Bipartisan Bill Aims to Combat PBMs’ Medicaid Spread-Pricing
US Senators on both sides of the aisle came together to announce the Protecting Pharmacies in Medicaid Act.
A group of US Senators introduced the Protecting Pharmacies in Medicaid Act this week, according to a news release.1 If signed into law, its provisions will limit the ability of pharmacy benefit managers (PBMs) to conduct the often-criticized spread-pricing tactic.
“Pharmacies are essential to the care and well-being of our rural communities. But spread pricing by PBMs is making it harder than ever for community pharmacies to stay in business and lining the pockets of middlemen,” said bill sponsor Senator Peter Welch (D, Vermont). “This bill takes an important step to limit PBMs’ abusive pricing practices, protect our pharmacies, and support our rural communities. I’m grateful to have Senators Marshall, Warner, and Cassidy’s partnership on this bipartisan legislation to protect the health of Vermonters and Americans across the country.”
Spread pricing involves charging Medicaid prescription drug plans more money than the PBMs pay the pharmacy for medications. | image credit: Shi / stock.adobe.com
Along with Welch, the bill was introduced with the help of Roger Marshall (R, Kansas), Mark Warner (D, Virginia), and Bill Cassidy (R, Lousiana), with the goal of ending spread pricing to the benefit of pharmacy revenue and patients’ out-of-pocket costs.
READ MORE: How Pharmacy Deserts are Being Defined, Identified
The spread-pricing tactic is often used by PBMs and it involves charging Medicaid prescription drug plans more money than the PBMs pay the pharmacy for medications.1 With profits from Medicaid surpassing what the PBMs owe pharmacies, they are able to pocket the difference, or the “spread.”
“Medicaid drug costs are increasing, pharmacy reimbursements are decreasing,” wrote the National Community Pharmacists Association (NCPA).2 “Something isn't adding up.”
Among a plethora of previously introduced federal bills, Congress has shown significant bipartisan support for PBM reform. While nothing substantial has crossed the finish line or put a stop to any PBM tactics on the federal level, further bills like the Protecting Pharmacies in Medicaid Act will put pressure on Congress to act.
“Pharmaceutical industry middlemen use a variety of tricks to line their own pockets at the expense of small, independent pharmacies and senior citizens,” said Senator Marshall.1 “Prohibiting PBM spread pricing will cut costs for prescription drugs relied upon by Medicaid enrollees while simultaneously preserving access to local pharmacies that have financially struggled in recent years due to PBMs cutting them out of their share of payments.”
While also limiting the power of PBMs to control prescription drug prices, this new bill will give back financially to patients and pharmacy locations. The existence of actions like spread-pricing have allowed the largest PBMs in the industry to gain more profits and grow their businesses. In the meantime, patients have experienced increased prices for their life-saving medications and thousands of community pharmacies have shut down.3
Indeed, the pharmacy industry has experienced a dire situation with recent studies showing that almost 30% of all US drug stores closed from 2011 to 2021.4 Even worse for patients, these closures have led to 150 US counties with no pharmacy access and nearly 4.8 million patients living in a county where there is just 1 pharmacy per 10,000 citizens.5
Despite its focus on a specific PBM tactic, signing the new bill will hope to quell current financial challenges within the industry. According to the bill’s summary,3 it is intended to save Medicaid an estimated $2 billion over 10 years. It requires passthrough in all Medicaid Managed Care programs, forcing the PBMs to pay pharmacies at a rate of average acquisition costs and dispensing fees. Finally, it ensures all pharmacies in Medicaid participate in the National Average Drug Acquisition Costs (NADAC) survey to improve pricing transparency.1,3
With so much bipartisan hope for PBM reform, many experts are anticipating the signing of near-future legislation. However, as PBM opposers continue to relay their wants and needs for reform, a majority of the power to enact change lies in the hands of Congress as they continue to gradually punt this legislation.
“Time and time again, PBMs have been caught using tactics like spread pricing to take advantage of the system, lining their pockets while harming patients and the taxpayers they are supposed to serve,” concluded NCPA CEO B. Douglas Hoey in the news release.1 “These policies nearly made it through Congress at the end of last year. That is why we are grateful for Senators Peter Welch, Roger Marshall, Mark Warner, and Bill Cassidy for introducing the Protecting Pharmacies in Medicaid Act, which not only promotes transparency and prohibits spread pricing, but it makes sure pharmacies are paid fairly, allowing them to continue serving their communities.”
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