In the Crosshairs: Officials push for transparency, accountability among pharmacy benefit managers

Erica Mahn: Tech advances, including AI, could one day lead to exit of PBMs.

Mariah Hollabaugh: Dismantling PBM monopolies "makes great sense."

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The yearslong scrutiny from lawmakers, the Federal Trade Commission and the health care industry on pharmacy benefit managers became a bit more intense with the recent bipartisan bill filed in the U.S. Senate that seeks to prevent health insurers or drug middlemen from owning pharmacies.

U.S. Sens. Josh Hawley, R-Missouri, and Elizabeth Warren, D-Massachusetts, last month introduced legislation targeting PBMs, which serve as intermediaries between prescription drug manufacturers and health insurance providers. The bill, dubbed the Patients Before Monopolies Act, seeks to force companies owning health insurers or PBMs to divest their businesses operating pharmacies within three years. A companion bill also was introduced in the House by Rep. Jake Auchincloss, D-Massachusetts, and Rep. Diana Harshbarger, R-Tennessee.

The legislation takes aim at revenue and market power for large PBMs and the conglomerates that own them. Three companies controlled nearly 80% of U.S. pharmacy benefit management in 2022, according to the FTC. CVS Caremark led with 33%, followed by Express Scripts at 24% and OptumRx with 22% of the market. The three PBMs are owned by companies that also offer insurance and other health care services. CVS Health (NYSE: CVS) owns Caremark, Cigna Group (NYSE: CI) owns Express Scripts and UnitedHealth Group Inc. (NYSE: UNH) owns OptumRx.

“The insurance monopolies are ruining American health care. Patients and independent pharmacies are paying the price,” Hawley said in a news release. “This legislation will stop the insurance companies and PBMs from gobbling up even more of American health care and charging American families more and more for less.”

PBMs negotiate prescription drug prices between insurers, pharmacies and drugmakers, and directly reimburse pharmacies for prescription drugs included under their agreed terms. However, government scrutiny has led to allegations of price fixing and vertical integration among PBMs.

Mariah Hollabaugh, system director of pharmacy at Citizens Memorial Hospital, said the approach that Hawley and Warren are taking to reform PBMs by trying to dismantle the monopolies in the industry “makes great sense.”

“Something like that is going to have to happen to resolve the state of affairs that we are in now,” she said. “What we’re seeing currently is that many of the insurance companies have shared ownership of the PBMs and many PBMs then in turn own [the] vast majority of the pharmacy options. What they have created is a monopoly that makes it nearly impossible for independent pharmacies to negotiate and be on a level playing field with the large chain source.”

In the ecosystem
Both Hollabaugh and Erica Mahn, executive director of community pharmacy services at Alps Pharmacy in Nixa, see a diminished role in the health care ecosystem for PBMs as a positive for the industry.

“There always has to be some valid communication between the pharmacy and the insurer,” Mahn said, noting her employer is an independent pharmacy. “The insurance companies have realized that when they don’t have to do that part, it makes their job a lot easier.”

Mahn said on the pharmacy side, Alps transmits claims as soon as a prescription is received.

“I run it through the PBM or the insurance company right then and there,” she said, noting somewhere in the processing of billing profitability is diminishing as the pharmacy is getting reimbursed at lower rates by PBMs, which also are adding fees.

“Independent pharmacies obviously are what is affected most because I don’t have the larger buying power specifically like big box stores,” she said. “So maybe they offer a discount that we don’t have access to or maybe on the CVS Caremark side, they’re sending into their personal mail-order pharmacy and then naturally they cut out the middle person there.”

Mahn said more transparency from PBMs is needed to understand the extra fees and where the money is going.

It’s also a demand the Missouri Pharmacy Association seeks, said CEO Ron Fitzwater. He said the PBMs, which were created to facilitate the dissemination of data between the patient, pharmacist and insurance company, now seem to operate in the shadows and make decisions that more benefit their bottom lines as opposed to the advantage of patients and payers. When insurance companies began offering prescription drugs as a health plan benefit in the 1960s, PBMs were created to help insurers contain drug spending, according to the National Association of Insurance Commissioners.

“If PBMs were to get back to their original role of helping to transmit data, that would be a benefit to the entire health care system and would help to bring the cost of drugs into the competitive market and pricing,” Fitzwater said via email.

CMH has retail pharmacies in Bolivar, Buffalo and Urbana, along with a hospital pharmacy and a senior pharmacy that serves residents of long-term care facilities. Hollabaugh said the Bolivar-based health care system switched last year from OptumRx to Integra, an independent PBM that is more of a subscription-based plan where the health system pays per covered person versus the PBM getting a percentage of every prescription.

“There’s definitely opportunities to revamp the payment structure of the pharmacy benefit model so that it is not driving them to have an incentive to own their own pharmacies and capture all of the volume, which hurts our independent pharmacies and decreases access for patients if the sole purpose becomes number of scripts versus access points for care,” she said.

Washington, D.C.-based Pharmaceutical Care Management Association is the national organization representing America’s pharmacy benefit companies. The organization said there were 73 PBMs as of March 2023. The PBM companies vary in size, geographic footprint and service offerings to create a marketplace for health insurers, employers, labor unions, government programs and other health plan sponsors, according to its website.

While declining an interview for this story, PCMA officials sent a statement from its president and CEO, JC Scott, noting the PBM Act legislation “would severely limit access to safe and affordable pharmacies that patients value and rely on for prescription drugs.”

Scott said PBM-affiliated pharmacies, which include mail-service and specialty pharmacies, provide convenient, reliable and affordable options to patients to access prescription drugs.

“Mail-service pharmacies could save patients, employers and public health plans $23.5 billion over 10 years and specialty pharmacies, which are sometimes affiliated with PBMs, have the technology and clinical expertise to enhance the quality of care patients receive, and typically can reduce the cost of extremely expensive specialty drugs by up to 45%,” he said in the statement.

Alternative option
While the elimination of PBMs isn’t part of the newly filed federal legislation, Mahn said she wonders if it one day might be a possibility.

“Honestly, with the advance of technology and (artificial intelligence) opportunities and things, I think it could go away very easily – the PBM portion of it,” she said. “But really just a person clicking a button and running the computer pieces back and forth very easily could be a new program now because we have the capability.”

If PBMs don’t go away, Hollabaugh said at the very least there needs to be a way independent pharmacies can still come to the table and be part of the search for a better system.

“If one of the large insurers is only providing plans that require one of the large chains of their pharmacy and that large chain isn’t present in the communities that they live in, how are they supposed to access medications?” she said. “The margins have become so thin and in many cases the pharmacy, they’re losing money to provide a prescription. How do they continue to take care of their patients and stay in business?”