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Pharmacy benefit managers defend their Medicaid role at Pa. Senate committee hearing

The companies that negotiate drug prices answered pointed questions about costs and where the money is going.

CVS Health Corp.'s PBM faced pointed questions at a state senate hearing in Harrisburg Tuesday
CVS Health Corp.'s PBM faced pointed questions at a state senate hearing in Harrisburg TuesdayRead moreOlivier Douliery Abaca Press/TNS)

State Rep. Doyle Heffley (R., Carbon) was walking down the street after a town hall meeting at an assisted living community when a local pharmacist stopped him and explained how he was losing money on filling prescriptions.

"He said, 'It's not a model that can be continued, and it's not sustainable,'" Heffley recalled Tuesday at a joint hearing of the Senate health and human services committee and the Senate majority policy committee. "And if we lose these community pharmacies, right now, people will have to drive 45 minutes or an hour to get a prescription filled."

Heffley is one of several legislators who proposed bills this year aimed at reining in pharmacy benefit managers, or PBMs — powerful companies that are hired by health plans to negotiate discounts with drug manufacturers and reimburse pharmacists for the medications they dispense. On Tuesday, Heffley was one of more than a dozen people who testified about the companies' role in Pennsylvania, as lawmakers — with an eye toward reforms in the next legislative session — try to gain a better understanding of a complex, multi-billion-dollar sector of the health-care system.

Pharmacists who serve the state's Medicaid patients have grown increasingly vocal about what they've described as deep cuts to their reimbursements by PBMs even as those firms have received more state money. The state paid PBMs $2.84 billion in 2017, according to the auditor general's office, up from $1.8 billion in 2013. Pharmacy benefit managers are subcontractors within the Medicaid program and don't have agreements directly with the state, but rather with managed care organizations that are overseen by the state Department of Human Services.

Heffley said that in his rural district, community pharmacists are providing a health-care service to the community "and we're providing the tax dollars to pay for that. But somewhere between us providing the dollars and them providing the service, those dollars are getting taken away. And those are tax dollars. I think what we need is oversight."

State Sen. Judith Schwank (D., Berks), the health and human services committee's minority chair, also stressed the need to keep patient access in mind when considering the role of PBMs. "We have to continually think about the population that is primarily served through Medicaid, both in urban and rural areas, that are going to be out of luck if we're not careful about how we structure this," she said.

Several industry officials who testified described pharmacists as important partners to PBMs.

"There is oftentimes some tension with pharmacies, where we're also trying to negotiate to get the best deal we can for the people that are paying for the drugs," said Natalie Pons, general counsel for OptumRx. "That said, we want to ensure that our pharmacies are paid fairly, that they are in fact getting paid above their costs."

"We need that pharmacy to stay in business. It is important for us to meet our network requirements," said Ben Twilley, director of state government affairs for Express Scripts.

CVS Health, which operates storefront pharmacies as well as a PBM — CVS Caremark — faced pointed questions about its offers to buy pharmacies.

"I have heard a lot of complaints from independent pharmacies, that after a PBM reduces payments made to a community pharmacy, those pharmacies get letters from drugstores affiliated with the PBM, asking if they want to sell their business," said the committee's chair, State Sen. Lisa Baker (R., Luzerne).

"Yes, there were letters that went out from CVS retail," said Erik Woehrmann, director of government affairs for CVS Health. "We do have stringent firewall protections in place between CVS retail and the Caremark, or the PBM side, of our business, that we do take very, very seriously. Any retail acquisition activity is completely unrelated to and separate from and not coordinated in any way with the PBM business."

"Our retail business discontinued sending those letters about a year ago," Woehrmann added.

Auditor General Eugene DePasquale is conducting his own review of PBMs, due out later this year. If there are fewer pharmacies and less competition, he said at the hearing, "we could be setting ourselves up for a health-care and fiscal disaster."