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Pennsylvania Auditor General Calls for Action on PBMs

Allison Inserro
A Pennsylvania report examining the role of pharmacy benefit managers (PBMs) in the state called for more transparency in how they do business managing Medicaid prescriptions.
A Pennsylvania report examining the role of pharmacy benefit managers (PBMs) in the state called for more transparency in how they do business managing Medicaid prescriptions.

Auditor General Eugene DePasquale said he wanted action to reduce Medicaid prescription costs and called for legislation to:
  • Allow Pennsylvania to directly manage its prescription drug benefits instead of contracting with healthcare managers to do so
  • Increase transparency into PBM pricing practices
  • Allow state oversight of PBM contracts
  • Require a flat-fee pricing model so that the state pays PBMs only for services rendered
In 2017, Pennsylvania taxpayers paid $2.86 billion to PBMs for Medicaid enrollees, according to the state Department of Human Services, an increase of 100% in 4 years, up from $1.41 billion in 2013.

According to the report released this week, the practice of so-called “spread pricing”—the difference between what a plan sponsor is billed and a participating pharmacy is reimbursed—varies widely in the state. When Pennsylvania sought information on the practice, it found that 1 PBM made no money on spread pricing, since it relies only on administrative fees. Three PBMs made between $2 million and nearly $40 million on spread pricing, earning average profits between 28 cents and almost $13 per Medicaid prescription filled, the report said.

The report cited steps taken by other states to rein in PBMs, such as in Ohio and California.

Efforts to address PBMs did not make it out of Pennsylvania’s most recent legislative session, the auditor general said. At hearings DePasquale held earlier this year, he said dozens of pharmacists recalled how they began receiving letters from a larger pharmacy offering to buy their own pharmacies, citing declining reimbursement levels.

PBMs have been the subject of intense focus of scrutiny, from groups like the Community Oncology Alliance that are calling for more transparency, from attacks from patient representatives, and FDA Commissioner Scott Gottlieb, MD, and even getting called out in President Donald Trump’s plan to lower drug prices.

But it is at the state level, where Medicaid costs are split with the federal government, that PBM costs are also getting a new look.

In a statement, the Pharmaceutical Care Management Association (PCMA) criticized the report, saying that it failed to mention that “PBMs are reducing prescription drug costs and increasing access to needed treatments for the state’s most vulnerable population.”

“The Pennsylvania Auditor General’s report unfortunately is highly biased toward one special interest, the independent drugstore lobby. The report omits any mention of how PBMs are reducing prescription drugs costs and increasing access to needed medications for Pennsylvania’s Medicaid beneficiaries,” said JC Scott, PCMA president and chief executive office. 

Without action, the state report said, PBMs can continue to not disclose whether they are reimbursing community pharmacists the same amount as their affiliated pharmacies for the same drugs; the total amount of business they do in a year; how they choose which prescription medications to cover; and how much profit they are make off of taxpayers.

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