“Reviewing the Role of Pharmacy Benefit Managers in Pharmaceutical Markets Forum” Brings PBM Abuses Under Congressional Scrutiny

On November 17, 2021, members of the Congressional Oversight Committee held a public hearing, called, “Reviewing the Role of Pharmacy Benefit Managers in Pharmaceutical Markets.”  The panelists on the forum included pharmacy and community oncology provider representatives, clinicians, and researchers, as well as a representative from the Pharmaceutical Care Management Association (PCMA) to speak on behalf of PBMs. The Panel brought significant insights to the attending committee members and sounded a refrain that Frier Levitt has been focused on for many years: PBM practices are harming patients and providers, and Congressional action is needed to resolve the problem.

The issues presented were all too familiar for independent pharmacies and community oncology providers.  The overarching theme was the need for transparency, and calls to pass the Prescription Pricing for the People Act or similar legislation to gain such transparency. A major focus was on pharmacy Direct and Indirect Remuneration (DIR), and it was observed that pharmacy DIR Fees increased 91,500% between 2011 and 2019 (according to this CMS report at p. 242). Other topics included the use of rebates and rebate aggregators in a manner that raises patients’ out-of-pocket costs; lack of transparency in spread pricing and other pricing practices; patient steering—the PBMs’ practice of inappropriately directing patients to PBMs’ wholly-owned pharmacies and away from independent pharmacies; and the use of “step therapy edits” and “fail first” requirements that often lead to horror stories for oncology and other vulnerable patients. The congressional members in attendance asked pointed and informed questions on these and other matters.

Antonio Ciaccia (friend of the Firm and unparalleled researcher in PBM practices) impressed the committee with the comment, respecting transparency, “Where there is mystery, there is margin.” Recognizing the historically important role PBMs have played in managing drug costs, he described how PBMs have essentially found ways to “print their own money” through lack of transparency in their role designing formularies and implementing pharmacy DIR. Speaking with Ohio Congressman Gibbs, who expressed great concern over what he viewed as the monopoly power exerted by vertically integrated drug distribution channels, Ciaccia also stressed the importance of regulatory oversight in managing such channels and reigning in anti-competitive practices.

Ted Okon from the Community Oncology Alliance (COA) (with whom this Firm submitted an Amicus Brief for the landmark Rutledge v. PCMA case), advocated on behalf of oncology patients when describing the harsh outcomes such patients suffer as the result of PBM “fail first” requirements and the difficulties arising from DIR fees. Responding to Okon’s statements, Congressman Norman stressed the importance of litigation against PBMs to curb such practices. On this last point especially, Frier Levitt agrees with the Congressman.

As Congressman Norman expressed, he is “all for litigation” because litigation will create “too much downside” for PBMs to engage in such practices. Litigation can be a powerful tool. Mr. Ciaccia observed, and Congressman Norman applauded the fact that the State of Ohio sued PBMs over the use of spread pricing in that State, ultimately forcing the Plan Centene and its subsidiary PBM, Envolve, to pay $88 million for overcharging the State’s Medicaid Program for its prescription drug plan. Unfortunately, Congressman Norman should be made aware that litigation against PBMs is not always so straightforward. 

While Ohio can bring the State’s resources to bear against PBMs when they abuse the State Medicaid system, most states, as well as the federal government, lack a private right of action for private citizens and businesses to sue to enforce laws regulating PBMs. Thus, although Frier Levitt has found success in litigation against PBMs, pharmacies and community practices that dispense prescription drugs could begin to create the “downside” necessary to end abusive PBM practices if Congressional committees like this simply created a private right of action for providers, allowing them to regulate PBMs through courts and arbitration.  Allowing pharmacies to become, essentially, “private attorneys general” would lift the regulatory burden from governments, which would conserve taxpayer resources and allow courts—or private arbitrators—to take up these issues and award relief for providers’ meritorious claims.

Congresswoman Harshbarger of Tennessee—herself a compounding pharmacist for 35 years and co-sponsor of the Pharmacy Benefit Manager Accountability Study Act of 2021—spoke passionately about how DIR fees result in below-cost reimbursement and uncertainty for independent pharmacies.  The Congresswoman echoed Congressman Norman’s sentiments regarding the importance of litigation. The Committee also sought the Panel’s opinions on how to solve these issues.

In discussing possible solutions, panelist Dr. Erin Trish spoke about the need to pass through rebates to consumers, so consumers can actually receive the benefits of those rebates.  Panelist Tiffany Jones from Senderra Specialty Pharmacy discussed the need for legislation that prevents PBMs from sidestepping current regulation; for example, she discussed that while the federal Any Willing Provider law requires “reasonable and relevant” reimbursement, CMS does not actually regulate pricing, essentially allowing PBMs to force independent pharmacies out of the marketplace by offering pricing below the cost of acquisition for drug products. Again, from Frier Levitt’s perspective, if Congress added a private right of action to enforce “reasonable and relevant” reimbursement, pharmacies would be better positioned to receive reimbursement relief.

The Forum ended with calls for transparency from the Panel members (with the exception of the PCMA representative), and the ranking member of the committee promised to issue a report to spur further action on the issue.

Circumscribing the role of PBMs in the drug distribution chain is part of Frier Levitt’s Mission Statement, and our attorneys understand the challenges and frustration that independent pharmacies and community oncology providers face with the issues tackled by this Forum.  Frier Levitt will be monitoring the Oversight Committee for any reports issued as a result of the Forum and will continue to advise and advocate for these providers.  If your pharmacy or practice is struggling with PBMs or any other issues, contact Frier Levitt to discuss how we can help.