HR 1946 empowers pharmacies to confront inflated prescription costs

Washington, DC (May 26, 2011)—The Association of Community Pharmacists Congressional Network (ACP*CN) today endorsed legislation to confront secret practices by pharmacy benefit managers (PBMs) that inflate drug costs for consumers and private-sector health care plans. 

HR 1946 by U.S. Rep. Tom Marino (R-PA) provides a new approach to help consumers and private health plans get access to the real costs of their medications.  The bill empowers independent pharmacies to negotiate with PBMs over the most important terms that affect retail prescription drug prices, and which are currently hidden from consumers and insurers.

“Your local pharmacist is in the best position to cut your prescription drug costs,” stated Mike James, ACP*CN Vice President for Government Affairs.  “Why?  Because only local pharmacists know how PBMs inflate fees and hide profits to take extra money out of your pocket.”

PBMs set prices that health plans pay for prescription drugs.  The PBMs then deliver the drugs to consumers who are covered by the plans through pharmacies or by mail.  HR 1946 was introduced to address the growing concerns of regulators that PBMs overstate the costs they pay to acquire drugs from manufacturers and then pocket the difference. 

According to congressional testimony on June 24, 2009 by Pharmacy Outcomes Specialists, “PBMs often get large rebates, as much as 50 percent, from drug manufacturers that are never passed back to the plan sponsor."

PBMs also typically overstate their costs for generic drugs by 10-15% according to American Health & Drug Benefits (ADHP), an independent, peer-reviewed journal.  ADHP estimates this tactic adds $2 million annually to the cost of plans with 100,000 members.

To prevent scrutiny, PBMs require pharmacies that dispense their drugs to sign contracts that prevent them from sharing any information about drug costs with consumers or insurers.  PBMs also use the contracts to underpay the pharmacies and hide the extra funds.  According to congressional testimony by the U.S. Office of Personnel Inspector General, “PBM contracts…make auditing them almost insurmountable” (June 24, 2009).

Pharmacies have complained to regulators that PBMs also use confidential patient information from pharmacies to force consumers into mail-order programs the PBMs own because the programs provide even better protection against cost disclosures.  For example, ADHP reported PBMs use their mail programs to switch patients to higher margin products without objections outside pharmacists would raise, and repackage bulk purchases from manufacturers into individualized prescriptions without passing savings on to consumers or insurers.

Similar legislation passed the House Judiciary Committee in 2007.  HR 1946 was modified to only apply to non-government-paid prescriptions where pressure for reform is strongest.  More than 60 of the nation’s largest employer-funded plans have dropped their PBMs or forced them to disclose their drug acquisition costs.

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