Independent Pharmacies vs. PBMs: Are Changing Laws Finally Leveling the Playing Field?

July 02, 2019

“Good things come to those who wait,” as the old saying goes. Unfortunately, it can be a long wait.

That’s been the case for independent pharmacy owners who have long waited for meaningful legislation that will level the playing field with third party pharmacy benefit managers (PBMs).

It’s the classic David vs. Goliath story.

Small pharmacies have been voicing their concerns for many years about what they see as unfair competition with mega pharmacies who have merged with insurance companies and PBMs. They’re also concerned about falling reimbursement rates from PBMs for prescription drugs and alleged abusive practices by PBMs, all of which lead to falling profits.

According to the PBMs, they help keep drug prices down and provide overall cost savings to patients and healthcare plans. But independent pharmacists largely disagree, as do many industry experts. They claim these middlemen and large mergers negatively impact competition and drive prescription drug costs and insurance premiums higher.

Most people aren’t even aware that if they get their prescription drugs through a health plan, there’s likely a PBM involved.

But that awareness is starting to change. As healthcare costs have continued to skyrocket, these pharmaceutical middlemen and the role they play in our healthcare system have been under increasing scrutiny.

And now for the good news …

Thanks to the efforts of state and national associations and the support of individual independent pharmacy owners, legislative efforts are finally paying off.

On the national level, on October 10, 2018, President Trump signed into law the Patient Right to Know Drug Prices Act. This law prohibits gag clauses, which are provisions in PBM contracts that prohibit pharmacists from letting customers know they could save money by paying cash out-of-pocket instead of using their insurance.

Every state in the nation also has at least one bill supporting independent pharmacies against the PBMs:

  • California has several measures, including CA S 1021, signed into law on 9/26/2018. This law prohibits drug formularies maintained by health insurers or health care service plans from containing more than four tiers. It also says patients can’t be forced to pay more than the retail price for a prescription drug if the retail price is less than the copay. A.B. 315, signed into law on 9/29/2018, requires PBMs to (1) obtain licenses from the Board of Pharmacy; (2) have fiduciary duties to their health plan clients; and (3) disclose data regarding drug costs, rebates, and fees earned to their clients.
  • In Missouri, Title XXII §338.600 establishes standards for audits of pharmacies. Any entity auditing a pharmacy is required to use the same standards and parameters consistently, and the law sets out standards for appealing the auditor’s conclusions. MO H 1542 (2018) would have mirrored the national Patient Right to Know Drug Prices Act in prohibiting gag clauses, but it didn’t pass the legislature.
  • In New York, A05502B prohibits health insurers from requiring the insured to purchase their prescribed drugs from a mail order pharmacy or pay a copayment when those purchases aren’t made from a mail order pharmacy if a similar fee isn’t charged for drugs from a mail order pharmacy. Two other bills would have governed how PBMs can audit pharmacies and prohibited gag clauses, but neither bill passed.

The big takeaway? It’s an uphill battle, but grassroots efforts can work.

Independent pharmacy owners have been instrumental in all of these initiatives, and their efforts are paying off. But if you’re one of those independents, you still face a host of challenges every day, making it crucial to have a risk management program that’s firing on all cylinders.

That’s where Heffernan Insurance Brokers can help. Contact us today to learn about our Pharmacy Owners Insurance program.