Sen. Harshbarger fights for PBM reform

An upcoming bill from Sen. Bobby Harshbarger, R-Kingsport, would allow Tennessee more control over pharmacy benefit managers, commonly known as PBMs.

The career pharmacist said the law will prevent the companies — which act as middlemen between drug manufacturers, insurers and pharmacies — from owning or operating retail pharmacies in the state.

"[PBMs] don't provide any care, but yet they're literally practicing medicine. And that to me is a problem," Harshbarger said. "They dictate what you're going to get and how much you're going to pay for it."

PBMs negotiate discounts and rebates between insurance plans and drug manufacturers. They also decide the amount insurers pay and the reimbursement pharmacies receive. In many cases, they directly reimburse pharmacies on behalf of insurers.

Although PBMs and their supporters claim they help lower costs for patients, they face scrutiny nationwide. Critics, audits and research conclude that these third-party groups drive up costs for consumers and insurers alike and push patients towards their own pharmacies, all while operating with an opaque system.

They're also largely unregulated.

As of 2021, the top three PBMs controlled 80% of the market. This outsized influence has driven all 50 states to enact PBM reform over the past decade.

Kristen Archibald, pharmacist and owner of West Towne Pharmacy in Johnson City, said PBMs affect how everyone interacts with healthcare.

"It affects their premiums, how much they pay for insurance, their coverage, their right to go to whatever pharmacy they want," she said. "Patients have to pay more because of what they do."

Pharmacists experience really no benefits working with them, she added.

"You just kind of have to," she said. "It is not collaborative."

PBMs hurt pharmacies, consumers for profit

In an audit of Express Scripts' 2023 practices, the Tennessee Department of Commerce and Insurance (TDCI) found that the PBM violated state law in at least a dozen ways. Among other findings, infractions included:

Not paying enhanced fees to pharmacies that qualified.Reimbursing pharmacies affiliated with PBMs more than non-affiliated pharmacies — payment differences between the two ranged as high as 3082%.Failing to provide TDCI with proof of pharmacy reimbursement.Failing to keep records from pharmacy reimbursement appeals.

Most notably, auditors found that the company collected over $30 million in profit through a practice called spread pricing, where PBMs charge insurers a higher price for a drug than what they reimburse pharmacies. The companies then keep the difference, or "spread."

PBMs have also been found to prioritize higher-cost drugs and collect fees from pharmacies after sales. Pharmacists have no insight into how PBMs determine these fees and other costs.

As independent pharmacists juggle these practices with physician and insurance coordination, determining cash flow can feel like trying to solve a puzzle without all the pieces.

"Unless you're doing thousands of prescriptions a day or you've got a niche, it's going to be hard to survive," Harshbarger said.

Archibald's pharmacy doesn't accept several insurance plans because the reimbursements from PBMs are unsustainable. Reimbursements are often still inadequate for the insurances they do accept.

"A majority of prescriptions that walk out of the door are profit losses," she said. "Most pharmacies make it by on rebates from their wholesaler because PBMs pay so poorly."

Abusive practices that force many pharmacies to close also hurt patients, the National Community Pharmacists Association argues. And by determining which pharmacies are in-network for patients and redirecting them to certain practices, PBMs directly hit consumer pockets.

"What is more, most of the time the patient is unaware of these hurdles affecting their care," a brief from the association states.

"If more people knew what they were doing, they would be like 'we're getting ripped off,'" Archibald said.

States fight back

Sen. Harshbarger's legislation would mark another significant pushback against PBMs in Tennessee.

In April, Gov. Bill Lee signed a bill into law that will increase the enforcement power of the TDCI. Previously limited to penalizing PBMs no more than $250,000 for violations, the department can now impose fees of over $300,000.

The Volunteer State is in good company on increasing reform. At least a handful of states have passed stricter enforcement provisions in the last year, including landmark legislation from Arkansas banning PBM-owned pharmacies. The law inspired Harshbarger's own bill.

"While they're doing amazing work, there isn't a federal oversight of PBMs," Archibald said about Tennessee action. "That's a big issue."

Federal reform stalls

Tennessee's national representatives agree.

"PBMs don't treat a single patient. They don't cure a single disease, and they don't insure a single American," Rep. Diana Harshbarger, R-Tenn., said in a February congressional hearing. "It's important that we get some PBM reform done."

Harshbarger, also a pharmacist — and Sen. Harshbarger's mother — has prioritized PBM reform throughout her career in Congress. So has Sen. Marsha Blackburn, R-Tenn.

But while both parties have agreed for years on the need for reform, meaningful legislation has yet to pass out of the Capitol's chambers.

In the meantime, states continue to take the matter into their own hands.