Dozens of state attorneys general, including California, are calling for Congress to end a practice they say has “exacerbated the problem of manipulated prices and unavailability of certain prescription medications.”
The 39 attorneys generals, which includes those representing United States territories and the District of Columbia, urge Congress to pass an act prohibiting pharmacy benefit managers, their parent companies or affiliates from owning or operating pharmacies, according to a letter on April 14.
“PBMs’ priority is not consumers, but rather their own bottom line. They must be reined in,” California Attorney General Rob Bonta said in a statement. “Drug prices have skyrocketed in recent years, and PBMs have exacerbated the problem. To protect consumers and small businesses, we need more competition — not less — in the marketplace.”
This practice has worsened the problem of manipulated prices, the growth of pharmacy deserts and the unavailability of certain prescription medications, according to a news release from the attorney general.
PBMs, however, say the blame for high drug costs lies with the manufacturers, and PBMs use their market power to negotiate rebates, helping health plan sponsors (employers) offer the pharmacy benefits their employees need at a price the employees can afford.
What is a pharmacy benefit manager?
Pharmacy benefit managers administer the prescription drug coverage provided by health plans, with services that include the processing and payment of claims for prescription drugs and contracting with network pharmacies, according to the California Department of Managed Health Care.
These “middlemen” negotiate the terms and conditions for access to prescription drugs for hundreds of millions of Americans, according to a Federal Trade Commission report published last year. The Federal Trade Commission found that three PBMs control over 80% of prescriptions filled across the country.
“They are also vertically integrated, serving as health plans and pharmacists, and playing other roles in the drug supply chain as well,” the FTC said. “As a result, they wield enormous power and influence over patients’ access to drugs and the prices they pay.”
Years of acquisitions have resulted in the leading pharmacy benefit managers to be part of “massive healthcare conglomerates” that include a health insurer, pharmacies and the pharmacy benefit manager as the negotiator between the two, the FTC said.
Some of the top pharmacy benefit mangers are CVS Caremark, Express Scripts, Optum Rx, Humana Pharmacy Solutions, MedImpact and Prime, according to the FTC.
Why are they calling for a ban on owning or operating pharmacies?
The attorneys general said that passing such a law would “foster competition in the marketplace and give consumers more access to pharmaceutical care, more choice as to their healthcare providers, and more affordable prices.”
Such legislation would ensure pharmacies compete on fair terms, the attorney generals said.
The attorneys general’ letter described pharmacy benefit managers as transforming from administrative service providers to “market-dominating behemoths” over the past few decades.
Pharmacy benefit managers’ affiliated pharmacies, meaning the ones they own or their parent company’s own, represent three of the top five largest pharmacies in the U.S. based on revenue, according to the attorneys general.
The attorneys general cited reports that describe the pharmacy benefit managers’ actions as harmful to independent pharmacies and that their position “allows and incentivizes them to provide their affiliated pharmacies with more favorable contract terms” and “steer consumers away from independent pharmacies” to theirs.