MA debate: Do pharmacy benefit managers help lower drug costs, or is it the opposite?

BOSTON — It took a call to the CEO of Massachusetts Blue Cross Blue Shield for Lauren Hunt, a Watertown resident and the daughter of former Gov. Jane Swift, to sidestep the pharmacy benefit manager handling her case and finally get the medication she needed for her illness.

“We learned it was a systems problem,” said Swift as she discussed her return to the State House Wednesday to advocate for legislation that would establish regulations in Massachusetts for pharmacy benefit managers.

But that information wasn’t revealed to either of them until the head of the state’s powerful health insurance provider intervened, even though they had spent hours on hold daily for months calling the pharmacy benefit manager to access the needed medication.

“When she is without her medication, Lauren takes a turn for the worst,” Swift said.

Swift said she acted the way any mother would.

“My child was struggling,” Swift said. Luckily, she had access to avenues not available to everyday citizens. “I could tell her story, but others don’t have the voice or the recourse.”

Swift, who has already testified during the legislative session in favor of a bill that would establish parameters to rein in the industry, was “deeply disturbed” as a former public official and a parent at the lack of industry transparency and accountability.

“There is no system in place to protect patients,” Swift said.

What are pharmacy benefit managers?

Pharmacy benefit managers were created as a cost-saving measure for employers. A contracted manager could determine which medications would be covered by insurance and was then authorized to negotiate prices for the drugs.

Mergers and buyouts have concentrated 80% of the industry into the hands of three major players:

• CVS Caremark, owned by CVS Health
• Express Scripts, owned by Cigna
• Optum Rx of United Health Group

The industry, which generates billions in revenue for their parent companies, has come under fire. Patients complain about lack of access to lifesaving medications, delays in receiving medicine and being directed to make their purchases at pharmacies owned by the management companies. Independent pharmacies complain that reimbursement rates are low, barely covering the cost of the medications.

Why have pharmacy benefit managers become controversial?

Published reports have taken the industry to task for the lack of transparency in pricing criteria, amid claims that the benefit managers, instead of lowering the cost of medications, have increased costs across the board.

Last summer, the Federal Trade Commission sent an order to the group purchasing organization Emisar Pharma Services demanding information and records pertaining to its business practices. Emisar negotiates rebates with drugmakers on behalf of Optum Rx. The order was similar to demands sent to two other group purchasing organizations — Zinc Health Services, affiliated with CVS; and Ascent Health Services of Cigna — earlier in the year.

Independently owned pharmacies fear low reimbursement rates will push them out of business. Shuttering pharmacies, along with chains opting to close retail outlets in cities, as recently happened in Boston and Worcester , could create pharmacy deserts in some communities.

Joanne Ortiz Read, owner of Eterna Pharmacy in Worcester and another outlet in Lawrence, said the rise of benefit managers has drastically impacted the landscape for small pharmacies.

“The reimbursements are not enough to have us continue in the business,” Ortiz Read said.

Supporters of legislation include the Massachusetts Association of Independent Pharmacists, Rare Disease Advocacy Association New England and Epilepsy Foundation New England.

“It’s time to advance state policy solutions here in Massachusetts that create more transparency around how PBMs operate, and finally rein in the bad actors who’ve been operating without scrutiny for too long,” said Bill Murphy, director of advocacy and public policy at Epilepsy Foundation New England.

What are defenders of pharmacy benefit managers saying?

The Telegram & Gazette reached out to CVS Caremark , which deferred to the Pharmaceutical Care Management Association .

Greg Lopes, vice president of public affairs at that organization, said in an email: “Any assertion that PBMs somehow increase prescription drug prices is ludicrous and is a false narrative driven by Big Pharma to shamelessly attempt to shift blame away from their egregiously high prices and the schemes they use to hold prices high. The mission of a PBM is to reduce drug costs, and we have a proven track record of lowering prescription drug costs for employers and patients. PBMs will save Massachusetts citizens more than $22 billion over 10 years and PBMs save patients and payors an average of $1,040 per person, per year.”

Even as some advocate for more transparency within the industry and are urging legislators to rein in pharmacy benefit management companies, other groups in Massachusetts believe these work to their benefit.

A coalition of organizations, Save Our Benefits, which include labor councils and unions, many that offer self-funded health insurance to members and employees, are pointing the finger for high prices at the big drug companies. The organization fears legislation could impede member organizations from shopping for and negotiating the best prices for medications while also interfering with customers opting for mail-order medications.

"As they are in all over the country, big pharma has spent over $1 million this session in Massachusetts alone pointing the finger at everyone else,” said Bob Rizzi, president of the Norfolk County Central Labor Council, a former trustee of the Massachusetts Bricklayers and Masons Health & Welfare Fund. “Drug manufacturers set the price and will say anything to avoid regulation including attacking fundamental ERISA-protected union health plans just to continue padding their own pockets at the expense of working families.”

Self-funded health plans are traditionally regulated by under the Employee Retirement Income Security Act, enacted in 1974.

The organization touts the benefit managers as a way to curtail costs through lower co-pays, directing patients to pharmacies that offer lower prices.

The Commonwealth Fund , an organization dedicated to promoting an equitable, high-quality health care system throughout the nation, particularly for people of color, low-income earners and other vulnerable populations, discussed the role of managers in a 2019 web post.

The organization noted the cost-saving benefits of managers that existed at the time as well as the controversy surrounding the practice of “spread pricing.” At issue is the fact that reimbursement from health insurance plans and employers for generic medications is significantly higher than what the management companies pay pharmacies. Managers pocket that difference and some believe consumers should benefit from these savings.

In a letter to legislators, the Patients Not PBMs coalition has made several demands, based on an array of legislation that has been filed by lawmakers during this session:

• Enact state licensing and oversight of PBMs and authorize the attorney general to enforce the laws and regulations relative to the operation of PBMs
• Prohibit PBMs from reimbursing community pharmacies below the pharmacy's cost to purchase a prescription drug
• Require PBMs to pass through at least 80% of manufacturer rebates to patients to lower their costs at the pharmacy counter or when purchasing specialty medications
• Prevent spread pricing from being used to harm community pharmacies
• Ban accumulator adjustment programs and require PBMs and insurers to count copay assistance toward a patient’s deductible or out-of-pocket cost
• Delink PBM profits from prescription drug prices to eliminate the incentive for PBMs to manipulate prices to increase profits
• Enact a PBM duty of care that prioritizes the patient first
• Increase transparency and regulatory safeguards for PBMs

In her tussle with the benefit manager that oversees her daughter’s insurance coverage, Swift said she found inefficiencies and a lack of knowledge on the part of those public-facing employees.

“There is no system in place to protect the patients like Lauren when the system breaks down,” Swift said.

With the intervention of the Blue Cross Blue Shield CEO, Hunt was able to refill her prescription after a two-month hiatus. The final straw for Swift was the requirement that her daughter listen to a lecture from a pharmacist or staff nurse detailing the dangers of stopping and starting the medication without medical supervision.

“She was already aware,” Swift said.

This article originally appeared on Telegram & Gazette: MA debate: Do pharmacy benefit managers help lower drug costs, or is it the opposite?