The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
Ohio Attorney General Dave Yost is helping to lead the vast majority of state attorneys general in calling on Congress to crack down on middlemen known as pharmacy benefit managers.
Yost and four other AGs led the effort that resulted in Tuesday’s letter to the leadership of the U.S. House and Senate. It says the Federal Trade Commission “and Congress must act to ensure fulsome regulation of PBMs nationwide.”
Since he was state auditor in 2018, Yost has been looking critically at pharmacy benefit managers, or PBMs.
The companies represent insurers in drug transactions and they decide which medicines get covered. They also negotiate huge, often non-transparent discounts from drugmakers in exchange for covering their products.
In addition, PBMs contract with pharmacies to create networks where insured people can get their medicine. In those networks, the PBMs decide how much to reimburse the pharmacies — regardless of how much the pharmacy paid for them.
Over the past 20 years, the PBM marketplace has been increasingly consolidated, with the three largest — CVS Caremark, OptumRx and Express Scripts — now controlling access to an estimated 80% of patients.
The companies have also become increasingly “vertically integrated.” Each is owned by a company that also owns a top-10 health insurer.
Meanwhile, CVS is also the nation’s largest pharmacy retailer and all three major PBMs own mail-order pharmacies that sell the most-expensive class of drugs. Increasingly, the companies are also buying up providers, such as doctors’ offices.
The attorneys general and many others are concerned that the huge corporations — each is among the 15 largest in the United States — are using their integration and concentration to drive out competition and set prices however they like.
“A small number of PBMs hold significant market power and are reaping abundant profits at the expense of the patients, employers, and government payors the PBMs are supposed to help,” the AGs’ letter said. “Pharmaceutical buyers and sellers have little choice but to employ PBMs, allowing them to extract both monopoly profits from individuals and monopsony profits from the market. Moreover, PBMs often dictate reimbursement rates and rules to independent pharmacies, making it difficult for many to survive.”
In Ohio, two of the PBMs — CVS Carmark and OptumRx — were found to have charged the state Medicaid system $224 million more in 2017 for prescription drugs than they paid pharmacists.
Yost sued OptumRx in 2019 on allegations that it had ripped off the Bureau of Workers’ Compensation. He also sued Express Scripts in 2020, alleging it had ripped off the Ohio Highway Patrol System.
And last year, he filed suit under Ohio’s antitrust law against Express Scripts and associated companies.
Attorneys general in other states have filed lawsuits of their own. And legislatures in Ohio and elsewhere have passed laws intended to bring transparency to the notoriously murky world of drug pricing.
In addition, the Federal Trade Commission in 2022 announced a major investigation into all three large PBMs.
But as it tackles drug prices, the Biden administration so far has been reluctant to talk about the role PBMs play in setting them. That might be because government programs get billions of the rebates PBMs negotiate and the administration can count that money as revenue.
Now Yost and almost all other state AGs are calling on Congress to act. They’re demanding federal legislation to “reform PBM practices to curtail their ability to unreasonably raise the price of drugs and to require greater transparency,” their letter said. “Such transparency should, among other things, require PBMs to produce pricing data to health plans and federal and state regulators in a standardized format. This will enable health plans to negotiate better deals with PBMs and will allow regulators to better hold PBMs accountable.”
