Pharmacies back bill instituting state oversight of pharmacy benefit managers

Jun. 19--A bill that passed the General Assembly this year would give the state more oversight over companies criticized for slashing payments to independent pharmacies that serve low-income patients in the state's Medicaid managed-care program.

The legislation, House Bill 465, passed unanimously in the Illinois House and Senate and doesn't satisfy the pharmacies' original demand that they be paid at least what they used to receive under Medicaid "fee-for-service" rates.

But the bill, if signed into law by Gov. J.B. Pritzker, for the first time would establish clear oversight powers for state agencies when it comes to alleged "pricing abuses" by pharmacy benefit managers, or PBMs, according to Garth Reynolds, executive director of the Springfield-based Illinois Pharmacists Association.

"This won't solve the whole reimbursement issue," Reynolds said. "It is the first of many steps so that the abuses slow down or stop."

Independent pharmacies, especially those in central and southern Illinois, have complained that the financial crisis facing them because of payment cuts by Medicare, Medicaid and private insurance accelerated when the state's Medicaid managed-care program expanded to all 102 Illinois counties on April 1, 2018.

The increased financial pressure has contributed to several downstate pharmacies shutting their doors, Reynolds said.

HB 465 would require PBMs -- which work for companies carrying out the state's Medicaid managed-care program and also for private insurance companies -- to disclose their pricing systems and other data to the Illinois Department of Healthcare and Family Services and Illinois Department of Insurance.

The data could lead to future restrictions on PBMs and would create an "enforceable appeals process" that pharmacies could use if they believe they are being wronged by PBMs, Reynolds said.

The bill also would do away with "gag clauses" in PBM contracts that prevent pharmacists from informing patients about lower-cost alternatives, even if paying the full cash price for a drug may be cheaper than paying a co-payment.

A group representing PBMs, the Pharmaceutical Care Management Association in Washington, D.C., took a neutral stance on the bill.

Greg Lopes, spokesman for the association, wrote in an email: "We appreciate the legislature taking up this important issue and share the goal of reducing drug costs for Illinois consumers. PBMs will continue (to) advocate on behalf of Illinois' consumers and health-plan sponsors to keep prescription drugs accessible and affordable."

PBMs are hired by managed-care organizations, or MCOs, to process payments to pharmacies. PBMs contend that they use their purchasing power to save money for the state and private insurance companies that use them as a middleman.

Independent pharmacies contend that PBMs may be padding their own profit margins by unfairly reducing rates paid to pharmacies and failing to pass on the savings to the state and other insurers that employ PBMs.

Reynolds said pharmacies also have seen their per-prescription "dispensing fee" from Medicaid -- designed to cover professional services -- drop from $5.50 for generics and $2.40 for brand-name drugs under the previous "fee-for-service" system to the current 45 cents per prescription. As a result, many pharmacies have seen their revenues from Medicaid drop by half or more, he said.

Illinois MCOs -- such as BlueCross and Blue Shield, IlliniCare, Meridian and Molina Healthcare -- have contracts with the state to carry out the managed-care program now serving 2.1 million Medicare beneficiaries, or more than two-thirds of the state's 3.1 million people in the Medicaid program.

Samantha Olds Frey, executive director of the Illinois Association of Medicaid Health Plans, which took a neutral stance on HB 465, said state Rep. Greg Harris, D-Chicago, the bill's House sponsor, "skillfully negotiated an agreed-upon piece of legislation that brought all sides together, which as you know, is not an easy feat in Springfield."

Michelle Dyer, a Carlinville pharmacist who owns and operates pharmacies in her hometown and in Gillespie and Bunker Hill, said she is among the business owners suffering because of PBMs.

About 30 percent of the total revenue for Dyer's pharmacies comes from Medicaid, and she said the 2018 reboot of the state's Medicaid managed-care program, known as HealthChoice Illinois, reduced her stores' Medicaid reimbursements by 15 percent to 20 percent.

Dyer said HB 465 is "not an immediate help, but it's laying some good groundwork. It also puts in place some restrictions and guidelines on pricing."

Contact Dean Olsen: [email protected], 788-1543, twitter.com/DeanOlsen.

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