Earlier this month over 500 independent pharmacy owners came together to launch FixRx. FixRx is a multi-prong campaign to fight the abusive practices of Pharmacy Benefit Managers (PBMs).
PBM and Industry Consolidation
PBMs manage the “pharmacy-benefit” for insurance companies, the government, and employers (“payors”) by negotiating drug pricing. By playing middle-man, PBMs keep a percentage of the spread: the difference in what they pay pharmacies for dispensing the drug and what the payors pay for the drug. Through highly-restrictive and low-transparency contracts, the spread is virtually unknown to pharmacies, drug companies, and payors alike.
Over the past 10 years, PBMs have consolidated to the point where the top 3 companies have 72% of the market share and the top 8 have 96% of the market share, according to the Drug Channels Institute. Additionally, PBMs have started to vertically integrate: PBMs are merging or partnering with payors, pharmacies, wholesale distributors and manufacturers.
Ironically, CVS Caremark closed its $70 billion acquisition of Aetna yesterday, cementing a $150 billion healthcare giant. Here is an image from our earlier article when it was announced that CVS Caremark would be acquiring Aetna for $70 billion:
Results of Consolidation
There have been a few expected consequences of the on-going consolidation.
One of the results of consolidation has been an outsized influence on national and state politics through lobbying efforts. FixRx claims that “PBMs spent tens of millions of dollars last year convincing government officials to keep this system, including more than $1 million in lobbying in New York State alone.”
Another result is the outsized negotiation power PBMs have compared to the rest of the industry, including patients, pharmacies and manufacturers.
Patients: “gag clauses” prohibit pharmacists from advising patients that the cash price is lower than their co-pay.
Pharmacies: DIR fees, vendor restrictions, pre-authorization, and audits/clawbacks are just some of the practices that hurt pharmacies’ bottom-lines.
Manufacturers: unilateral power over PBM formularies and requiring rebates hurt the manufacturer’s bottom-line.
In Ohio, a state investigation in June found that PBMs overcharged taxpayers by more than $200 million between April 1, 2017 and March 31, 2018. As a result, Ohio’s Medicaid program terminated its contracts with all of its PBMs and mandated new contracts that implement transparent pricing by January 1, 2019.
FixRx: Uniting NY Pharmacies Against PBMs
FixRx is a joint effort of the New York City Pharmacists Society (NYCPS) and the Pharmacists Society of the State of New York (PSSNY). The pharmacies are uniting to develop stronger lobbying efforts, all in an effort to have their voices heard by Federal and NY state legislators.
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