disclosure of proprietary drug pricing information, which could promote tacit collusion among drug manufacturers to raise drug prices,” PCMA said.
As the states continue to go after PBMs, the federal government is sounding the alarm, too. During his drug pricing speech, Trump vowed to “eliminate the middlemen.”
HHS Secretary Alex Azar has also argued for getting rid of the rebate system in which PBMs operate. “What if instead we said no rebates, flat price, fixed price in the contracts,” he told reporters at a briefing this month. “Take away this whole, what’s called the gross-to-net spread that removes that and makes people indifferent to what the list price is in that system and takes away the incentives where even the pharmacy benefit manager makes money from higher list prices.”
Greenleaf said eliminating PBMs, at least in the short term, doesn’t seem realistic. “But I think there is a real question about what benefit they are serving,” she said.
“There will be always be focus on PBMs and the rebate process so long as a patient cost-sharing at the pharmacy counter is based off a pre-rebate list price,” she added. “So long as that is happening, you’re always going to be questioning what exactly PBMs are doing and who these rebates are really benefiting.”
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— Trump plans to unveil a proposal on Tuesday evening to withhold Title X family planning dollars from groups that provide abortions or referrals in a speech to antiabortion group Susan B. Anthony List, The Washington Post's Ariana Eunjung Cha, Juliet Eilperin and Josh Dawsey report. Vice President Pence hosted a Thursday dinner at his residence with conservative leaders ahead of the decision. Antiabortion groups, who are enthusiastic about the policy shift, were briefed in detail about the proposal in a conference call Friday morning.
The plan — which delivers on a long-held objective of abortion opponents — would require a “bright line” of physical and financial separation between clinics that receive at least $260 million annually in federal funding and any organization that provides abortions or referrals to abortion clinics. It could deprive Planned Parenthood and other women's health centers of millions of dollars a year. White House press secretary Sarah Huckabee Sanders said that the plan “would ensure that taxpayers do not indirectly fund abortions” and that Trump “is pleased to support” it.
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The pick puts a Washington insider in the role to restore confidence in an agency that has been fraught with political infighting. Wilike "was unaware Trump’s announcement was coming, although he was a leading contender for the job and recently flew to the president’s private Mar-a-Lago Club in South Florida to meet with Marvel Entertainment chief executive Ike Perlmutter, an unofficial adviser to Trump on veterans issues,” Lisa and Paul write. “Wilkie could bring stability to VA’s sprawling $186 billion health-care, benefits and cemetery system, which during Trump’s 16 months in office has grown more dysfunctional despite the president’s campaign pledge to deliver reform."
During the confirmation process, Wilkie will likely face questions from senators about how far he would go to shift medical appointments to the private sector at taxpayer expense.
AHH: If you read the excellent 2010 book "The Immortal Life of Henrietta Lacks," you'll especially appreciate this: A painting of Lacks now sits in the National Portrait Gallery to commemorate how she provided a line of human cells involved in some of medicine’s greatest breakthroughs. Before Lacks died of cervical cancer in 1951, doctors took cells from a biopsied tumor and, without her permission or knowledge, began using them for research that continues today. Because Lacks’s cells reproduce indefinitely, scientists can use them to replicate experiments.
In the 2017 portrait by Kadir Nelson, she’s vibrant but modest, Erin Blakemore writes for The Post. “In Nelson’s portrait, newly acquired by the Smithsonian and on display now, she’s completely human .... Look a bit closer, though, and you’ll find hints of Lacks’s rich, controversial afterlife,” Erin writes. “Her dress is missing buttons, a nod to how her cells were taken. Cell-like flowers bloom on her dress. She may look like an ordinary woman, but Nelson won’t let you forget her importance: She stands in front of wallpaper emblazoned with the 'flower of life,' a geometric pattern that represents immortality.”
OOF: The United States plans to provide several million dollars to support the response to the Ebola outbreak in Congo, our colleague Lena H. Sun reports. While the World Health Organization said the outbreak does not yet meet the criteria of an international public health emergency, the WHO said Friday it requires a “vigorous response” from the international community to prevent an escalation in the outbreak. Details of the plan to provide funding for the response effort are still being finalized and are expected to be announced this week.
“The discovery this week of at least one case in Mbandaka, a densely populated port city on the eastern bank of the Congo River, has raised concerns about the potential for rapid spread of the disease, which had previously been limited to a remote area in the rain forest of Congo’s Equateur province,” Lena reports. “WHO officials estimate that outbreak-control efforts will cost $26 million over the next three months. So far, the WHO has received commitments for about $9 million.”
OUCH: A new study has found half of women have some degree of regret a few years after having their eggs frozen. While most of the women surveyed said such regret was mild, 16 percent described moderate to severe regret, The Post’s Ariana Eunjung Cha reports.
The study also found a marked number of the surveyed women “grossly overestimated the probability of having a child, with some believing they had a 100 percent likelihood of having a child with their banked eggs,” Ariana reports. There was a correlation between regret and women who got a lower number of eggs in their egg-freezing cycle, with those who got 10 or fewer eggs being four times more likely to feel regret.
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Great to have our incredible First Lady back home in the White House. Melania is feeling and doing really well. Thank you for all of your prayers and best wishes!— Donald J. Trump (@realDonaldTrump) May 19, 2018
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The measure broke open partisan House divisions as Democrats abandoned negotiations with Republicans over the food stamp changes, which would require adults to spend 20 hours per week working or undergoing job training as a condition to receive benefits. Democrats argued that up to a million or more people would lose benefits, as most states wouldn’t have the resources to set up necessary training programs, while Republicans argued the food stamp changes are a reasonable way to help adults get to work, our colleagues note.
Either way, the House farm will would have likely been a non-starter in the Senate, which is working on its own farm bill. Our colleague Caitlin Dewey wrote before the House bill failed that it provided a “snapshot of where food politics stands” and highlighted six issues that could surface in the Senate: food stamps, sugar reform, school lunch, farm subsidies, cage-free eggs and conservation.
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Two weeks ago, the DEA suspended opioid sales by Shreveport company Morris & Dickson, accusing it of failing to “properly identify large suspicious orders for controlled substances sold to independent pharmacies.” The suspension order against Morris & Dickson was the first time in six years the DEA had taken such drastic measures against a distributor. The company immediately disputed the allegation.
Friday’s reversal “is a striking vindication for our family company,” said Paul Dickson, Morris & Dickson’s president. “This proves what we’ve said all along — that DEA’s hasty action was unjustified. We have always taken our responsibility to prevent diversion seriously.” Justice Department spokesman Ian Prior said the rescission of the DEA’s immediate suspension order would give the agency “the opportunity to further review” the case while continuing to investigate the company.
— A few more good reads from The Post and beyond:
- The Senate Health, Education, Labor and Pensions Committee holds a hearing on addressing shortages and improving care on Tuesday.
- The House Veterans Affairs Committee holds a hearing on “Assessing VA's Governance Structure” on Tuesday.
- The Senate Health, Education, Labor and Pensions Committee holds an executive session on “Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2018” on Wednesday.
- The Senate Appropriations Subcommittee on Interior, Environment and Related Agencies holds a hearing on the Indian Health Service 2019 budget on Wednesday.
- The House Veterans Affairs Subcommittee on Economic Opportunity holds a legislative hearing on Wednesday.
- The Senate Banking, Housing and Urban Affairs Committee holds a hearing on the status of the “Housing Finance System” on Wednesday.
- The House Energy and Commerce Subcommittee on Health holds a hearing on “Reauthorization of the Children’s Hospital Graduate Medical Education Program” on Wednesday.
- The Brookings Institution holds an event on opioids on Wednesday.
- The Senate Finance Committee holds a hearing on rural health care on Thursday.
- The Brookings Institution holds an event on medical marijuana in the United States on May 29.