Lawmakers say drug stores’ issues with Medicaid pharmacy benefit managers will be a key issue in the next legislative session

L to R: Reps. Russell Weber, Joni Jenkins and Danny Bentley and Sens. Stephen Meredith and Morgan McGarvey
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By Melissa Patrick
Kentucky Health News

State Rep. Danny Bentley didn’t mince words when he told a health advocacy group that a priority of the next legislative session will be to deal with pharmacy benefit managers’ Medicaid payments to drug stores.

Independent pharmacies in Kentucky and around the nation have said for years that the problems are so bad that PBMs threaten their survival.

“I’m ready to do away with all of them,” Bentley said, adding later, “PBMs are not honest, period.”

Bentley, a Republican from Russell in Greenup County, was speaking as part of a legislative panel titled, “”Preparing for the 2020 General Assembly” at the Oct. 11 Kentucky Voices for Health annual meeting in Lexington.

In his effort to explain what PBMs do, Bentley first noted that he had dealt with them for 44 years as a registered pharmacist and opined, “Really, they don’t do anything.” He said one of the main issues with them is their lack of price transparency and the lack of legislation to require them to be so.

PBMs are middlemen between insurers and drug manufacturers. They determine what drugs are offered, how much someone pays for the drug, and the payments to pharmacists.

Lawmakers have been working on PBM issues for years. Most recently, in 2018, they passed Senate Bill 5, which let the Department of Medicaid Services, rather than managed-care organizations that handle relations between patients and health-care providers, set pharmacists’ reimbursement rates.

The law lets the agency regulate contracts between the MCOs, pharmacists, and PBMs; requires more transparency in how PBMs spend the $1.7 billion a year they get for processing prescriptions in Kentucky; and gives the state authority to penalize the MCOs and PBMs for noncompliance.

In a report earlier this year, “Medicaid Pharmacy Pricing: Opening the Black Box,” the state said two PBMs kept $123.5 million last year from the Medicaid program by paying pharmacies a lower rate to fill prescriptions, while charging the state more for the same drug.

Medicaid Commissioner Carol Steckel assured members of the Medicaid Oversight and Advisory Committee in July that the state was committed to resolving the payment issues of PBMs, which she called “predators.” The state is negotiating contracts with the MCOs, which will take effect in July 2020. MCOs hire PBMs to oversee their drug benefits.

The attorney general’s office is investigating whether PBMs have overcharged the state and discriminated against independent pharmacies.

Ohio is among the states that have tried to rein in questionable payment practices of PBMs. Last year, two Ohio PBMs “billed Medicaid $244 million more in a single year than they paid pharmacies, allowing them to profit three to six times the industry standard,” Catherine Candisky and Darrel Rowland reported for The Columbus Dispatch.

Ohio Medicaid officials, among other things, then banned “spread pricing,” in which a PBM keeps the difference between what it bills Medicaid and what it pays the pharmacy; and imposed a “pass-through” pricing model, which requires PBMs to pay pharmacies the same amount they bill the state.

A new analysis shows that this new model “netted an additional $38 million, a 5.7% increase, in the rates paid pharmacies to fill prescriptions during the first quarter of this year compared with the final quarter of last year,” the Dispatch reported.

Kentucky’s Medicaid department told lawmakers in July that one of the proposed changes in the state’s new MCO contracts will require all PBMs to use a “pass-through model” of payment.

Other states have fired their PBMs. Michigan has proposed to fire its PBMs and manage its drug program itself starting Dec. 1, which is expected to save the state $40 million; California will shift all Medicaid benefits from PBMs by 2021; and West Virginia fired its PBM in 2017, Axios reports.

Steckel, the Kentucky Medicaid boss, said in July that she was using Kentucky data to replicate a West Virginia study showing the impact of removing pharmacy services from MCOs, which is what the Kentucky pharmacists’ lobby and many legislators want. The West Virginia study found that the state saved $54 million by removing prescription drugs from Medicaid managed care.

State Sen. Ralph Alvarado spoke at the Kentucky Voices for Health annual meeting. (Photos by Melissa Patrick)

Sen. Ralph Alvarado, the lieutenant governor candidate running with Gov. Matt Bevin, did not participate in the panel, but spoke to the group briefly beforehand. He said if the state’s analysis shows it would make financial sense to remove pharmacy services from the MCOs, “you can expect that to be brought back in” to the government.

Also on the panel were Rep. Joni Jenkins and Sen. Morgan McGarvey, Democrats from Louisville, and Sen. Stephen Meredith of Leitchfield and Rep. Russell Weber of Shepherdsville, Republicans.

The legislators said other issues likely to be brought up in the next session are medical marijuana; expanding nurse practitioners’ scope of practice; insulin cost; health department funding; and electronic cigarettes. Weber, who sits on the Public Assistance Reform Task Force, said he was not sure if it would recommend legislation.

Alvarado told the group that he and Bevin had discussed ways to approach e-cigarettes, which as of Oct. 8 had been associated with 1,299 cases of lung injury and 26 deaths in the U.S. He said the ideas include outlawing “vaping” altogether, as a few states have done; taxing it at a higher rate and using the money to pay for education and getting people off of tobacco products; and placing all e-cig products behind the counter and requiring proof of age, with limits on purchases. He said that would allow adults who want to use the products in order to quit smoking combustible tobacco to get them.