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Axios
6 hours ago
- Business
- Axios
PBMs fight back against state restrictions
Drug price middlemen are going to court to fight a first-in-the-nation effort to police their ownership of retail pharmacies as more state legislatures and Congress crank up scrutiny of their influence on the cost of medicines. Why it matters: Large pharmacy benefit managers like CVS Caremark, Express Scripts and Optum Rx are increasingly being blamed for higher drug prices and the outsize role they play in the pharmaceutical supply chain. But major changes could be slow to materialize because of the complex system and the pivotal role the middlemen play negotiating drug purchases for commercial health plans and employers. State of play: CVS Health and Cigna, which owns Express Scripts, filed lawsuits last week seeking to stop Arkansas from enforcing a new law that largely prohibits them from owning retail pharmacies in the state. Both lawsuits argue that the Arkansas policy violates the Constitution's Dormant Commerce Clause. CVS Health argues that the law improperly leverages the state's licensing power. CVS Health says it will have to close 23 pharmacies in Arkansas under the law, which is effective Jan. 1, 2026. Cigna, which owns mail-order pharmacies operating in the state, says the law will harm the 50,000 Arkansas residents it serves. But the ramifications are nationwide, with many other states weighing new restrictions, including prohibitions on steering business to affiliated pharmacies. Texas and New York have introduced bills similar to Arkansas'. Other states are also getting aggressive: Alabama in March passed a law requiring PBMs to reimburse independent pharmacies at rates at least as high as Medicaid. The Pharmaceutical Care Management Association, a PBM trade group, says such laws would hurt seniors and veterans using prescription drug home delivery and patients with complex medical conditions who rely on specialty pharmacies for their treatments. The other side: The PBMs are only fighting Arkansas in the courts because they're worried other states will follow the lead of Gov. Sarah Huckabee Sanders (R) in trying to secure patient access and affordable prescriptions, Sanders' spokesman Sam Dubke wrote in an email. Between the lines: PBMs play a pivotal role in the drug supply chain and have benefited from consolidation and vertical integration, allowing some companies to steer business to affiliated pharmacies or push contracts on independent pharmacies. The Federal Trade Commission during the Biden administration blamed CVS Caremark, Express Scripts and OptumRx for hiking the cost of drugs, including overcharging patients for cancer treatments. The Trump administration, which has said it wants to "cut out" drug middlemen," halted an FTC lawsuit against the companies in April. Flashback: This isn't the first time PBMs have clashed with Arkansas in the courts. And the U.S. Supreme Court in 2020 unanimously ruled in the state's favor, deciding in favor of a law that forced PBMs to reimburse pharmacies at least what they pay in drug acquisition costs. The PCMA had brought the lawsuit, arguing that the policy preempted federal laws governing private health plans. Every state has passed some kind of legislation to regulate PBMs, per the National Academy for State Health Policy. What to watch: The massive Republican budget bill moving through Congress also includes narrow PBM changes, including moving to flat-fee payment for services in Medicare Part D and prohibiting PBMs from charging Medicaid managed care insurers more for a drug than the price they pay a pharmacy for dispensing it. Reality check: PBMs are adept at shifting their business models to keep up with the changing health care landscape, and likely won't see that much impact to their operations if legislative proposals moving through Congress pass, financial services firm TD Cowen wrote in a report released Monday.
Yahoo
3 days ago
- Business
- Yahoo
How Democrats can pull off a win under a GOP trifecta: Dismantle the "legal" drug cartel
Just before President Trump pushed her out at the behest of his corporate donors, former Federal Trade Commission chairwoman Lina Khan released a damning report about the most rapacious and anti-competitive actors in the entire healthcare system: pharmacy benefit managers. These middlemen in the drug supply chain don't discover new medicines. They don't manufacture them. They don't even physically dispense most prescriptions. Yet they rake in tens of billions of dollars each year by driving up costs for everyone else — especially patients battling cancer, HIV, heart disease, and autoimmune conditions. In their report, FTC investigators documented how the PBM industry — which is dominated by just three firms, CVS Caremark, Express Scripts, and OptumRx, that collectively oversee roughly 80% of all prescriptions dispensed nationwide — imposed eye-popping markups on generic drugs used to treat deadly diseases. The PBMs' affiliated pharmacies charged hundreds — even thousands — of percent more than they paid to acquire drugs like the cancer treatment Gleevec and multiple sclerosis medication Ampyra. This isn't just a case of corporations being greedy. It's the result of a rigged market structure. In theory, pharmacy benefit managers could play a valuable role by negotiating with drug manufacturers for lower prices. Since they haggle on behalf of health plans that collectively enroll hundreds of millions of Americans, these PBMs have considerable leverage, and should theoretically drive a hard bargain and win enormous discounts. And in fact, they do. The problem is that those savings rarely flow to patients at the pharmacy. Instead, PBMs have made the supply chain so convoluted that almost nobody on the outside — whether the patient filling the prescription, the pharmacist dispensing it, the doctor writing it, or even the employer sponsoring the health plan — can easily tell how much a drug will cost after discounts, rebates, and various fees and clawbacks are applied. This opacity isn't an accident. It's by design. The lack of transparency enables PBMs to overcharge patients and health plans. Congressional investigations have revealed numerous instances in which PBMs steered patients towards more expensive drugs — which come with bigger discounts and rebates for the PBM — "even when there are lower-cost and equally safe and effective competing options" available. Some of the largest PBMs have even created offshore shell corporations to help pocket negotiated rebates — instead of passing them off to patients. Patients don't even realize when they're being ripped off. PBMs almost never disclose the total discounts they negotiate on specific drugs. So patients' cost-sharing obligations are calculated based on a drug's unnegotiated, inflated "list price," rather than its true discounted price. As a result, patients spend billions more out-of-pocket than they otherwise would if the discounts were publicized. These inflated costs are a key reason that 21% of American adults have skipped filling a prescription in the past year due to affordability concerns, while 12% have skipped doses or cut pills in half. The FTC also found clear patterns of self-dealing, where PBMs steered the most profitable prescriptions to their own affiliated pharmacies while boxing out independent community pharmacies. Thousands of independent pharmacies have closed in recent years, leaving entire counties without a single brick-and-mortar store where patients can fill a prescription. Finally, PBMs use their consolidated power to keep drugs off of health plan formularies — unless manufacturers pay exorbitant fees. This is a policy failure. But it's also a political opportunity. Congress has previously considered two bipartisan bills that would rein in PBMs' worst abuses. If reintroduced and passed, one bill would eliminate the perverse incentive for PBMs to favor expensive drugs by delinking PBMs' compensation from list prices. Another would require that negotiated discounts be passed directly to patients at the pharmacy. And just last month, FTC Chair Andrew Ferguson reignited an FTC lawsuit against pharmacy benefit managers (PBMs) that accuses them of anticompetitive behavior. Democrats have a chance to lead — and win — on this issue. Taking on PBMs doesn't just lower drug costs. It shows voters that we're willing to fight the entrenched interests hurting their families and their finances. It shows that we're the party that puts patients ahead of profiteers. We don't need to wait for the next election. We just need the political will to act.
Yahoo
4 days ago
- Business
- Yahoo
CVS and Express Scripts sued to block a new law restricting drug middlemen
CVS and Cigna-owned Express Scripts filed lawsuits Thursday to block an Arkansas law that tries to curb the power of pharmacy benefit managers (PBMs) in the state. PBMs, also known as drug middlemen, are third-party administrators of prescription drug plans for health insurers. They negotiate with pharmaceutical companies over how much a health plan will pay for a drug and set the out-of-pocket costs for patients. Arkansas Gov. Sarah Huckabee Sanders signed a law last month that banned PBMs from owning and operating pharmacies in the state, saying at the time that they 'have taken advantage of lax regulations to abuse customers.' The legislation came following two reports from the Federal Trade Commission and the House Committee on Oversight and Accountability last year that accused PBMs of reaping massive profits by pushing patients to pay for more expensive drugs, including life-saving cancer medicine. Supporters of the Arkansas law, which goes into effect in January, claimed it would also greatly help independent pharmacies, which can't compete with PBM-owned chains like CVS. In its lawsuit Thursday, CVS said the legislation will force it to close 23 pharmacies in the state, eliminating hundreds of jobs, and claimed the ban would 'drive-up costs for Arkansans.' CVS, which declined to further comment, said in their press release that the law violates the Dormant Commerce Clause, a part of the Constitution that restricts states from discriminating against or unfairly burdening out-of-state businesses. It also said the law violates the company's Equal Protection rights. Susan Peppers, vice president of pharmacy practice for Evernorth Health Services, which runs Express Scripts and is owned by Cigna, said in a press release that 'if this law takes effect in January, hundreds of thousands of Arkansans will be left scrambling to navigate the forced closure of pharmacies and finding new ways to get their medicines and critical clinical support.' While advocates say the law will help rural Arkansans whose local pharmacies can't stay afloat, Express Scripts is claiming the opposite. The law 'could be especially challenging for the more than 40% of Arkansans that live in a rural area and may not have easy access to a retail pharmacy,' it said. In a statement to Quartz, Arkansas Attorney General Tim Griffin defended the legislation. 'Pharmacy benefit managers wield outsized power to reap massive profits at the expense of consumers,' he said. 'Through Act 624, Arkansas is standing up to PBMs on behalf of consumers, and I will vigorously defend our law.' For the latest news, Facebook, Twitter and Instagram.
4 days ago
- Business
CVS and Express Scripts sue Arkansas over restriction on pharmacy benefit managers
LITTLE ROCK, Ark. -- CVS and Express Scripts asked a federal judge on Thursday to block a law prohibiting pharmacy benefit managers from owning or operating pharmacies in Arkansas, challenging the first such restriction enacted by a state. The lawsuits come a little over a month after Gov. Sarah Huckabee Sanders signed the legislation restricting pharmacy benefit managers, also known as PBMs, which run prescription drug coverage for big clients that include health insurers and employers that provide coverage. Supporters of the Arkansas law have said it's needed because PBMs are forcing independent pharmacies, especially those in rural areas, to close. But in its lawsuit, Express Scripts said the measure would end up having 'devastating consequences' and force pharmacies around the state to close. 'And it will create mass confusion among Arkansans about where and how they can receive needed prescription medications, irreparably breaking bonds that patients have formed over many years with their pharmacists and pharmacy-provided home-visit nurses,' the company's lawsuit said. In a separate lawsuit, CVS said the new law 'represents an assault on free commerce between the states and the foundational principles of fair-market competition that underpin the Union.' CVS, which ran TV ads urging Sanders to veto the legislation, has said it would have to close its 23 retail pharmacies in the state if the law takes effect. Attorney General Tim Griffin defended the law on Thursday, saying PBMs' 'wield outsized power to reap massive profits at the expense of consumers.' 'Through Act 624, Arkansas is standing up to PBMs on behalf of consumers, and I will vigorously defend our law,' Griffin said in a statement. Arkansas is among several states where lawmakers have taken up efforts to regulate PBMs, and a group of attorneys general urged Congress last month to pass legislation similar to Arkansas' law.
San Francisco Chronicle
5 days ago
- Business
- San Francisco Chronicle
CVS and Express Scripts sue Arkansas over restriction on pharmacy benefit managers
LITTLE ROCK, Ark. (AP) — CVS and Express Scripts asked a federal judge on Thursday to block a law prohibiting pharmacy benefit managers from owning or operating pharmacies in Arkansas, challenging the first such restriction enacted by a state. The lawsuits come a little over a month after Gov. Sarah Huckabee Sanders signed the legislation restricting pharmacy benefit managers, also known as PBMs, which run prescription drug coverage for big clients that include health insurers and employers that provide coverage. Supporters of the Arkansas law have said it's needed because PBMs are forcing independent pharmacies, especially those in rural areas, to close. But in its lawsuit, Express Scripts said the measure would end up having 'devastating consequences' and force pharmacies around the state to close. 'And it will create mass confusion among Arkansans about where and how they can receive needed prescription medications, irreparably breaking bonds that patients have formed over many years with their pharmacists and pharmacy-provided home-visit nurses,' the company's lawsuit said. In a separate lawsuit, CVS said the new law 'represents an assault on free commerce between the states and the foundational principles of fair-market competition that underpin the Union.' CVS, which ran TV ads urging Sanders to veto the legislation, has said it would have to close its 23 retail pharmacies in the state if the law takes effect. Attorney General Tim Griffin defended the law on Thursday, saying PBMs' 'wield outsized power to reap massive profits at the expense of consumers.' 'Through Act 624, Arkansas is standing up to PBMs on behalf of consumers, and I will vigorously defend our law,' Griffin said in a statement. Arkansas is among several states where lawmakers have taken up efforts to regulate PBMs, and a group of attorneys general urged Congress last month to pass legislation similar to Arkansas' law.
