By Rose Hoban
When a patient goes to the pharmacist to pick up a prescription of, say, Prilosec the anti-heartburn drug, it may cost one person a $5 copay, for another person it’s a $3 copay and for someone else, it’s $50.
The differences in price depend on both who insures each patient and which pharmacy benefits manager is used by those insurance companies.
Pharmacy benefits managers (PBMs) are the big companies that most patients don’t know exist. They’re big companies with fat profits that act as middlemen between insurers and patients. Those profits are generated by charging fees to insurance companies to handle the pesky business of getting drugs to patients on one side, and by using their large size to negotiate lower prices with drugmakers.
And while patients may pay lower prices for their medications, pharmacists – in particular independent pharmacists – often feel squeezed by PBMs.
That’s what’s behind bills (House Bill 466 and companion Senate Bill 384) making their way through the state legislature in Raleigh that would give independent pharmacies a little bit of leverage in their negotiations with PBMs.
“I’m from a small town and I have watched a lot of our industry, a lot of our business fall away,” said Rep. Brenden Jones (R-Tabor City), the main sponsor of the bill in the House. “I’ve got several family friends who are pharmacists and we just got into a discussion one day and I decided to open the book and look at it.”
According to the Pharmaceutical Care Management Association, about 266 million Americans have a PBM managing the drug benefit portion of their health insurance. And it’s a highly consolidated business, with only three companies controlling about 80 percent of the market, about 180 million patients.
“We lost our local hardware store,” explained Jones. “If he orders 5,000 washers at a quarter apiece, Lowe’s orders 50 million at 10 cents apiece.”
It’s the same with a huge PBM that’s able to wrestle prices down when negotiating with drugmakers.
And when a PBM starts to negotiate with a small community pharmacist, like the one owned by Joe Moose and his brother in Cabarrus County, the PBM calls the shots, and often, small pharmacists get squeezed.
“I don’t even know when I’m filling a prescription if I’m making money or not,” Moose said during a 2016 interview with NC Health News.
“For example, Prilosec costs me 20 bucks,” Moose said. “I may sell that generic to a patient, I run it through the insurance and they come back and say they’ll only pay me $15 for that drug. Then the patient has a $3 copay, so I actually lost two to sell it.
“So we’re selling drugs and have no idea whether we’re making money off that. I don’t know of any other business that operates like that,” Moose said.
That’s one of the changes HB 466 would make, prohibiting a PBM from collecting money from patients over and above what was billed by the pharmacy.
The bill would also allow local pharmacists to discuss lower-priced options with their patients, something that many PBM contracts currently prohibit.
Peering inside contracts
The big PBM companies are located outside of North Carolina, meaning that state regulators at the Department of Insurance have little or no jurisdiction over the companies or the contracts they enter into with insurers or with small pharmacists.
Ben Popkin, who used to be the legal counsel for the Department of Insurance before moving over to DHHS earlier this year, explained that many of the contracts between pharmacists and PBMs have nondisclosure clauses. That means a regulatory agency like the DOI can’t even look at those contracts to help pharmacists like Moose.
“The DOI has no authority over contracts entered into by private parties, so if you’re dealing with a PBM company which is outside our regulatory authority and you’re dealing with a private business which is also outside our regulatory authority, the department will have no legal standing to intervene in that contract,” Popkin said
He explained that contracts between companies in different states often stipulate that the laws and rules of one of the states predominate.
Popkin said it looks like the legislature is trying to give companies in North Carolina some power to push back by requiring that contracts between a PBM and an insurer located in North Carolina be available for review by DOI.
“I was able to sit down with the PBMs and with the insurance companies and the local pharmacists and come to some agreeable language,” Jones said. “It’s a starting place and I think this will give our local pharmacists a little more leverage in their contracts.”