When Gov. Tony Evers signed bipartisan legislation in March to regulate pharmacy benefit managers, independently owned drug store managers such as Dan Strause and Jason Schwager of Watertown’s Hometown Pharmacy, and Heather Walker of Waunakee’s Hometown outlet, had reason to celebrate.
But they also saw more work ahead to rein in the complicated billing and pricing structures used by these administrators or middlemen between insurance companies and pharmacies.
“Wisconsin is not the only state that has enacted legislation to regulate PBMs. Most states in the country have. Wisconsin is now [acting], but is lagging behind,” Walker said.
PBMs administer prescription drug benefits for insurers, Medicare Part D drug plans, large companies and other payers. Some of the pricing and billing practices have increased the cost of prescription drugs and steered patients away from independent pharmacies and toward those owned by PBMs.
While Wisconsin’s legislation addressed some PBM practices that drive up prescription drug prices, it failed to rein in practices that hurt independent pharmacies’ bottom line, including patient steerage.
In late March, Wisconsin joined a number of other states that had acted to increase transparency in PBM administration. In announcing the legislation, Evers called the PBM administration “a confusing and opaque system that often sends folks jumping through hoops just to access their life-saving medications.”
The new regulations encourage greater oversight of PBMs by requiring them to be licensed by the Office of the Commissioner of Insurance and to submit reports on rebates they receive from drug manufacturers, but do not pass on to consumers.
It also eliminates what is referred to as the gag clause, which previously prevented pharmacists from telling patients about how to achieve prescription drug costs savings and it reforms what Walker called “predatory auditing practices.”
The reform prohibits demands for reimbursements from pharmacies on the basis of clerical errors.
Additional measures are aimed at protecting consumers. One requires a 30-day notice of any drug formulary changes that removes the drug or reassigns it to a benefit tier with a higher cost. Another ensures pharmacies post signage informing customers of legal drug substitutions or how to find the FDA’s approved list.
Hometown and other independent pharmacies continue to lobby for additional reforms.
The PBM system is intentionally complicated, according to Walker, Strause and Schwager.
Strause and Schwager called the Hometown pharmacy chain unique because it has 73 locations, with most having local owners with community ties, unlike the big-box pharmacies.
“We work together to lower costs and add services,” Strause said.
Strause called PBMs entities that the public knows little about, but are the drivers of “grossly inflated prescription prices” in the United States.
“We can easily (provide) 5 inches of paper documenting up to 54 different ways they skim profits, but also are more than happy to provide information on a building block by building block basis,” Strause said. “The more people know — and how to (fix) things — the better and faster we can work to solve this.”
Strause said PBMs own or have “marketing arrangements” with large pharmacy chains and mail-order companies.
“So they are financially driven to force patients into the pharmacy they own,” he said. “A Medicare patient is a good example of market manipulation. Medicare pays a plan that is PBM-driven a flat amount per month to take care of a patient. In a normal market, there would be normal competition and the customer/patient would choose where they wanted to be served.”
Strause said PBMs didn’t like the fact that patients were selecting pharmacies they didn’t own.
“So they created penalties, such as higher co-pays or out-of-pocket payments if patients don’t go to their pharmacy,” he said. “They call these pharmacies ‘preferred,’ giving the impression they have negotiated better pricing, but that is very misleading, as it simply isn’t true ... It’s misleading and outrageous.”
Strause said that when the U.S. Supreme Court ruled in December of 2020 that PBMs can be regulated by state laws, it was a huge victory for patients in the long run.
“But in the short run, PBMs have increased abusive tactics to eliminate as much competition as possible,” Strause said.
When asked how this was happening, Strause said PBMs initiate predatory audits, engage in patient steerage by forcing patients using increasing penalties to go to pharmacies of the PBMs choice and not of the patient’s choosing, and initiating various fees and brand rebates that force patients to take brand drugs versus cheaper generics so the PBMs can earn more rebate money. Strause also said the PBMs engage in false marketing to patients via letters and calls implying the patient must switch pharmacies, even if that is not the case.
Strause said Hometown Pharmacy has been active in educating lawmakers on its concerns about PBMs, but this came with a cost.
“We received significant retribution for this activity, via predatory audits and exclusions from networks, not allowing us to serve patients who wanted our services,” Strause said.
Schwager said the new law addressing PBMs is only the tip of the iceberg. He also said that the aggression of the PBM’s is something that could put Hometown out of business.
“It could put us out of business, but not without a fight,” he noted. “The new PBM law is a start and a start only. We need transparency in how much money PBMs are taking out of our healthcare dollars. The more transparency and information we all have as consumers, the more we can all push back.”