Latest news with #PBMs
Axios
14 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
14 hours ago
- Business
- Yahoo
Community pharmacists in Pa. say they're struggling to absorb Rite Aid's customers
A Rite Aid pharmacy in West Chester, Pa. (Capital-Star photo by Peter Hall) Ron McDermott is a part-owner of six pharmacies in western Pennsylvania and any outsider might think his business has never seemed better. Since the Philadelphia-based retail pharmacy chain Rite Aid declared bankruptcy last month and announced plans to close hundreds of stores across the state, McDermott has seen a flood of new customers looking to transfer their prescriptions. 'A lot of people are walking into our pharmacies. A lot of people are calling,' McDermott said. 'You'd think that's great news, but there are problems.' For most businesses, a major competitor shutting their doors would be welcome. But for pharmacists, taking on new clients can actually pose a risk to their bottom line. McDermott's pharmacies have had to turn away some new customers whose medications would cost them more to stock and package than they could make selling them. 'It's the complete opposite of what we want to do as a caring, community-based pharmacy,' he said. 'We have to be careful when we take on new patients. That's a sad situation in health care. It's not the way it should be.' McDermott blames middlemen in the pharmaceutical supply chain called pharmacy benefit managers, or PBMs. They're companies that contract with insurance plans to handle their prescription services, and are responsible for reimbursing pharmacists for drugs that they cover. But McDermott and other pharmacists say those reimbursements have been getting smaller for years, to the point where pharmacies are actually losing money dispensing certain drugs. Prescription for trouble: Pennsylvania pharmacists say PBMs are driving pharmacy closures Along with handling administrative work for insurers and reimbursing pharmacies, they also create insurance plans' formularies — their list of approved or preferred drugs. In that role, they negotiate with pharmaceutical manufacturers, often receiving kickbacks in exchange for placing their products on a plan's formulary — their list of approved or preferred drugs. On the other end, they negotiate with pharmacies to determine how much they'll reimburse them when they dispense drugs to insured patients. The companies' power comes largely from their size. The three biggest PBMs, Caremark, Express Scripts and OptumRx, are part of healthcare conglomerates that rank among the biggest companies in the country, and have hands in the insurance and pharmacy businesses too. CVS Health, for example, owns CVS, the largest chain pharmacy in America, CVS Caremark, the largest PBM, and Aetna, one of the largest insurance companies. It's the sixth largest company in the U.S. by revenue. The 'big three,' as they're known in the industry, are responsible for processing about 80% of all prescriptions in America. That means pharmacists who refuse to accept the reimbursements that they offer are likely to lose customers whose insurance plans rely on them. Many of those customers only use generic drugs, which cost pennies or fractions of pennies to stock. Generally, generics make up a majority of a pharmacy's drug sales, and can be sold at a profit. But a disproportionate share of their revenue comes from the sale of name brand drugs, which can cost thousands of dollars per bottle and is often where reimbursements fall short of costs. Rob Frankil, the executive director of the Philadelphia Association of Retail Druggists, a trade group for pharmacists, said that McDermott is not alone. 'I'm already having a lot of my members tell me they're not willing to take in Rite Aid patients, because they're already losing money on prescriptions they fill,' he told the Capital-Star. 'It all stems from the same thing: the reimbursement is bad when you fill prescriptions.' Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, a national trade group whose members include CVS, Express Scripts and OptumRx, rejected the notion that PBMs contribute to pharmacy closures. 'PBMs put patients first by working to lower prescription drug costs,' Lopes said in a statement. 'It makes no sense to blame PBMs for pharmacy closures in Pennsylvania. Independent pharmacies often point the finger at PBMs, instead of acknowledging that there are many factors that influence closures, including customer preferences for online options and changing demographics. ' Lopes added that PBMs 'are supporting community pharmacies in Pennsylvania through programs that increase reimbursement and advocating to allow them to expand the additional clinical services they can offer.' 'Pharmacies as gold' Lucas Berenbrok, a researcher at the University of Pittsburgh's School of Pharmacy, has been tracking pharmacy closures around the country. Recently, he was part of a study that found around 200 have closed in Pennsylvania alone between January 2024 and March 2025. Berenbrok's research did not dive into the reasons for the closures, but, anecdotally, he said that it often comes back to unsustainable business models and low reimbursement rates. 'This is a big deal because one of the things that pharmacy has prided itself on for a long time is how accessible we are,' he said. 'That's why I got started in this research.' Lately, Berenbrok's work has been focused on identifying what he and his colleagues are calling 'keystone pharmacies.' These are businesses that, if they closed, would create pharmacy deserts in the communities they serve. Berenbrok said his team identified over 200 keystone pharmacies in Pennsylvania, though the list has not yet been made public. 'It's more of a preventative approach to say, 'Hey, let's look at these pharmacies as gold and try to do things to help them stay in business,'' he said. The recent spate of closures has not just affected local, independent pharmacies, but large chains as well. In 2021, CVS announced it would close 900 pharmacies. In 2024, Walgreens announced it would close over 1,200 in the coming years. Last month, Rite Aid declared bankruptcy. In bankruptcy filings, it announced plans to shutter about 150 of pharmacies in Pennsylvania alone, but all of its roughly 350 stores in the state may ultimately close. In a press release, Rite Aid announced that more than 1,000 of its stores nationally will be sold to other businesses, including CVS and Walgreens, with many remaining open through the transition. A spokesperson for Rite Aid did not respond to multiple requests for comment about how many of those are in Pennsylvania, and how many locations in the state may ultimately shutter. 'A pharmacist is one of very few health care providers where you can walk in and talk to a highly educated, highly trained professional, and sometimes you don't even have to have an appointment or copay,' Berenbrok said. 'It's a really great thing, I think, for everyone to understand and recognize how important it is to have a pharmacy around.'
Chicago Tribune
2 days ago
- Business
- Chicago Tribune
Lawmakers send flurry of bills to governor's desk in final days of spring session
SPRINGFIELD — Along with a budget that passed shortly before Saturday's deadline, Illinois legislators passed a flurry of bills in the final days of the General Assembly's spring session on issues ranging from police hiring practices to traffic safety. Here are some of the bills heading to Gov. JB Pritzker's desk after passing out of the legislature at the end of the four-month session. A measure designed to rein in the practices of pharmacy benefits managers, or PBMs — companies that act as intermediaries between drugmakers, insurance corporations and pharmacies — was approved with broad bipartisan support and is backed by Pritzker. The largest PBMs are part of corporate entities that include pharmacy chain CVS and UnitedHealth Group. Critics blame them for driving up prescription drug costs for patients while pushing independent pharmacies out of business. The measure awaiting Pritzker's signature would bar PBMs from charging insurance companies more for drugs than they are paid by pharmacies and pocketing the difference; prohibit them from giving better reimbursement rates to pharmacies that are owned by the same company; and require them to pass along rebates negotiated with drugmakers to health plans and patients. PBMs also would be required to make annual reports on pricing and other practices to the Illinois Department of Insurance, and would be charged an annual $15-per-patient fee, with the first $25 million collected going to a grant fund to support local pharmacies. 'For far too long, pharmacy benefit managers' business practices have operated with little regulation, transparency, and accountability. Illinois is putting an end to that,' Pritzker said in a statement Saturday after the House sent the measure to his desk. A trade group representing the industry argued that PBMs are 'the only check against drug companies' unlimited pricing power' and said the proposed changes would lead to higher prices at the drugstore counter. But PBMs have drawn scorn from across the political spectrum. President Donald Trump, Pritzker's frequent sparring partner, in April issued an executive order that aims to lower drug prices through steps that would include increasing 'transparency into the direct and indirect compensation received by pharmacy benefit managers.' And ruby-red Arkansas recently became the first state to bar PBMs from owning pharmacies. Illinois is set to study safety measures on DuSable Lake Shore Drive, including whether cameras powered by artificial intelligence could reduce crashes under a measure sent to Pritzker. Democratic Sen. Sara Feigenholtz, the bill's sponsor, has pointed to the use of cameras that could 'track vehicles' as opposed to focusing only on a fixed point, and detect violations beyond just speeding. State law now largely allows automated speed cameras around parks and schools but not on DuSable Lake Shore Drive. There were disproportionately high rates of collisions and traffic fatalities on the drive compared with the rest of Chicago from 2019 to 2024, according to data provided from transit advocates to Feigenholtz's office. The American Civil Liberties Union of Illinois has said guardrails are needed to protect people from 'omnipresent AI surveillance,' though neither the ACLU or any other organizations officially opposed the bill. A bill introduced in response to the 2024 fatal shooting of Sonya Massey in the Springfield area by a downstate sheriff's deputy now awaits Pritzker's signature. Sean Grayson was fired from his job as a Sangamon County sheriff's deputy after the killing and charged with murder. After Massey's death, it was revealed that Grayson previously worked for five law enforcement agencies and had been the subject of citizen complaints and criticism from superiors who questioned his competence. Grayson also had two DUIs on his record before he went into law enforcement. The legislation would bar law enforcement agencies from making a final offer for employment without getting a signed release from the applicant directing 'any and all entities that previously employed the individual to produce or make available for inspection all employment records, including background investigation materials collected in connection with making a final offer of employment.' A statewide office to support under-resourced public defenders throughout Illinois would be created under another criminal justice measure sent to the governor. The bill, dubbed by advocates as the Funded Advocacy & Independent Representation bill, or FAIR Act, could assist public defenders in rural areas, where the availability of effective public defense for indigent criminal defendants can be sparse. Advocates, including the Cook County public defender's office, argued the bill would create more of a level playing field for public defense when compared with prosecutors, who can get statewide help on cases through the Illinois attorney general's office. Some of the assistance provided by the statewide public defender office could be the availability of more public defense lawyers and defense experts who may specialize in various evidentiary or forensic practices. The Cook County public defender's office also pushed for legislation to expand the jurisdiction of its attorneys representing noncitizen Cook County residents in immigration cases being heard outside the county. The bill passed the Senate on Friday 37-19 after clearing the House in early April. 'As immigrant communities are grappling with shifting federal policies, we must adapt to ensure there is no lapse in access to counsel,' Sen. Omar Aquino, a Chicago Democrat who sponsored the bill, said. 'Families deserve to know that this resource is available and reliable despite changes happening at the federal level.' According to Tovia Siegel, a proponent of the bill and the director of organizing and leadership at The Resurrection Project, the Cook County's public defender's office can currently represent immigrants only in Chicago's immigration court, but individuals in that court are being 'sent all over the country.' 'We're even seeing people sent out of the country, and so it's essential that the Cook County public defender's office has the ability to continue representing their clients,' Siegel said. Another measure the Democratic-controlled General Assembly passed with a specific eye on the Trump administration centered on abortion rights. The bill is intended provide more protections under Illinois' 2023 shield law, which prevents health care workers from facing disciplinary action by the state if, for instance, they provide abortion care to someone from a state that has more stringent abortion restrictions. The legislation also would ensure prescribing abortion medications such as mifepristone would remain legal in Illinois even if the U.S. Food and Drug Administration revokes approval, as long as the World Health Organization recommends the drug's use. Democrats have warned that access to these drugs could be jeopardized following declarations toward that end by Project 2025, the Heritage Foundation policy group thought to have influence on the Trump White House. Also heading to Pritzker's desk is a bill that aims to strengthen restrictions on how firearms are stored or kept in place where a minor, or someone who isn't allowed to own a gun, has access to them. Gun owners could be fined up to $1,000 if a prohibited person gets hold of an improperly stored firearm. The fine would increase to $10,000 if the person kills someone with the firearm. Gun owners could also face civil penalties if they fail more than twice to report the loss or theft of their gun within 48 hours upon acknowledging the crime. 'I'm pleased that we're moving forward with this legislation where I anticipate the governor will agree with its importance,' said state Rep. Maura Hirschauer, a Democrat from Batavia. 'Gun owners and nongun owners alike can agree safe gun storage can reduce unintentional injuries, suicides and intentional harm like school shootings by stopping unauthorized access, and it's time for us to take action,' she said. Republican state lawmakers took issue with several provisions in the measure and warned the legislation could be challenged in court. 'I wish we had more opportunity to talk this through,' Rep. C.D. Davidsmeyer, a Republican from Jacksonville, said. 'You're trying to do something that makes people safer, but you're actually infringing on our rights.'
Yahoo
2 days ago
- Business
- Yahoo
Illinois bill aims to lower prescription costs, rein in pharmacy benefit managers
A bill that seeks to control the rising cost of prescription drugs while also offering financial help for many small, independent pharmacies in Illinois cleared the state Senate on Thursday and awaits action in the House. The bill, known as the Prescription Drug Affordability Act, contained in House Bill 1697, would put new regulations and impose new fees on a large but little understood segment of the prescription drug industry — pharmacy benefit managers, or PBMs. 'This really restricts the ability of PBMs to extract large amounts of money out of the prescription drug system,' Sen. Dave Koehler, D-Peoria, the bill's chief Senate sponsor, said in an interview. PBMs act as a kind of third-party intermediary in the insurance industry who manage prescription drug benefits on behalf of insurance plans. They do that by negotiating prices with drug manufacturers, setting reimbursement rates paid to pharmacies, developing formularies, or 'preferred drug lists,' and maintaining pharmacy networks where insured individuals get their prescriptions filled. But they have also come under criticism in recent years for being too closely integrated with some of the nation's largest retail pharmacy chains and for helping drive up the cost of prescription drugs, often at the expense of smaller, independent community pharmacies. 'They extract extra profit from patients through opaque and often predatory tactics,' Gov. JB Pritzker said in calling for the legislation during his State of the State address in February. 'Not only are they driving up health care costs for Illinois families by hundreds of millions of dollars per year, but they are also putting small, local, independent pharmacies out of business.' Many large PBMs, such as CVS Caremark, a subsidiary of CVS Health, also either own or are affiliated with large retail chain pharmacies. Critics of their practices argue they use their position to steer patients to their own pharmacies, often to the detriment of smaller, independent pharmacies. That has resulted in what some people call 'pharmacy deserts' in many small towns, rural areas and low-income urban communities. 'PBMs routinely reimburse my pharmacy below cost for brand name prescriptions, medications where they're already pocketing massive rebates from drug manufacturers,' David Bagot, an independent pharmacist from Petersburg who is also president of the Illinois Pharmacists Association, told a Senate committee Wednesday. 'Meanwhile, they pay their own affiliated pharmacies – including PBM-owned community, mail-order and specialty pharmacies – much higher rates for the same medications.' The bill would prohibit PBMs from 'steering' insured patients to their own affiliated pharmacies, either by requiring them to use a particular pharmacy or by forcing the patient to pay more for their medications if they use a different outlet. It would also prohibit the practice of 'spread pricing,' or charging an insurance plan one price for a given drug while reimbursing pharmacies at a lower rate for that same drug and pocketing the difference. In addition, the bill calls for levying a fee on PBMs based on the number of patients they insure. Money from that fee would go into a fund for the Department of Commerce and Economic Opportunity to award up to $25 million a year in grants to independent pharmacies and pharmacies located in rural counties, medically underserved areas, low-income communities and pharmacies that serve high concentrations of Medicaid patients. It also would require PBMs to remit all the money they receive in the form of rebates from drug manufacturers to the insurance plan sponsors. And it would require them to disclose to state regulators how much they receive in rebates each year. Pharmaceutical industry lobbyists argued many provisions of the bill, including the fee levied on PBMs, will actually end up being passed on to insurance plans and consumers, thus resulting in higher prescription drug prices. 'This is not a prescription drug affordability bill,' said Lori Reimers, lobbyist for the Pharmaceutical Care Management Association. 'Costs will rise. When you give more money to pharmacies, when you restrict tools that lower cost, the cost of insurance and health plans are going to go up on your constituents.' Reimers noted that since 2016, Illinois lawmakers have enacted 20 new laws pertaining to PBMs including laws granting the state Department of Insurance regulatory powers over PBMs, all with the intent of bringing down drug prices. 'And I don't think anybody's here saying that drug prices have gotten lower yet,' she said. 'But here we are with a much bigger bill.' The bill passed the Senate with bipartisan support, 56-1. Sen. Dave Syverson, R-Cherry Valley, cast the only no vote. The language the Senate passed was an amendment to a House bill that originally dealt with training for 911 dispatchers. The bill now goes back to the House for concurrence with the Sente amendments.
Yahoo
4 days ago
- Business
- Yahoo
Texas Rx For Relief: Abbott Tames Pharmacy Benefit Managers
Texas pharmacists lauded Gov. Greg Abbott on Tuesday for signing Senate Bill 1236 into law. The measure aims to curb anti-competitive practices by pharmacy benefit managers (PBMs) that have reportedly driven numerous neighborhood pharmacies out of business and raised prescription drug costs for patients. Authored by Sen. Bryan Hughes (R-Mineola) and sponsored in the House by Rep. Cole Hefner (R-Mount Pleasant), SB 1236 targets PBMs, middlemen in the pharmaceutical supply chain who have been criticized for prioritizing profits over patients and pharmacies. The bill passed unanimously in the Texas Senate and House and introduces contract transparency, prohibits unfair fees, and ensures compliance with existing PBM regulations. It takes effect September 1, 2025, and applies to contracts entered into or renewed after that date. 'The PBMs set the reimbursements for our local pharmacies, which are struggling to stay open,' Hughes said, per a news release by the Texas Pharmacy Association. 'They also determine the prices for their own pharmacies. Senate Bill 1236 continues the Legislature's efforts to make sure that anti-competitive behavior by someone with a lot of bargaining power, that's been granted to them by the government, is not weaponized in the market.' Texas Pharmacy Association CEO RoxAnn Dominguez hailed the legislation as a victory for patients and pharmacists. 'We are incredibly grateful to Governor Abbott for making SB 1236 the law in Texas, and to Sen. Hughes and Rep. Hefner for their hard work and dedication to Texas patients and pharmacists,' Dominguez said in the press release. 'We look forward now to working with the Texas Department of Insurance and the Attorney General's Office to implement SB 1236 for the betterment of patient care.' PBMs manage prescription drug benefits for insurers, employers, and government payers, but their practices have drawn scrutiny. A January 2025 Federal Trade Commission report found that the top three PBMs—CVS Caremark, Cigna Express Scripts, and UnitedHealth Group's Optum RX—which control 80% of the drug supply market, marked up specialty generic drugs by hundreds or thousands of percent at their affiliated pharmacies. These markups included critical medications for cancer, HIV, and multiple sclerosis. The report also noted higher reimbursements to affiliated pharmacies compared to independent ones. A July 2024 FTC report highlighted that nearly 30% of Americans surveyed reported rationing or skipping medications due to high costs, which the pharmacy association said are driven by PBM practices. These practices have led to widespread pharmacy closures, with Texas losing at least one pharmacy weekly between January 2023 and January 2025. In San Angelo, pharmacist Bryan Abernathy closed his 68-year-old pharmacy in January, citing PBMs' low reimbursement rates. 'We really get pennies on the dollar,' Abernathy said. Sen. Lois Kolkhorst (R-Brenham), chair of the Senate Committee on Health and Human Services, criticized PBM market dominance during a hearing. 'Who in America thinks that's a good idea?' Kolkhorst said, noting that 'the losers are the pharmacists which are sometimes the only people that people in underserved areas get a chance to interact [with]. . . but the other loser is the patient.' SB 1236 addresses these issues by prohibiting abusive PBM audit practices, banning unilateral changes to reimbursement rates during contract terms, and mandating online access to pharmacy network contracts. It also requires health benefit plans to include unique identifiers on enrollee ID cards and limits payment adjustments after claims are processed, except in cases of fraud or errors. 'PBMs' anti-competitive tactics have threatened our ability to deliver quality healthcare to our communities,' Jobby John, a Lakeway pharmacist, and the Texas Pharmacy Association president said in the press release. 'SB 1236 will go a long way toward correcting inequities in the system and ensuring transparency and fairness, which will help protect the neighborhood pharmacies that patients trust.'
