The Practices of Pharmacy Benefit Managers Shrouded in Secrecy

Ted Strickland served as governor of Ohio from 2007 to 2011.

As reported in the Dispatch in early June, the Federal Trade Commission announced that it would conduct a study of the contracting practices of pharmacy benefit managers.

Most Americans are blissfully unaware of the complex complexities plaguing our healthcare system, which often increase the cost of intensive care and reduce the availability of lifesaving drugs. The commission’s study is an important step in the right direction.

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Pharmacy benefit managers were originally trained more than 50 years ago to handle complaints and negotiate lower prices with drug manufacturers. But to this day, they administer drug plans for hundreds of millions of people, most of whom have no idea what they are doing, or even that they exist.

They are essentially intermediaries who operate in secrecy, playing an important role in determining the costs of prescription drugs and even in monitoring drugs covered by an insurance plan.

This lack of transparency is exacerbated by the fact that 80% of the prescription drug market is controlled by just three pharmacy benefit managers.

With such a small number of pharmacy benefit managers wielding such immense power, they have become a major factor in driving up the cost of much-needed prescription drugs in states across the country, including Ohio.

Ted Strickland served as governor of Ohio from 2007 to 2011.

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A particularly heinous practice is called “spread pricing”. When a PBM engages in tiered pricing, it completes the process of billing a health insurance plan to fill a prescription, but reimburses the pharmacy for less than what it bills the insurance plan. The pharmacy benefits manager then pockets the difference.

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Consumers are not the only ones to suffer the consequences of pharmaceutical benefit managers’ practices such as tiered pricing. Independent pharmacies can be reimbursed below cost and eventually forced to close, sometimes creating pharmaceutical deserts.

A recent study by the University of Iowa found that between 2003 and 2018, at least 1,230 independent pharmacies closed. For many, especially those who live in rural parts of the country, their local pharmacy serves as their primary healthcare infrastructure.

An elderly couple impressed by the high cost of prescription drugs.

As a result, higher health care premiums and longer waiting times usually ensue.

Families in Ohio are already struggling to make ends meet due to inflation making everyday goods more expensive, soaring gas prices and ongoing commodity shortages.

Surveys of the practices of pharmacy benefit managers have already revealed why there is such a need for transparency. For example, an investigation in Delaware found that the state’s drug benefit manager specifically targeted independent pharmacies with audits, despite the fact that plan managers “could not trace a single plan reimbursement to based on pharmacy audits conducted by (the pharmacy benefit manager)”.

Attorney General Dave Yost also found evidence that state drug benefit managers “participated in a conspiracy to improperly and illegally obtain funds (from the Ohio Department of Medicaid) to which they were not entitled. were not entitled in violation of the laws of the State of Ohio.”

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All of these issues need to be explored and investigated further, which is why I am so encouraged by the Federal Trade Commission’s recent announcement to launch an investigation into pharmacy benefit managers.

As they stated in their press release, the commission plans to “examine the impact of vertically integrated pharmacy benefit managers on access and affordability of prescription drugs.”

CVS Pharmacies is part of the same conglomerate that contains CVS Caremark, the company's pharmacy benefit manager.  It is one of six PBMs the FTC is focusing on through mandatory orders to obtain information about their business practices.

The commission is focusing on the six largest drug benefit managers in the country through mandatory orders for information about their business practices.

While I am confident that the actions of the commission – combined with the bipartisan legislative efforts pursued by Senators Chuck Grassley and Maria Cantwell – will bring much-needed transparency to the practices of pharmacy benefit managers, we must all be part of the solution.

We must continue to educate ourselves about the role of pharmacy benefit managers in our critical health care decisions and advocate for reforms that lower prescription drug prices and provide greater accessibility.

Ted Strickland served as governor of Ohio from 2007 to 2011.

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