Senate Co-Sponsorship Memoranda

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Senate of Pennsylvania
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted:	May 6, 2019 12:42 PM
From:	Senator Kim L. Ward
To:	All Senate members
Subject:	Requiring Transparency and Patient Protection in PBM Practices

I am introducing several bills to provided transparency and patient protection in practices by pharmacy benefit managers (PBMs).

PBMs are supposed to reduce prescription drug costs and improve convenience and safety for consumers, employers, unions, and government programs. However, the median price of brand medications increased 232 percent from 2008 through 2017 according to a study done by Express Scripts, a PMB itself. While the increase cannot be attributed to PBMs alone, their practices and lack of transparency have contributed significantly to it.

For most of their history since they were created in the 1960’s, PBMs provided prescription drug claim processing services. Now, only three PMBs control about 75% of the market and they have moved far beyond claim processing. PMBs today perform drug utilization review, drug plan formulary development, determine which pharmacies are included in a prescription drug plan’s network, decide how much network pharmacies will be reimbursed for their services, and operate mail order and specialty pharmacies themselves.

PBMs have grown into huge operations at the expense of health care consumers by using price spreading to pay pharmacies far less for drugs than what it actually costs the pharmacy to buy it, increasing their revenues through high rebates from drug manufactures without giving any savings from them to patients, driving prescriptions for highly profitable specialty drugs to themselves through pharmacies they own, and providing little-to-no transparency on claim payments to health insurer providers.

The bills I am introducing will not end PBMs but they will provide transparency and reform on some of the practices PMBs have utilized which have contributed to higher prescription drug prices and less choices in pharmacy services for patients.

Document #1

Description:	Bill #1 – Drug Benefit Claim Transparency & Reverse Auction Procurement This legislation will authorize all public sector pharmacy benefit plans in the Commonwealth to use a “reverse auction” process in selecting a PBM. Through the use of innovative technology, complete historical data on all prescription claims covered in the past year are provided to potential bidders who then submit their best prices in a multiple stage bidding process, with bids in each stage being analyzed to calculate the actual dollar cost of the submitted drug pricing proposals. Once a PMB is retained, all pharmaceutical claim invoices submitted by the PBM can be automatically reviewed in real-time and electronically, line-by-line and claim-by-claim. Any claim errors or overcharges can be identified before bills are paid. Already utilized by large public and private employers as well as union benefit plans and saving them an average of 15% for their pharmacy benefit plans, this reverse auction and claims transparency technology will enable the Commonwealth, local governments, and school districts to monitor and examine how much their PBM is paying on claims and see its formulary structure. Doing so will allow employers to provide their employees quality prescription drug benefits while driving down costs. This bill will also prohibit PBMs contracted with a public sector pharmacy benefit plan from accepting manufacture rebates for any drug on its formulary as a conflict of interest.

Document #2

Description:	Bill #2 – Patient Privacy Protection This legislation will prohibit any insurer or PBM from using patient information for the purpose of marketing. PBMs that own their own pharmacies drive prescription business to them regardless of whether it is in the best interest of the patient or the benefit plan. Too often, patients receive letters informing them their medication costs will significantly increase if they do not switch to a “preferred status” pharmacy without truth to the claim or disclosure of the “preferred pharmacy” being owned by the PBM. Under this bill, patients will still be able to use a PBM-owned pharmacy but a PBM may not use the patient information it gains through its services as a PBM to expressly market its pharmacy.

Document #3

Description:	Bill #3 – Protecting Patient Choice for Pharmacy Services PMBs are using both direct and indirect profit-growing tactics that are significantly curtailing patient choice. Whether it is obvious, like requiring all enrollees to use mail order for their prescriptions or less transparent such as practices which give an economic advantage to their PBM-owned pharmacies over any other pharmacies within their network, PBMs are stripping patients of their ability to make decisions when it comes to their prescription drugs and doing it literally at the expense of our local community pharmacies. This bill aims to reverse that trend by creating parity among pharmacies for patients by doing the following: Granting patient access to their pharmacy benefits at a local pharmacy by requiring PMBs to offer more than mail-order only services. Require PBMs to allow all pharmacies within its network to offer the same patient incentives offered in its PBM-owned pharmacy. Prohibit the use of Direct and Indirect Remuneration (DIRs) fees by PBMs. Initially used only in Medicare Part D plans to recoup “lost” costs in the administration of the plans, DIRs have become a common practice among PBMs who use arbitrary DIR fees without any transparency to boldly increase profits at the expense of independent pharmacies, plan sponsors and consumers. The lack of transparency surrounding DIR fees allows PBMs to clawback money from the pharmacies, without allowing a pharmacy to plan accordingly because DIR fees are not adjudicated at the point of sale, meaning the pharmacy lacks knowledge of if, when and how much a DIR fee on a prescription may be.