PBM Consolidation Could Worsen ‘Spread Pricing’ in 2022

In a recent survey conducted by the National Community Pharmacy Association (NCPA), 95% of pharmacy owners said they're ‘significantly concerned’ about consolidation and vertical integration among pharmacy benefit managers (PBMs). 

There's no question that clawbacks and DIR fees are negatively impacting pharmacy, and if the trend continues, 2022 will be worse than 2021. 

In fact, 21 states have passed laws against ‘spread pricing’ ... but so far the PBMs are finding ways around these statutes, to claw back even more money. 

According to an article published in Modern Healthcare, PBMs seem to be getting the better of the 21 states that banned spread pricing and are continuing to bill Medicaid for more than the price paid to drugstores for medicines. 

What is Spread Pricing?

For the uninitiated, ‘spread pricing’ occurs when PBMs pay pharmacists for dispensing medications at one rate, then return months later to ‘claw back’ the difference between that amount and the contracted rate established by a Medicaid-managed care carrier. This occurs *after* state Medicaid agencies have closed the books on prescription purchases. 

Thus, clawbacks inflate states' drug spending and the capitation rates paid to Medicaid managed care carriers, and distort insurers' medical-loss ratios, says Antonio Ciaccia, president of drug pricing watchdog 3 Axis Advisors. 

State Examples: Ohio, Michigan 

To address the problem, state legislatures have tried to save taxpayer money by banning spread pricing. However, so far it doesn't seem to be working. 

For example, look at Ohio. 

PBMs overcharged Ohio by millions of dollars by changing the spread pricing model, according to the testimony of state Medicaid Director Maureen Corcoran delivered to state legislators earlier this month. The companies charged payers more than they paid pharmacies and kept the difference, the Columbus Dispatch reported. 

Meanwhile, in Michigan, community pharmacies participating in the state’s Medicaid managed care program aren’t begin helped much by Michigan’s spread pricing ban, according to a 3 Axis Advisors review. PBMs PBMs hiked the initial reimbursements to pharmacists and clawed back the difference later, Ciaccia said. 

"What that means is that the entire fundamental premise with which pricing is based in Medicaid programs across the country is essentially trash," Ciaccia explains. "We're talking about billions and billions and billions of dollars of implications if there's no integrity with the data with which they're using to set any of these items. This phenomenon is occurring in states across the country, but this is the first public outing of the practice.” 

In other words, PBMs' Medicaid clawbacks also violate the spirit—if not the letter—of the law in states that attempted to curb spread pricing by requiring pass-through pricing instead. This model pays PBMs administrative fees and requires them to return drugmaker rebates and discounts to their payer partners. 

‘Spirit’ vs. ‘Letter’ of the Law 

Of course, the letter of the law is what truly matters, and PBMs do abide by their contracts with drugstores. 

"Independent pharmacies voluntarily enter into contracts with pharmacy benefit managers, PBMs, which set reimbursement for pharmacies at fair market values," says Greg Lopes, spokesperson for the Pharmaceutical Care Management Association (PCMA), a PBM-industry lobbying group. "Independent pharmacies more often than not are backed by powerful pharmacy services administrative organizations—the largest of which are owned by drug wholesalers—which are negotiating on the pharmacies' behalf." 

At this writing, more than a dozen states are investigating PBM clawbacks, working with the law firm Liston & Deas. The firm won a $214 million settlement from Centene in a lawsuit that alleged the insurer's PBM overcharged Arkansas, Illinois, Mississippi, and Ohio for prescription drugs. Centene also is in settlement talks with other states and has reserved $1.25 billion to cover claims related to its now-defunct PBM, Envolve. 

"You have all this historical data showing really crappy reimbursements to pharmacies and, all of a sudden, the state bans spread pricing and, voila, PBMs decided to be altruistic to pharmacies?'" Ciaccia says. "It's building in an excess from a contractual standpoint for the PBM to claw back." 

Consolidation in the PBM industry has exacerbated the problem, says Anne Cassity, Vice President, Federal and State Government Affairs at NCPA. Just three companies—CVS Caremark, UnitedHealth Group's OptumRx, and Cigna's Express Scripts—are responsible for 75% of U.S. prescription drug claims. Unlike their close cousin, direct and indirect remuneration fees, clawbacks in Medicaid are not barred by federal law but governed by pharmacists' contracts with PBMs, according to Cassity. 

"This all goes back to these 'take it or leave it' contracts," Cassidy explains. "If the PBM tells the pharmacy, 'You have to agree to everything in this contract, even these clawbacks. If you don't, then you could possibly lose a third of your patients.' That's the catch." 

Is There Any Relief in Sight?  

Given all of the above, what's a pharmacy owner to do? 

You *can* fight back at the state level, but you have to know HOW. 

NCPA and RxSafe recently teamed up on a webinar, “NCPA Legal Wins and the Lasting Impact on Your Business.” The event featured Attorney Rob Smith, partner at Katten, Muchen, Rosenman, LLP who most recently argued on behalf of the state of North Dakota before the Eighth Circuit in defense of two North Dakota laws regulating PBMs (in PCMA v. Wehbi), and Matt Walker, Executive Director of the West Virginia Independent Pharmacy Association. Smith and Walker, in a follow-up to their presentation at the 2021 NCPA Annual Convention, helped to explain how last year’s unanimous 8-0 decision in Rutledge changed the legal landscape and how pharmacists can work to push for new PBM regulations at the state level. 

Click here to watch the webinar. 

Whether or not you are taking action in your home state, you may want to take the opportunity to contribute to NCPA’s Legal Defense Fund, which funds expenses related to multiple ongoing federal lawsuits, on behalf of community pharmacies nationwide. 

For more information or to donate, visit NCPA’s LDF page 


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