By Danny Sanchez, Chief Executive Officer, EmpiRx Health
There currently is some form of pharmacy benefit manager legislation pending in virtually every state in the nation. While this may seem like a victory for PBM reform advocates, state-by-state reform is not the solution for transforming the traditional PBM industry. The fact is that complying with a patchwork of PBM regulations across all 50 states will be burdensome, prohibitively expensive, and unsustainable for smaller and mid-sized PBMs. These alternative PBM companies actively offer greater transparency, affordability, and innovative services and solutions to improve patient health outcomes and lower costs.
The Dominant PBMs
If ever there were a business sector in urgent need of top-to-bottom reform, it’s the traditional PBM industry. The largest PBMs control more than 80% of the pharmacy care market. Their anticompetitive, opaque and self-serving business practices have intensified the national crisis of rising prescription drug costs while stifling innovation in essential pharmacy benefit services.
Ultimately, this is leaving employees and their families, who depend on employer-sponsored health plans, to carry the burden.
The dominant PBMs have also limited employee health care options, by forcing an alarming number of community pharmacies to go out of business.
How is this happening? Legacy PBMs continue to squeeze reimbursement rates to the point where community pharmacies lose money on many of the prescriptions they fill. Meanwhile, those PBMs are forcing patients to use the pharmacies or mail-order services that they own, at the expense of trusted local pharmacies. According to the National Association of Chain Drug Stores (NACDS), more than 5,800 pharmacies have closed since 2018. That has created pharmacy “deserts” across America and limited access to the vital health care services pharmacies provide.
State Reform Efforts
Despite repeated bipartisan attempts by Congress to pass legislation that enacts much-needed reforms on the federal level, the harmful business practices of the largest PBMs remain unchecked, leading state legislatures to take matters into their own hands. Exemplifying this shift, Arkansas recently passed a law prohibiting PBMs from owning pharmacies, to stop the big, legacy PBM companies from prioritizing their pharmacy networks. Iowa state lawmakers recently passed PBM legislation. Iowa’s legislation focused on establishing fair pharmacy reimbursement rates and limiting PBMs from excluding local pharmacies.
The Patchwork Quilt Trap
Although the new state PBM laws are well-intentioned, creating 50 sets of state PBM reform laws will effectively reinforce the monopolistic power of the largest PBMs, by driving smaller, patient-focused pharmacy care competitors out of business.
Human resources and benefits teams are already struggling to satisfy employee health care needs while constantly dealing with rising costs, especially for prescription drugs.
If the more transparent, clinically-driven, and patient-centered PBMs are saddled with the onerous task of complying with 50 different sets of state PBM regulations, employees and employers could find themselves with even fewer, more costly pharmacy care options.
Congress: The Best Answer
For too long, the major players in the PBM industry have strayed from their original health care mission, acting more like Wall Street trading firms as they prioritize volume-driven rebates and financial incentives.
Without decisive federal action, the more than 180 million Americans who use commercial benefits plans for their health care needs will increasingly face barriers to affordable, accessible care. Creating a more affordable, patient-first future for pharmacy care requires a more transparent and health-care-centric operating model than the one that dominates today’s PBM industry.
The best path for achieving that vital goal is through federal action that encourages competition and empowers PBMs to adopt business practices that truly benefit patients and employers.