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State bill aims to protect local pharmacies with tougher oversight of pharmacy benefit managers

Kiley Koscinski

Apr 24, 2024

A bipartisan group of state legislators from Allegheny County want to keep more neighborhood pharmacies in business by tightening regulations on the drug pricing market.

A bipartisan group of state legislators from Allegheny County want to keep more neighborhood pharmacies in business by tightening regulations on the drug pricing market.

State Reps. Jessica Benham (D-Pittsburgh) and Valarie Gaydos (R-Aleppo) have introduced legislation to establish the state's Insurance Department as an overseer of pharmacy benefit managers, who serve as an intermediary between pharmacies, drug manufacturers and insurance companies.

At a press conference Wednesday, Benham said that while large pharmaceutical companies gets most of the blame for America’s high drug prices, pharmacy benefit managers — or PBMS — also play a role.

“Right now, shadowy middlemen [are] working between the insurance companies and the pharmacies and unfairly directing consumers to the big guys,” she said. “Our locally owned pharmacies are trusted community institutions that deserve a level playing field with the big corporate chains.”

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Insurers work with PBMs to create a list of preferred drugs for their policy holders and to set plan costs for patients. PBMs emerged in the 1960s as an intermediary to help employers and insurers select medications for their health plans.

The industry exploded along with the growth in spending on prescription drugs. And just three firms — Express Scripts, CVS Caremark, and OptumRx — now control about 80% of the PBM market. Both of Pittsburgh’s largest health care insurers, UPMC and Highmark, use Express Scripts to administer benefits.

Supporters of the industry say PBMs help insurance plans reduce the cost of drugs — and insurance premiums. But critics say they can be a barrier for patients who need treatment.

“Doctor spend hours and hours on paperwork … that should be spent taking care of patients," Gaydos said, "not trying to convince a PBM to spend money on a patient."

PBMs sometimes receive an administrative fee from insurance providers. But they also collect rebates from drug manufacturers and some have been found to undercut reimbursements to pharmacies, sometimes forcing them to sell drugs at a loss.

“Pharmacies are losing money on most prescriptions they dispense,” said Eddie DeCaria, co-owner of Moon Township-based Porter’s Prescription Pharmacy.

He added that the issue goes beyond keeping small pharmacy businesses afloat. He said patients who prefer local pharmacies over mail-order services could see fewer options as stores go out of business. He said dozens of community pharmacies have closed across the state this year as a result of the rapidly changing health care market.

“This affects anyone who has ever been sick,” DeCaria said. “If you can’t get your medications, you’re going to be sick.”

Kiley Koscinski


90.5 WESA

State Representatives Jessica Benham and Valerie Gaydos were joined by other lawmakers at Porter's Pharmacy in Moon Township Wednesday.

The legislation sponsored by Benham and Gaydos would require PBMs to report the amount of rebates and payments they receive from drug manufacturers, and how those rebates and payments were distributed by the PBM. It would also require the state insurance department to establish a channel to file complaints about PBMs.

The bill bans a number of practices criticized by lawmakers Wednesday. Those include patient steering, which is when a PBM channels prescriptions to their own retail or mail order pharmacy, and spread pricing, which is when a PBM charges an insurer more than they pay a pharmacy for the drug, pocketing the difference.

Benham and Gaydos were joined at Wednesday’s press conference outside DeCaria's pharmacy by two Democrats, Congressman Chris DeLuzio and state Rep. Emily Kinkead, as well as Republican state Senator Devlin Robinson.

“These bills aim to address the ever-evolving changes in the health care market regarding pharmacy benefit managers,” said Robinson, who has introduced a similar bill in his chamber. “There is currently very little state oversight to ensure costs are being covered adequately. This has been extremely tough on all of our pharmacies, and I've heard from many in my district.”

DeLuzio applauded the state bills, and said the federal government needs to similarly step in as PBMs impact local pharmacies across the country.

“Health care can be one of the biggest costs facing families here in western Pennsylvania,” he said. Deluzio said that the Biden Administration's Inflation Reduction Act helped control prices by allowing the federal government to negotiate with drug manufacturers. But he said there is more work to be done.

“We should be standing shoulder to shoulder, regardless of party, like you're seeing today in the fight against rising costs to keep our local pharmacies strong and healthy and give folks a chance to not risk financial ruin just for getting the medicine they need,” he said.

Both the state House and Senate bills have been introduced and referred to committee. Benham acknowledged that lawmakers still need to iron out details, but stressed that the issue has bipartisan support.

Such regulations would also appear to have the backing of Gov. Josh Shapiro, who called for a broad changes to the industry in his annual budget address in February.

Gaydos stressed that not all PBMs engage in the practices she seeks to regulate, but said lawmakers should prevent larger companies from taking advantage of pharmacies and patients.

“Greater transparency, more accountability and clear oversight will help ensure that the free market is working to provide the best care at the best price, and to ensure that PBMs act in the best interest of patients,” she said.

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