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Senators Ask OIG to Investigate PBM Industry

After the Senate Finance Committee’s hearing (third in a series of hearings), “Drug Pricing in America: for Change,” held on April 9, 2019, Senators Chuck Grassley and Ron Wyden wrote a letter to the Department of Health and Human Services’ Office of Inspector General (OIG) alerting OIG that “increasing number of reports” raise concerns about how Pharmacy Benefit Managers (PBMs) are operating. In the letter, Senators Grassley and Wyden expressed their concern about PBMs and pointed to findings by state officials in Pennsylvania, Ohio, and Kentucky in the past several months on how PBMs made millions while handling prescriptions for Medicaid patients. Specifically, the Senators indicated that:

  • In August 2018, the State of Ohio released an audit report finding that the PBMs’ spread pricing practices resulted in the state’s Medicaid Program being billed $224 million more than the total price paid to pharmacies, which reflected more than an 8% markup for prescription drugs paid for by Medicaid. A subsequent article published in January 2019 reported that the PBMs were paying their own pharmacies even more than competitors. 
  • In December 2018, the Pennsylvania Auditor General released a report finding that three PBMs made millions off the Medicaid program, with profits averaging between 28 cents and nearly $13 per prescription.
  • In February 2019, the Kentucky Department of Medicaid Services released a report finding that, in 2018, PBMs in the state made $123 million off the state’s Medicaid program through spread pricing practices – a nearly 13% markup.

The Senators further requested OIG to conduct “a federal-level analysis of PBM practices across state Medicaid programs, including practices that may allow for inappropriate profiteering and potential anti-competitive practices in state Medicaid programs.”

Also, on the day of the hearing, The Ways and Means Committee advanced the Prescription Drug Sunshine, Transparency, Accountability, and Reporting Act (STAR Act, H.R. 2113) to increase drug pricing transparency and public reporting of information. Specifically, the bill:

  • Requires drug manufacturers to publicly justify large price increases for existing drugs and high launch prices for new drugs
  • Requires applicable manufacturers to report to the Health and Human Services (HHS) Secretary the total aggregate monetary value and quantity of samples provided to covered entities
  • Requires the HHS Secretary to conduct a study on inpatient drug costs;
  • Requires the HHS Secretary to publicly disclose the aggregate rebates, discounts, and other price concessions achieved by PBMs
  • Requires all drug manufacturers to submit information to the HHS Secretary on the average sales price for physician-administered drugs covered under Medicare Part B

It is highly recommended that you retain counsel who has an in-depth knowledge in the PBM industry to investigate PBMs business practices. Frier Levitt routinely works with plan sponsors, to control or eliminate spread pricing, evaluate and confirm rebate compliance, conduct PBM audits to ensure compliance, and negotiate better terms in future PBM contracts. If you are a Plan Sponsor entering a contractual relationship or having a dispute with a PBM, contact Frier Levitt today to speak to an attorney.