When a bill passed the N.C. House in a 114-0 vote in April 2023, one might assume the N.C. Senate would give it a serious look. But that’s not how things work at the state legislature.
Penny Shelton, the executive director of the N.C. Association of Pharmacists, is questioning why state Senate leaders have put House Bill 246 into a Rules Committee pigeonhole after the House’s 114-0 vote.
This bill addresses pharmacy benefits managers, the middlemen between pharmacies and insurers that are supposed to work to keep drug prices low. The three largest PBMs, owned by CVS, Cigna and UnitedHealth, have a combined 79% market share, according to the Federal Trade Commission.
For years PBMs have sparked political and regulatory suspicion that they are a shell game that insurers are using to pad their own bottom line.
The House bill aimed to put some restrictions on PBMs, including limits on their use of “spread pricing” to extract value for themselves.
But the bill doesn’t appear likely to move out of the Rules Committee in what remains of the 2024 legislative calendar. Similar legislation stalled in 2019 and 2020.
The Senate Rules Committee is chaired by Bill Rabon, while the vice chair is Warren Daniel. The committee has prevented open committee debate on the bill.
“The power and money of the $100-plus billion [PBM] behemoths that spout lies apparently carries more weight, for our Senate leaders, than patient needs, local community economies, and small businesses,” Shelton says in an email. Her group has nearly 2,000 members, including students and a few pharmacy technicians.
“We are told some senators are not for the bill. But our work tells us the majority of senators are in favor of taking action. The only concern we hear is ‘We’re concerned healthcare costs will go up,’ but there is evidence from other states that shows this is not the case. We need our lawmakers to be bold to take a stance.”
Senate rules allow for the use of a discharge petition to remove a bill from committee and bring it to the floor. That takes the signatures of two-thirds of the chamber’s membership and then the votes of two-thirds of the members on the floor to ratify the removal.
The PBM industry, unsurprisingly, opposes the bill.
“House Bill 246 mandates a special $10.24 pharmacy tax on patients for every prescription at the pharmacy counter,” said Phil Blando, a CVS Caremark spokesman. “The bill harms seniors and others with limited mobility by effectively banning lower-cost home delivery of prescriptions. This bill will not lower the cost for prescription drugs in North Carolina set by the manufacturers.”
Shelton said that “over 100 community pharmacies” across the state have closed in the last 18 months. She blamed the “growing number of non-negotiable PBM contracts with pharmacies” that “reimburse the pharmacy less than the pharmacy can buy the medication.”
Nor is that the only kind of price distortion going on.
Shelton cited a pharmacist who told her what happened when he decided to fill a prescription for a drug that “been on the market for decades as non-specialty” for his wife, who was then a cancer patient.
He could buy the drug for about $70, and would have sold it to a customer for $98. He initially paid for it out of pocket because the PBM in their insurance chain considered the drug a “prior authorization med.”
It eventually approved reimbursement, with a $134 patient copay.
“Of course, there is no way for him to know what the PBM charged the health plan for that drug, but it was most definitely greater than $134,” Shelton said. “Think about that: The PBM is supposed to be saving patients and health plans money. Ironic, right? Why can’t our N.C. Senate leaders understand this?”
The Federal Trade Commission is investigating PBMs, and last month issued an interim report about its findings that tracks with Shelton’s comments. The FTC has noted that the large insurers are highly concentrated and vertically integrated. CVS has a large chain of retail pharmacies, and CVS, Cigna and UnitedHealth have their own mail-order and specialty pharmacies.
The FTC says about 10% of rural America’s independent pharmacies closed between 2013 and 2022, partly because they have no real bargaining power relative to PBMs. They get take-it-or-leave-it contract offers, along with pricing terms that are “opaque and unpredictable,” it says.
Because of vertical integration, “PBMs can have the ability and incentive to put downward pressure on reimbursement rates for rival, unaffiliated pharmacies — including to a degree that may be unsustainable for small, independent pharmacies,” the FTC report says.
It adds that investigators have seen PBM internal documents that point toward “programmatic or network ‘right-sizing’ or ‘network pruning’ of pharmacies.”
Pushing independent pharmacies out of the market and other anticompetitive conduct “could ultimately lead to higher costs and lower quality services for people around the country,” the FTC has said.
(This story originally appeared in the North Carolina Tribune newsletter.) |