States vs. PBMs at the Supreme Court: What’s at Stake for Patients

Earlier this month, the state of Arkansas and the trade association for pharmacy benefit management companies faced off in the U.S. Supreme Court over whether states have the authority to regulate PBMs.

For the layperson, the complex legal discussion could have obscured the fact that this is a bloody battle for the soul of pharmacy, as well as for the ability of state governments to cultivate health care accessibility and control costs within their borders. Pharmacists across the country and attorneys general from almost every state are rooting for Arkansas, because PBMs are doing serious damage to patients and the health care system. They need to be reined in. 

At the center of the debate is an Arkansas law, passed in 2015, which seeks to curb the pricing practices of PBMs, which have laid waste to pharmacies across the state, eliminated local jobs and impeded patients’ access to health care in many communities. By extension, it could also determine whether any state has the right to control similar practices. 

In theory, health insurers hire PBMs to manage their pharmacy benefits and secure the best prices for medications. Pharmacies must contract with the PBMs – not the health plans – to provide medications to patients. The rub is that through their pricing formulas, PBMs can exploit their excess power and lack of accountability to reimburse pharmacies for prescriptions at rates that are well below what the pharmacy pays to purchase them. 

Perhaps worst of all, recent investigations and audits across the country have exposed that while PBMs have been undercutting local pharmacy providers on prescriptions, they’ve also been turning to state Medicaid programs, employers and other plan sponsors, and charging much higher rates for those same prescriptions. These opaque practices cost business owners and taxpayers billions – all while driving local providers out of business.

Thousands of pharmacies across the country have closed in recent years because of this impossible economic dynamic. Three PBMs control nearly 80 percent of the market – which means those three Fortune 25 companies stand between an overwhelming percentage of patients and their local pharmacist. The impact on pharmacy providers has been significant. 

PBMs have been shown to provide higher reimbursements to pharmacies owned by their parent companies, and while overpaying their own pharmacies, PBMs have been working to prevent patients from filling those prescriptions at the pharmacy of their choosing. That’s called steering, and it’s simply unfair and anti-competitive.

Why should people care – aside from those unfortunate pharmacy owners? Because it’s also bad for patients, which is why Arkansas and most other states are trying to do something about it. 

Patients, including seniors in the taxpayer-funded Medicare Part D program, are paying more for their prescriptions. That extra money they are paying is going straight into the PBM’s pockets. The United States is the only country in the world that has handed the management of prescription drugs to these corporate intermediaries. Not coincidentally, U.S. consumers pay the highest drug prices in the world.

Patients are also losing their trusted and accessible health care providers – a terrible thing during any time, let alone during the worst pandemic in a century. Pharmacists are irreplaceable members of the patient’s entire health care team. Patients are deprived of the ability to get advice and counsel on their medications from a highly trained licensed professional in their community and of their own choosing, a professional who is the health care system’s foremost expert on medications. 

Pharmacies also provide routine vaccinations and screen for high blood pressure and diabetes – usually without an appointment. They’re essential and easy to reach. These clinical services are things that the mail order enterprises can’t do – and won’t – and are thankfully not controlled by PBMs.

PBMs and their apologists say if Arkansas wins, interstate chaos will follow. That’s fear-mongering, and it’s nonsense. They also say it will lead to higher prices, which is unsupported by credible evidence. 

Let’s be clear – unregulated PBMs are almost wholly unaccountable for what they do. What other health care sector enjoys that privileged status? It’s unwarranted. Given their unbridled power to adversely impact the health of our citizens, it should not be allowed to continue.

The outcome of the case may well turn on a matter of law – whether a specific federal statute prohibits Arkansas from doing what it reasonably seeks to accomplish. But if the merits of Arkansas’ motives carry weight, then a ruling in its favor would simply be the right thing to do. 

A decision is expected in the spring of next year.

Scott J. Knoer is executive vice president and CEO of the American Pharmacist Association, representing pharmacists in all sectors of pharmacy.

B. Douglas Hoey is CEO of the National Community Pharmacy association, representing independent community pharmacies.

John Vinson is CEO of the Arkansas Pharmacists Associations, representing pharmacists in the state of Arkansas.

Rebecca Snead is executive vice president of the National Alliance of State Pharmacy Associations, representing state pharmacy associations and other stakeholder organizations.

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