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States Want Say on Drugs
Pharmacy Managers Extending Control |
| Sunday, August 22, 2004 By John A. MacDonald, Staff Writer Hartford Courant |
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WASHINGTON -- Lawmakers in more than half the states, including Connecticut, have pushed in the last two years to impose greater regulation over the private companies that control the benefits of virtually all Americans who have coverage for prescription drugs.
With little fanfare, the companies, known as pharmacy benefit managers, have amassed vast new powers that have made them as influential with drugs as managed care companies are with doctors and hospitals. But the power has brought charges that pharmacy benefit managers do not always act in the best interest of consumers. Among other things, the companies have been accused of switching prescriptions without patients' knowledge, steering patients away from local pharmacies and skimming discounts they negotiate with manufacturers. The companies' growing powers and the disputes over their business practices have led many lawmakers to argue that states should exercise control over PBMs - as they do with insurance companies. Some analysts predict the regulatory push will intensify next year, when new Medicare legislation will permit pharmacy benefit managers to compete with traditional insurers to provide prescription drug coverage to millions of older Americans. Connecticut Attorney General Richard Blumenthal, who supported a move to regulate pharmacy benefit managers that operate in the state, said: "They are an increasingly powerful institution that shape the kind of medical care that patients receive and its quality. Their decisions are literally a matter of life and death." Mark Merritt, president of the Pharmaceutical Care Management Association, a trade group, argued that PBMs are already extensively regulated by the states and the federal government and that additional rules would boost the prices consumers pay. Currently, pharmacy benefit managers save consumers about 25 percent off the retail cost of prescription drugs, he said. In July, the Federal Trade Commission estimated that 95 percent of patients with prescription drug insurance coverage receive their benefits through a pharmacy benefit manager. The largest of about 60 PBMs operating in the United States are Medco Health Solutions, Express Scripts and Caremark Rx. As recently as the early 1990s, pharmacy benefit managers did little more than process claims. But in recent years PBMs have expanded to provide many new services. They negotiate complex discount programs with manufacturers, set up pharmacy networks and lists of approved drugs and monitor drug utilization. Some large insurers, such as Aetna and CIGNA, operate their own pharmacy benefit managers; others contract out the job. In either case, the amount of the discounts is closely held for competitive reasons. Some of the state legislation seeks to require PBMs to make this information public. Pharmacy benefit managers have fought off a majority of the state regulatory efforts, including one this year in Connecticut. Still, six states and the District of Columbia have passed laws, according to the National Conference of State Legislatures. Over the last two years, 32 states have considered measures. Merritt's organization has gone into federal court to block far-reaching regulatory measures adopted in Maine and the District of Columbia. Other states that have passed measures include Georgia, Maryland, New Hampshire, South Dakota and Vermont. In Connecticut, state Sen. Joseph J. Crisco, D-Woodbridge, co-chairman of the legislature's insurance and real estate committee, said, "I believe we should have legislation." Crisco said the influential program review and investigations committee, which he chairs, is studying the issue while lawmakers are out of session. Insurance committee records indicate that two PBMs, Express Scripts and Medco, as well as Anthem Blue Cross Blue Shield and America's Health Insurance Plans, a large trade group, spoke against the measure at a February hearing. Crisco said the issue raised more questions than lawmakers had time to address. Richard Cauchi, a health care analyst for the National Conference of State Legislatures, said he detects "a growing recognition" among state lawmakers that some kind of regulation makes sense. The level of activity in state legislatures, he said, is "certainly significant." So far, in states that have either passed laws or debated them, lawmakers have focused on two kinds of regulatory approaches. One requires benefit managers to obtain a license and report certain basic business activities. In addition to the basics, the other requires a public filing of extensive information about PBM business practices, such as the amount of discounts from drug manufacturers and how the discounts are distributed. Several analysts said investigations of the nation's three largest pharmacy benefit managers have fanned the state regulatory push. Most recently, New York Attorney General Eliot Spitzer announced that he had sued Express Scripts for allegedly conducting a scheme that inflated the prices that participants in New York's largest employee health plan paid for prescription drugs. Earlier, 25 state attorneys general, including Blumenthal, began investigating the business practices of Caremark Rx. That inquiry includes Advance PCS, a benefit manager Caremark acquired earlier this year. The attorneys general have said little about the details of their investigation. In April, Medco Health Solutions agreed to pay $29.3 million to settle a lawsuit by the attorneys general of 20 states, including Connecticut. The suit involved charges that Medco - the largest PBM in the country, covering 62 million people - violated laws against unfair and deceptive trade practices. Among other things, the suit said that Medco, which was not required to admit guilt, had switched patients' prescriptions without their knowledge. Archie Lamb, an Alabama lawyer who specializes in health care litigation, said many states are pressing regulatory efforts because the federal government has not acted, because rising prices have forced states to look more closely at prescription drug costs and because of PBMs' "unconscionable" business practices. While pharmacy benefit managers have run into criticism in a number of states, two federal agencies have supported the PBMs' side of the argument. In its July report, the Federal Trade Commission said, "To date, most empirical evidence suggests that PBMs have lowered costs for health plan sponsors." Supporting the commission's conclusion, a study by the Government Accountability Office found that PBMs trimmed 18 percent on average off the retail price for selected brand-name drugs purchased by participants in three health care plans that cover federal workers. For generic drugs, the savings averaged 47 percent, said the GAO, the investigative arm of Congress. Addressing the issue of regulation, the trade commission said, "Vigorous competition is more likely to help ensure that gains from cost savings are passed on to consumers of health care services, either as lower premiums for health insurance, lower out-of-pocket costs or improved services." But the trade commission also reported that some PBM practices have "raised public concern" and said that the agency has launched a study of benefit managers' use of mail-order services. Margherita Giuliano, executive vice president of the Connecticut Pharmacists Association, said that benefit managers are "very, very profitable," and have attempted to lure local pharmacists' customers to PBMs' mail-order operations. Giuliano called for greater disclosure of the discounts PBMs negotiate with drug manufacturers, adding that she is waiting for legislation in Connecticut "that has some bite to it." Merritt, who represents the benefit managers, said critics, such as local pharmacists, are motivated by economic self-interest. "We face almost zero complaints from consumers," he said. "We save money for consumers." The debate over regulation is likely to intensify next year, when Medicare will begin signing up millions of seniors for the government's new prescription drug insurance plan. The insurance plan will be a permanent replacement for the Medicare drug discount card that started June 1. Federal officials say they anticipate some pharmacy benefit managers will seek to offer the coverage - which would be a substantially new role for PBMs. Cauchi, the conference of state legislatures' health expert, said the new Medicare program could spark additional state regulatory efforts. States have traditionally regulated both pharmacies and insurers, he said. "There is an assumption this is fair game for state legislatures." Copyright © 2004, Hartford Courant; Reprinted with permission. |
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