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PBM oversight pushed as small pharmacists fume

Thursday, Mar 14, 2019

* Press release from yesterday…

Majority Leader Greg Harris, D-Chicago, is joining state Sen. Andy Manar to announce their efforts to rein in unfair insurance programs and regulate pharmacy benefit managers that dramatically increase out-of-pocket costs for patients at a press conference and rally on Wednesday March 13 at 2 p.m. in the Capitol Rotunda.

“We need to put access to quality, affordable care over the bottom line of corporations,” Harris said. “The status quo is clearly broken when patients are seeing the out-of-pocket cost of their lifesaving medications more than double, simply due to unfair practices that help boost profits at the expense of patients.”

Harris introduced an amendment to House Bill 465, which makes various reforms aimed at lowering prescription drug costs for patients in Illinois. Harris’ measure defines and regulates pharmacy benefit manager (“PBMs”) practices within the State of Illinois; requires pharmacists to inform customers of a less expensive drug product for their prescription; protects consumers entering the emergency room from having coverage of treatment rejected; and prohibits insurers from adopting “copay accumulator programs,” that prevent manufacturer copay cards from reducing out-of-pocket expenses for patients.

“PBMs are billion dollar corporations that are currently operating with no oversight in Illinois,” Harris said. “Over 25 states have begun regulating PBMs including Indiana, Kentucky and Texas. It’s time for us to do the same in Illinois and create protections that will level the playing field and help reduce drug costs for patients.”

* Peter Hancock with Capitol News Illinois

PBMs generally work on behalf of health insurance plans to negotiate drug prices and develop what are called “formularies” — rules that determine what drugs will be covered for particular conditions, and in some instances, under what conditions those drugs will be covered.

In addition, in the case of high-cost drugs, PBMs will often set a “maximum allowable cost” that limits how much pharmacies will be reimbursed for a particular drug.

Independent pharmacies complain those maximum allowable costs are often less than the wholesale price they pay to manufacturers to obtain the drug. They also allege that certain PBMs have direct ties to large, retail chain pharmacies, such as CVS Health, which operates the nation’s largest chain of retail pharmacies and provides pharmacy benefit management services. […]

“We agree with … Harris that more can be done to address rising drug prices,” [an association that represents PBMs, the Pharmaceutical Care Management Association] said in a statement. “However, legislation HB 465, promotes the special interest agenda of the independent drugstore lobby while having adverse effects on drug costs for Illinois consumers.”

The association has also argued that it is not to blame for the closure of small, independent pharmacies. Those pharmacies, it said, are at a natural competitive disadvantage because they do not have the purchasing power to negotiate the same kind of prices with wholesalers that PBMs can negotiate.

More here.


Independent pharmacies in Illinois argue they are paid very little in dispensing fees for prescription drugs and often prices and fees eat up their profits. They warn that unless the legislature takes action many independent pharmacies will disappear which has happened in Lincoln and Logan County.

“If they are allowed to continue this practice, and allowed to stamp out competition, and drive prices up we should only expect that there are going to be fewer pharmacies as time goes on,” said Senator Manar.

In the past year independent pharmacies have closed in Lincoln, Taylorville and Mt. Zion.

* More context

The Springfield-based Illinois Pharmacists Association says many owners of the state’s more than 500 independent pharmacies and smaller chains are being paid less than the “acquisition cost,” or wholesale cost, of the medicines they dispense to Medicaid patients.

Garth Reynolds, executive director of the association, says pharmacies also have seen their per-prescription “dispensing fee” from Medicaid, a fee designed to cover professional services, drop from $5.50 for generics and $2.40 for name-brand drugs under the previous “fee-for-service” system to the current 45 cents per prescription.

Advocates for managed-care organizations and PBMs say the managers save states money in their Medicaid systems. But advocates for pharmacy owners say Illinois’ less-than-transparent managed-care contracts conceal what may be unfairly high profits by PBMs that are being earned at the expense of independent pharmacies.

And because at least one PBM, CVS Caremark, is owned by the huge chain that operates CVS pharmacies, independent pharmacies say Caremark’s rate cuts may be designed to put independents out of business.

That CVS Caremark issue is huge.

* And this talking point from the PBM industry is probably not helping the industry deal with the lobbying by independent pharmacies

Repeal any willing pharmacy provisions. Requirements that all pharmacies be included in Part D networks drives up costs and are unnecessary, given the network adequacy requirements. Congress should repeal the provision. A recent study showed that greater use of limited network pharmacies in Part D could generate $35 billion in savings over 10 years.

Everybody has pharmacies in their legislative districts. And many constituents love their local pharmacists. They are a potent force, but they’re rapidly declining.

- Posted by Rich Miller        

  1. - wordslinger - Thursday, Mar 14, 19 @ 10:24 am:

    I’m amazed that there still are any independent pharmacies. I don’t know how they do it, what with Walgreens, CVS and WalMart crushing everything in sight.

    Walgreens will make an offer to buy any independent pharmacy in the country and likely shut it down, but bank the scripts.

  2. - Red Ranger - Thursday, Mar 14, 19 @ 10:38 am:

    PBMs as the victims, thats a winning argument. I’d lead with that one!

  3. - lost in the weeds - Thursday, Mar 14, 19 @ 11:14 am:

    Not surprised. There is something going on with my subscriptions. After a request by RPM

  4. - Huh? - Thursday, Mar 14, 19 @ 11:21 am:

    Small towns don’t have the size to support a CVS or Walgreens. Sometimes all an independent pharmacy is the only thing available within a reasonable distance.

  5. - The Extorted - Thursday, Mar 14, 19 @ 11:54 am:

    This is not a purchasing issue! Most pharmacies purchase within buying groups that have as many pharmacies as Walmart or Walgreens. This is a reimbursement issue!! We are not reimbursed at the same level for the same medication! I repeat, CVS. Walmart and Walgreens are paid more!!

  6. - Fed Up Pharmacist - Thursday, Mar 14, 19 @ 12:49 pm:

    The arguments by the PBM lobby/PCMA is so absurd it’s laughable. Purchasing power isn’t the issue. But when one of the top pharmacy chains owns one of the top PBMs, there is clearly a conflict of interest. We are doing everything we can to survive these mob-like tactics!

  7. - Chicagonk - Thursday, Mar 14, 19 @ 2:20 pm:

    @Fed Up - I agree that there needs to be PBM reform, but hesitate to back change that would drive up medicaid costs. Are there effective coops that could start their own PBM or get better deals from the PBMs?

  8. - Lester Holt’s Mustache - Thursday, Mar 14, 19 @ 2:25 pm:

    ==The Extorted - Thursday, Mar 14, 19==

    Rich, why does this guy get to use exclamation points? The rest of us get blocked posts, but he gets 6? C’mon man

  9. - PharmLifer - Thursday, Mar 14, 19 @ 2:43 pm:

    @Chicogonk — Auditor General’s report showed the use of the PBM’s in Managed Care created over $7 Billion in mismanaged funds. There’s plenty of research showing PBM’s do not add cost savings but rather drive up prices in both Commercial and government plans. Medicaid will save money by eliminating the PBM’s and going back to the traditional fee for service program.

  10. - nanderson - Thursday, Mar 14, 19 @ 3:41 pm:

    My husband is a 5th generation owner of an independent pharmacy. Two issues, when CVS and Caremark merged…how does that happen? Advertising of Rx is done in two countries only, US and Australia. Further, approximately 40% of the cost of a drug is rebated back to either the middleman or insurance company. So if you spend $100 on a drug, they get $40 back. Sadly, small pharmacies are finding it more difficult to compete with chains.

  11. - OG-Pharmacist - Thursday, Mar 14, 19 @ 4:07 pm:

    West Virginia took the medicaid drug benefit away the PBMs and saved $54 million in one year and still were able to pay the pharmacies an extra $122 million more than they were paid by the PBM. $122 million spent in the state instead of going to out of state PBM. Illinois has over 5 times as many public aid people over West Virginia.

  12. - Senior & Seen it All - Thursday, Mar 14, 19 @ 4:26 pm:

    The PBM’s don’t mention that they might pay a pharmacy $60 for a generic Rx and bill the state or provider $600 for that same Rx. I have the evidence from auditing both sides of the claims for some self insured companies. This is what is raising drug prices nationally.

  13. - Dr. Pepper - Thursday, Mar 14, 19 @ 4:31 pm:

    Ohio has lost 30% of its independent pharmacies in underserved areas over the past 5 years, primarily due to the predatory tactics of first, PBMs then second, chains. Can I sell you cigarettes with that heart medicine? We are going the same way. Apparently (perhaps for the first time) WVa came up with a logical approach.

  14. - Old Pharmer - Thursday, Mar 14, 19 @ 4:47 pm:

    Arkansas, Kentucky, West Virginia, and Ohio have all proven that PBMs are increasing costs and decreasing access to healthcare. Don’t believe the PBM propaganda.

  15. - Clemenski - Thursday, Mar 14, 19 @ 5:48 pm:

    I own my independent pharmacy…I’ll show anybody my books to prove these MAC prices are unattainable…the majority of them cannot at be found anywhere on this earth…how are we to survive?

  16. - Blue Dog Dem - Thursday, Mar 14, 19 @ 6:47 pm:

    Shop small folks. Its our only chance.

  17. - Lynn S. - Friday, Mar 15, 19 @ 1:48 am:

    Just wanted to start this by saying that I have been reading this blog for at least 10 years, and I deeply appreciate Rich and his staff. They (and many of the commenters) make this joint a great place to hang out.

    Am I the only person to notice that within about 3 hours of the time this article went up, the PBM association came over here to buy an ad?

    Definitely not criticizing you, Rich. The advertisers help you pay the bills. And you’re really good about labeling content, so that we know who’s behind an ad when it appears.

    Just a bit surprised at the speed this all happened at.

  18. - Lynn S. - Friday, Mar 15, 19 @ 1:48 am:

    Just wanted to start this by saying that I have been reading this blog for at least 10 years, and I deeply appreciate Rich and his staff. They (and many of the commenters) make this joint a great place to hang out.

    Am I the only person to notice that within about 3 hours of the time this article went up, the PBM association came over here to buy an ad?

    Definitely not criticizing you, Rich. The advertisers help you pay the bills. And you’re really good about labeling content, so that we know who’s behind an ad when it appears.

    Just a bit surprised at the speed this all happened at.

  19. - Siriusly - Friday, Mar 15, 19 @ 8:57 am:

    Lynn- those ads and the corresponding web pages take weeks to build. I am sure that group had the ad buy planned. Not sure what you are trying to imply but I disagree with it.

    I don’t really get this issue. I don’t have a local shoe store or half as many small retailers in my home town as we used to. Walmart CVS Target Amazon the entire economy is shifting. Lots of blame to go around. These benefit managers keep us from getting fleeced by big pharma. I don’t think we can blame them for the fact that the economy now favors wal mart vs small neighborhood store.

    If Il gets rid of the benefit managers I think big pharma will have a field day with my drug prices !!!

  20. - Rich Miller - Friday, Mar 15, 19 @ 9:15 am:

    ===Just a bit surprised at the speed this all happened at. ===


    They’ve had a display ad up for a while now and have been lagging at getting me copy for a text ad.

  21. - Fed Up Pharmacist - Friday, Mar 15, 19 @ 9:59 am:

    Siriusly, you seem awfully fond of the PBMs. Odd. Not something you typically hear given the overwhelming evidence coming out almost every day showing that PBMs are the ones fleecing us. As for the ads taking weeks to build, the press releases from PCMA regarding the Illinois pharmacy lobby are nearly identical to the New York lobby, and I’m sure the Arkansas, Ohio, Georgia, Kentucky, etc. A little ad tweaking now and then to twist their stories for their next adversaries it seems.

  22. - Crazy Pharmacy Owner - Friday, Mar 15, 19 @ 11:21 am:

    Just to put it in simple words we buy a product for $10 and PBM pays $5 for it and charges state $20 only business in world gets paid less then what they pay for a product and middleman in these case PBM make out like bandit whose only job is to push papers. Its smoking mirrors about PBM saving money.

  23. - FactsRfacts - Monday, Mar 18, 19 @ 3:40 pm:

    Siriusly-Interesting that you have such a simple explanation of economics for Lynn regarding such a complex matter. PBMs add no value to the healthcare system and are a non-essential component as we will see shortly. If they are not doing anything wrong, then they have nothing to hide. They however hide behind the term “proprietary information” which means “doing things that we don’t want anyone to know”.

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