Several states are going even further than Congress or the Trump administration in reining in drug middlemen they blame for high prices, advancing strict reforms like license requirements.
Arkansas enacted a law earlier this year requiring licenses for pharmacy benefit managers (PBM), which manage drug plans for employer- and union-sponsored health plans.
“The pharmacy benefit manager who is playing games with Arkansas citizens do not have sufficient oversight,” said Scott Pace, CEO of the Arkansas Pharmacist Association, during a press conference announcing the law. “They operate under a curtain of secrecy.”
Arkansas Gov. Asa Hutchinson, a Republican, signed the licensure bill, which requires any PBM to get a license to do business in the state.
The law was passed in response to complaints from pharmacists in the state who said that PBMs cut reimbursements for cheaper generic drugs too low.
“The pharmacists were ultimately faced with a challenge of taking large losses or turning their patients away simply because of the actions of the insurance companies and their pharmacy middlemen,” said Pace. He also argued that PBMs overpay pharmacies that they own for drugs versus paying a smaller amount to independent pharmacies.
The new law requires a PBM to provide a “fair and reasonable” compensation program for the reimbursement of pharmacist services in order to get a license, according to a summary from the Arkansas Pharmacist Association, which fought for the law.
The Pharmaceutical Care Management Association, the PBM industry’s top lobbying group, criticized the Arkansas law.
“The Arkansas mandate is designed to roll back some of the savings the state’s employers and government plans have enjoyed by empowering politicians to play a role in how much drugstores are paid in private contracts,” the group told the Washington Examiner. “The only possible beneficiary will be drugstore owners, who’ve made it clear they want to charge higher rates.”
Arkansas is the latest state to turn to licensure of PBMs. It joins four other states that have passed a law to require PBMs get a license to do business: Florida, Louisiana, Maryland and Tennessee.
Other states, like California, are considering similar bills.
The push for licensure goes beyond legislative and administrative initiatives meant to curb the influence of PBMs.
There is wide bipartisan support in Congress for legislation to end pharmacy “gag clauses,” which PBMs sometimes put in contracts with pharmacists to prohibit the pharmacists from telling consumers it is cheaper to buy drugs out-of-pocket than through their insurance.
The Senate passed a bill that bans such “gag clauses” for private plans, while the House Energy & Commerce Committee is weighing its own version.
Meanwhile, the Trump administration is mulling several actions that generate heated opposition from PBMs.
The administration is considering a proposed rule that could affect protections for PBM-negotiated rebates from a federal anti-kickback law. Currently, the rebates have a safe harbor and PBMs cannot be prosecuted for violating the federal law that prohibits kickbacks related to payments for federal programs like Medicare.
The administration has zeroed in on rebates as a factor in raising drug prices. Health and Human Services Secretary Alex Azar has derided such rebates as gimmicks.
Currently, PBMs negotiate with drugmakers for rebates to discount the price of drugs. But PBMs get a cut of that rebate. Azar, a former pharma CEO, charges that PBMs are creating an incentive for higher list prices because they will only cover drugs with a high list price in order to get a larger cut of the rebate.
PBMs respond that the rebates provide vital discounts and that pharma companies are the main driver of high drug prices because they set the list price so high.
