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Senate of Pennsylvania
Session of 2019 - 2020 Regular Session


Posted: January 8, 2019 02:17 PM
From: Senator Lisa Baker
To: All Senate members
Subject: Fairness, Transparency and Pharmacy Benefit Managers
Last year, the Senate Health and Human Services Committee convened a hearing regarding the role and impact of Pharmacy Benefit Managers (PBMs) in Pennsylvania. As third-party administrators of drug benefit programs for health plans, PBMs work to help contain costs. Those testifying pointed to a 30% savings on pharmacy benefits for managed plans as opposed to unmanaged plans. But the terms of these agreements are often unknown to consumers, and some practices have been questioned for their effectiveness. For example, pharmacists spoke about “spread pricing,” which allows PBMs to charge a plan sponsor more for a drug than it actually pays the pharmacy and pocket the difference.

Many states are taking steps to implement tighter controls. Maryland now regulates how PBMs may negotiate with pharmacies and bans “gag clauses” that prohibit a pharmacist from informing customers they may be able to save money by paying for medications out-of-pocket, rather than using their insurance coverage. Additionally, Ohio has forced its Medicaid Managed Care Organizations to renegotiate the terms of its contracts saving an estimated $220 Million a year.

While PBMs play an important role in our health care system, concerns over transparency and fairness must be addressed. In the near future, I plan to introduce legislation to:
  • Ban the use of “gag clauses” in PBM contracts with pharmacies.
  • Eliminate the practice of “spread pricing.”
  • Establish a value-based Pay for Performance program rewarding pharmacies and PBMs if certain metrics regarding drug adherence/compliance and cost saving measures are met.
  • Allow PBMs to charge only a small, specified administrative fee per claim.
  • Require the use of the Centers for Medicare and Medicaid Services (CMS) National Average Drug Acquisition Cost (NADAC) to set the price of prescription drugs filled through Medicaid.
  • Provide for a reasonable professional dispensing fee to pharmacies to standardize reimbursements across the entire Medicaid population.
This legislation will not eliminate all concerns related to PBMs. However, it is a critical first step in addressing some of the problems identified. I hope you will consider joining me as a cosponsor.