Under the leadership of Centers for Medicare and Medicaid Services Administrator Seema Verma, the Trump administration recently released key guidance mitigating pharmacy benefit managers’ abusive “spread pricing” practices in state Medicaid-managed care programs.
This involves PBMs paying pharmacies, including independent long-term care pharmacies, substantially less than they receive from state Medicaid programs to administer prescription drug benefits. PBMs then pocket the difference.
Initially prompted by Senate Finance Committee Chairman Charles Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.) seeking more information from the Department of Health and Human Services Inspector General on Medicaid spread pricing, a growing number of states have investigated the scheme. Kentucky, Ohio, Pennsylvania and New York are among the growing number of states to complete such analyses. Across the board, they’ve concluded that by employing spread pricing tactics, PBMs and Medicaid Managed Care Organizations are overcharging state governments and paying pharmacies inadequately.
CMS and key federal lawmakers have acted decisively in a bipartisan, thoughtful manner to curtail this wanton abuse of taxpayers, in general, and low-income consumers, in particular. It is now time to direct scrutiny at the Medicare side of the spread pricing ledger.
There is little question the same PBM spread pricing practices we’ve seen in Medicaid are pervasive throughout the commercial and Medicare markets. This results in increased costs for elderly consumers and hinders the ability of independent LTC pharmacies to compete in the pharmacy marketplace. A comparable level of scrutiny, public accountability and data release are the logical next steps.
Under current law, PBMs are required to report Medicare spread pricing data to CMS. However, the law prevents the agency from sharing specific details with the public.
We believe CMS should release this information publicly in “summary form” to help optimize transparency and to help determine the true extent of PBMs’ spread pricing abuse across all federal health care payment programs. This is plain common sense, as failure to spotlight the truth surrounding PBMs’ Medicare abuses has the potential to create access and cost problems for consumers, undermine free and fair competition, and jeopardize small and local business owners’ ongoing economic viability.
More broadly — from a business standpoint — monopolistic prescription drug plan and PBM conglomerates pay affiliated (commonly owned) pharmacies differently from unaffiliated (independent) pharmacies. Payment differentials vary based on the corporate objectives of the PDP/PBMs and exploit undue concentration across related markets like insurance, benefits management, and retail, mail-order, specialty and LTC pharmacies.
Policymakers have yet to address the anticonsumer, anticompetitive impact of PDP/PBM spread pricing across the entire Medicare, Medicaid and commercial market landscape, and the need is there. In the final analysis, a comprehensive “spread pricing” solution requires disclosure and evaluation across all markets to end abusive spread pricing and undue use of disproportionate market power to benefit just pharmacies that share common ownership with PBMs — to the detriment of independent competitors and the principles embodied in our free-market system.
Alan G. Rosenbloom is president and CEO of Senior Care Pharmacy Coalition, the only national organization exclusively representing the interests of LTC pharmacies.
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