November 7, 2019

New York Is Working to Reign in Pharmacy Benefits Managers

On Oct. 23, Vincent Chiffy of Parkway Drugs in Utica, NY stood up with hundreds of his colleagues from across the state to call on their Governor, Andrew Cuomo, to sign state Senate Bill 6531 – legislation that is, according to Westview News “the nation’s toughest protections from prescription drug middlemen known as pharmacy benefit managers.”

Chiffy was attending his third mass demonstration on this issue, following two prior actions last spring held in the state capital.  These were organized by the Pharmacists Society of the State of New York (PSSNY) and the New York City Pharmacists Society (NYCPS). S6531 was introduced in the Senate last May by Senator (and state Insurance Chairman) Neil Breslin and by Assembly Member (and Health Committee chair) Dick Gottfried – both Democrats. The springtime actions helped to push the bill though both chambers. The challenge now is to get the governor to sign it.

Ostensibly, the role of a pharmacy benefit manager (PBM) is to buy in bulk from pharmaceutical companies to negotiate discounts and then to pass the reduced price on to the consumer via pharmacies. PBMs are primarily used by large commercial insurers, Medicare part D and Medicaid managed care.  More that 70% of the PBM business in the US is now controlled by just three corporations; CVS, Express Scripts and United HealthCare Optum. The rate of profit these entities accrue through this process is undisclosed.

Insurers (whether commercial or publicly funded) generally buy drugs in massive quantities in part because they can’t anticipate precisely how much of a drug they will need and when. When Medicaid purchases a drug, for example, it has to consider, according to the Kaiser Family Foundation, “1) the dispensing fee paid to the pharmacist; 2) the amount paid to the pharmacy for the ingredients of a drug; and 3) the rebate received from the manufacturer. States have flexibility to set professional dispensing fees, but there are federal requirements for the other inputs.”

Under the current system in New York, PBMs set their own patient copay rates and use a Maximum Allowable Cost (MAC) system to calculate the cost for each drug they provide. Independent pharmacies dealing with PBMs are routinely required to accept the MAC reimbursement – with no negotiation – despite the fact that the PBM-set rate it is often below the cost of the drug. Independent pharmacies are effectively forced to choose between taking the loss or losing a customer.

Mr. Chiffy said he was demonstrating because, “There’s no rules and regulations to stop them (PBMs) from what they’re doing… We have to make laws to make it illegal.”

Right now, New York’s independent pharmacies are losing money on at least half of the Medicare Managed Care prescriptions they fill. Says Westview News, “70% of pharmacies in New York have been forced to lay off employees or reduce store hours in 2019. In 2020 it is expected that 90% of pharmacies may be forced into these measures if there is no change in the reimbursement system.” If signed, New York’s Senate Bill 6531 would revise PBM licensing and regulations to foster increased protections for patients, taxpayers, and pharmacies. The Pharmacists Society of the State of New York has called it “the toughest bill passed to date in the U.S. regulating PBMs.”

While it sits on the Governor’s desk, AAHIVM is working with the bill’s prime sponsors and other supporters in the legislature to get it signed. Senator Breslin’s office is advising us on how the Academy can help to keep this on the Governor’s radar.

You can help too by contacting his office, the Governor’s Citizen Assistance Line at 518-474-8390 or e-mailing him at https://www.governor.ny.gov/content/governor-contact-form.