Pa. legislators pass bill designed to help community pharmacies stay in business, regulate 'middlemen'

JOHNSTOWN — Westmont Rexall Drug Store and nine Mainline Pharmacy locations have shuttered within the past four months, even as support from patients in the Johnstown area remained strong.

The community pharmacies' owners said the closures were forced by years of low reimbursements paid by pharmacy benefit managers, or PBMs, widely described as the "middlemen" between health insurers and pharmacies.

Pharmacist Joe Martella, owner of Martella's Pharmacy, with multiple locations in the Johnstown area, said he is fighting the same challenges that put the other local pharmacies out of business.

"It's happened all around us," he said. "We are hoping we are not next. We are living it every day. Reimbursements are not lucrative enough to stay in business."

The Pennsylvania Legislature took a significant step Thursday toward regulating PBMs, passing a bill proposed by state Rep. Jessica Benham, D-Allegheny.

"This is one of, if not the, most significant pieces of legislation passed by the state Legislature this year," Benham said Friday as the bill awaited a signature from Gov. Josh Shapiro to become law. "It is a huge win not only for local community pharmacies, but for patients. It will help keep pharmacies in business, lower the cost for patients, and level the playing field between large corporate pharmacies and community pharmacies."

PBMs sit at the nexus of drug manufacturers, health insurers and pharmacies – getting rebates from drug manufacturers for placing a specific drug on a health insurance plan's formulary, and paying pharmacies on behalf of health insurance providers for drugs dispensed to patients.

But those payments, or reimbursements, for medications that PBMs set for pharmacies rarely cover the wholesale price that a pharmacy pays to stock them – unless that pharmacy is owned by the PBM, according to an ongoing report from the Federal Trade Commission.

Last week, as Benham's bill moved through the final stages of Pennsylvania's legislative process, the FTC released an interim report showing that the "big three" PBMs — CVS Caremark, Express Scripts, and Optum Rx — reimbursed their PBM-affiliated, big-box pharmacies 20 to 40 times the National Average Drug Acquisition Cost, a common measure of pharmacy acquisition costs of drugs, and significantly more than unaffiliated pharmacies for two cancer treatment drugs, generic Zytiga and generic Gleevec.

The findings suggest PBMs may be doing the same for other drugs, bolstering what community pharmacists have said for years.

Those three PBMs have become vertically integrated over time, owning pharmacy chains and managing 79% of prescription drug claims for approximately 270 million people.

The commission's study is ongoing, but the initial analysis can inform state and federal policymakers who are also scrutinizing PBMs, it said.

Benham's bill, passed with bipartisan support from state lawmakers and waiting only for Shapiro's signature as of Friday to become law, is the product of 18 months of research and six months of traveling across the state to meet with pharmacists, she said.

Although the state Senate amended her original proposed bill, it still contains provisions for putting an end to unfair prescription reimbursement contracts for independent pharmacies, limiting PBMs' ability to charge pharmacies after drugs are prescribed, and requiring more transparency from PBMs — especially on the amount of rebates they receive from drug manufacturers, and whether that money is passed on to health insurers or kept by the PBM.

"We've been waiting for years for this kind of reform," Martella said.

The bill prohibits a PBM from reimbursing a retail pharmacy an amount less than the amount that the PBM reimburses a PBM-affiliated pharmacy.

It also bans PBMs from requesting that pharmacies pay back the entire amount of money for a medication dispensed because of "scrivener's errors," or paperwork mistakes discovered during audits that don't affect the patient's receipt of their prescribed medication.

The bill also prohibits "clawbacks," which is another way PBMs can charge pharmacies without much transparency, through reconciliations months after drugs are dispensed.

The bill establishes network adequacy, requiring a PBM to provide a reasonable and accessible retail pharmacy network under a health benefit plan that provides convenient patient access, and that network cannot be limited to PBM-affiliated pharmacies only.

"Patient steering," or requiring health plan members to purchase pharmacist services exclusively through mail-order pharmacies or a PBM retail pharmacy affiliate, is also prohibited by the bill.

A provision for transparency is also included. Starting next July and each year after, PBMs must submit a report to the state detailing the aggregate amount of all rebates the PBM received from pharmaceutical manufacturers for all its health insurer clients, as well as administrative fees that the PBM received from manufacturers and health insurer clients. PBMs must also report the amount of money or rebates they received from drug manufacturers which they did not pass through to health insurer clients.

Benham said she has scheduled a press conference July 19 in Cambria County with state Rep. Frank Burns, D-East Taylor Township, at one of the two remaining Mainline Pharmacies, at 1049 Shoemaker St., Nanty Glo. Mainline closed nine of its locations in March.

More than 70 pharmacies have closed in Pennsylvania since Jan. 1 — including more than 30 independent pharmacies and more than 40 chain pharmacies, the Philadelphia Association of Retail Druggists testified to the state Senate this year.

Burns, state Rep. Jim Rigby, R-Ferndale, and state Sen. Wayne Langerholc, R-Richland Township, voted last week in support of the final amended version of Benham's bill.

Russ O'Reilly is a reporter for The Tribune-Democrat. Follow him on Twitter @RussellOReilly.