Arkansas lawmakers debate dispensing fees for pharmacy benefit managers

Arkansas lawmakers spent five hours Monday debating whether to permanently require pharmacy benefit managers (PBMs) to include dispensing fees in their reimbursements to pharmacies for prescription drugs.

The Joint Insurance and Commerce Committee questioned Arkansas Insurance Department staff and heard public comment from 11 people for and against the proposed rule, which has been temporarily in place since September and is set to expire in January.

PBMs are companies that serve as middlemen to negotiate prescription benefits among manufacturers, distributors, pharmacies and health insurance providers. The companies rank prescription drugs, with the highest-tiered products costing consumers the lowest out-of-pocket costs.

Pharmacies have sent the Insurance Department roughly 3,000 complaints this year about PBMs, Insurance Department general counsel Booth Rand said Monday. The complaints state that PBMs either illegally pay pharmacies below the federally-set national average drug acquisition cost (NADAC) prices, or they pay pharmacies at or barely above NADAC, which is not enough for financial solvency, Rand said.

Some of Monday's speakers, representing PBMs and employers that insure large numbers of Arkansans, claimed consumers instead of PBMs will be forced to pay the dispensing fees under the new rule. Some lawmakers said they agreed.

"I'm going to get more than 3,000 complaints if people's copayments go up by $10 to cover a $10 dispensing fee every single time they get a prescription filled," said Sen. Missy Irvin, R-Mountain View. "For some people, particularly the elderly, that is going to be a significant amount of money every single month."

Other lawmakers and speakers who supported the rule said it will hold PBMs accountable for alleged violations of state law and prevent unfair PBM reimbursements that could drive pharmacies, especially independent operations, out of business and leave communities without vital health care resources.

"I think it's more about stabilization [of costs] and ensuring that the rates are legal and justifiable than it is about whether it costs more or not," said John Vinson, CEO of the Arkansas Pharmacists Association, in an interview after the meeting.

Independent pharmacists from rural areas urged the Arkansas Legislative Council's Executive Subcommittee to pass the temporary rule in September.

The problem is not exclusive to mom-and-pop pharmacies, Brad Lawson, a Little Rock-based health care supervisor for Walgreens, said Monday. He said unfair PBM reimbursements have forced the company to close several locations and plan further closures nationwide. He disputed that the rule would burden consumers with higher costs by default.

"I would challenge that that's a choice PBMs are making if they choose to prioritize their spread over patients' health and keeping pharmacies open," Lawson said. "The status quo, the business model that we have right now, is not sustainable."

Transparency and accountability

Arkansas lawmakers have approved several policies regulating PBMs within the past decade, and some said Monday that more legislation might come during the session that starts next month.

Act 900 of 2015 required the drug middlemen to pay pharmacies at least as much as the national average of what drugstores pay wholesalers for the drugs. Additionally, two bills passed in 2018 forbade PBMs from paying their affiliate pharmacies higher reimbursement rates than non-affiliate pharmacies. Several PBMs are affiliated with mail-order pharmacy operations.

Despite these laws, PBMs have continued to strain Arkansas pharmacies, and the state has 40 fewer pharmacies now than two years ago, even with some new pharmacies opening in that time, Vinson told the committee.

The temporary rule did not include the Insurance Department's proposed methodology for determining the dispensing fee amounts. Rand initially said the "bulletin" listing the data the department would require from PBMs would be ready for lawmakers in October. By November, it was still not ready.

According to the rule presented Monday, the required data would include "the total annual average percentage of total pharmacy reimbursement above or relative to NADAC pricing (or WAC, wholesale acquisition cost if NADAC is unavailable)."

It would also include PBMs' average dispensing fees paid to pharmacies, the total amount of price adjustments PBMs make in response to complaints and the total number of drug reimbursement claims paid during the previous calendar year, among other things.

Irvin said the proposed rule would allow "price-fixing" by the Insurance Department based on "a subjective review of the data" and ultimately "has nothing to do with PBMs."

Sen. Jonathan Dismang, R-Searcy, said he didn't believe the proposed rule was necessary when the Insurance Department already has the ability to collect PBMs' data thanks to existing state laws.

Until all the required PBM data is collected, Rand said, the department will not know which health insurance plans would be required to pay dispensing costs. Dismang and Sen. Ricky Hill, R-Cabot, both took issue with this.

"It still sounds to me like [you're saying], 'Pass it now, review it, and we'll write everything later and tell you what it's going to cost you," said Hill, the committee's Senate chair.

Vinson and Rand both said there would likely be no dispensing fees, and therefore no changes to copays and premiums, if PBMs pay pharmacies "fair and reasonable" reimbursements. They said the rule would create the transparency and accountability necessary for this to happen.

The Legislative Council's Administrative Rules subcommittee will take up the rule for a final vote Thursday. If the committee votes against it, the temporary rule will be rescinded before its expiration date of Jan. 12, Rand said Monday.

Other attempts at regulatory action

PBMs have long been a source of frustration for local pharmacies and regulatory entities nationwide. The three largest PBMs in the nation — Express Scripts, Caremark and OptumRX — are owned by much larger corporations that each also own a top-10 health insurer. The Federal Trade Commission released an interim report in July saying these conglomerates are eliminating competition and increasing drug prices at the expense of patients.

In May 2022, Arkansas then-Attorney General Leslie Rutledge sued the drug manufacturers Novo Nordisk, Sanofi and Eli Lilly, accusing them of conspiring with the three largest PBMs to inflate the cost of insulin. The case is still pending in Pulaski County Circuit Court.

Rutledge's successor, Tim Griffin, filed a new lawsuit in June of this year against Express Scripts and OptumRX, alleging that they used data from drug manufacturers and distributors to maximize their financial gain instead of using it to mitigate the opioid addiction epidemic.

Earlier in June, Rand said the Insurance Department would start fining PBMs $5,000 per violation in response to the large volume of complaints from pharmacies. The department followed through in August, fining Caremark, Express Scripts, Magellan and MedImpact a cumulative $1.47 million.

Jonathan Buxton, the Pharmaceutical Care Management Association's senior director of state affairs, said the PBMs the organization represents pay pharmacies "fair and reasonable" reimbursement rates. He also said the Insurance Department is responsible for enforcing the state's laws if PBMs are found to violate them.

"Aren't you also responsible for following the law and taking care of your customers?" Rep. Robin Lundstrum, R-Elm Springs, asked Buxton.

"All of our members are complying with the law," Buxton replied, drawing laughter from some meeting attendees.

The Pharmaceutical Care Management Association challenged Act 900 of 2015 in federal court upon its passage. The U.S. Supreme Court reviewed and upheld the law in 2020.

Arkansas Advocate is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Arkansas Advocate maintains editorial independence. Contact Editor Sonny Albarado for questions: [email protected].