STATE HOUSE – Sen. Linda Ujifusa, a member of the Senate Health and Human Services Committee, is taking aim at the high cost of prescription drugs with two bills that protect Rhode Island patients and taxpayers from the harmful activities of Pharmacy Benefit Managers (PBMs), private corporations that work on behalf of insurers and make enormous revenues in the complex, non-transparent system that gets drugs from manufacturers to patients.
Although PBMs provide no actual health care, the National Community Pharmacists Association estimates that PBMs are adding about 30 cents per dollar to the price consumers pay for prescriptions. Not surprisingly, there has been a huge uptick in the number of states enacting new laws to control PBMs. According to the National Conference of State Legislators at least 30 states enacted laws in 2021 to regulate and bring transparency to PBMs. West Virginia, for example, passed a bipartisan bill last year that requires PBMs share their “savings” directly with consumers.
“Other states are doing a much better job monitoring and overseeing PBMs and have saved consumers and taxpayers hundreds of millions of dollars,” said Senator Ujifusa, (D-Dist. 11, Portsmouth, Bristol). “Rhode Island should follow their lead.”
One bill (2023 S-0106) addresses several current industry practices that harm consumers and taxpayers. The bill would prohibit “rebates,” or legal kickbacks that PBMs get from manufacturers that incentivize PBMs to put on their covered drug lists more expensive drugs that result in higher profits, even if there are more effective or affordable drugs available.
The bill would also ban a practice known as “spread pricing” wherein PBMs charge health plans and payers more for a prescription drug than what they reimburse to the pharmacy — and then keep the difference or “spread.” According to the Wall Street Journal, Ohio found this spread came to $5.70 per prescription and the state could have saved roughly $4 per prescription by eliminating spread pricing.
In addition, the bill restricts PBM “utilization management” techniques that prevent patients from getting drugs prescribed by their physicians in a timely manner. For example, PBMs routinely impose “prior authorizations” that require patients and their care providers to get third-party approval before getting prescribed medicines. PBMs also require patients to start with or switch to lower-priced medications before being approved for medications their physicians originally prescribed. PBMs can also essentially force patients off their current therapies by increasing out-of-pocket costs or terminating coverage of particular drugs. Multiple states are acting to restrict these PBM practices.
Rep. John J. Lombardi (D-Dist. 8, Providence) has introduced the companion legislation (2023-H 5078) in the House. The bill was also introduced last year (2022-H 8002) and had the support of the Rhode Island Medical Society (RIMS), an association of physicians, physician assistants and medical students that advocates for better patient care.
A second bill (2023-S 0581) would prohibit the Executive Office of Health and Human Services (EOHHS) from contracting with Managed Care Organizations (MCOs) that subcontract with PBMs. MCOs are private companies that the state pays to manage health insurance for Rhode Islanders on Medicaid.
“Ohio prohibited its MCOs from contracting with PBMs,” said Senator Ujifusa, “and estimated its savings at $150 to $200 million per year. Many other states are also restricting PBMs in their MCO contracts to save patients and taxpayers money.”
PBM conglomerates rank fourth (CVS), fifth (UnitedHealth Group) and thirteenth (Cigna) on the Fortune 500 list ranking largest corporations by revenue. Their revenues exceed those of the largest pharmaceutical manufacturers that are actually making the drugs. CVS makes about 46% of its revenue from its PBM business.
“The bottom line is that consumers face unaffordable prescription costs, taxpayers support an enormous Medicaid budget and actual healthcare providers are leaving or shuttering due to under-reimbursements,” said Sen. Ujifusa. “We must follow the lead of other states and protect our citizens from middlemen PBMs, who are enjoying strong financial growth and helping cause these problems.”