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Pharmacy firms reject audit findings

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Pharmacy benefit managers in Pennsylvania are calling unfounded a report alleging that they are using their position as private subcontractors with the state to shroud unfair business practices.

The report, released last week by state Auditor General Eugene DePasquale, said the state's four pharmacy benefit managers need to operate with more transparency, stronger government oversight and more uniformity in how they reimburse pharmacies.

Pharmacy benefit managers or PBMs, act as middlemen in the pharmaceutical market, leveraging their buying power with drug companies to bring savings to insurers. PBMs work as subcontractors to health care providers that contract with the state to serve Medicaid enrollees.

In his audit investigating PBMs and their work with state Medicaid insurers, DePasquale criticized the state's four PBMs – ESI, CVS Caremark, PerformRx and OptumRx Inc. The report was based on testimony from independent pharmacists, industry representatives and representatives from national PBMs. 

"Prescription drug costs continue to rise, despite the wave of less-expensive, generic drugs that are now available," DePasquale said. "Pharmacy benefit managers have ballooned in the shadows of the marketplace, drawing in skyrocketing profits while flexing increasing control over who may access which prescription medications."

Two of the PBMs, CVS Caremark and PerformRx, rejected the criticisms but said they shared the goal of lowering drug prices.

"We applaud Auditor General DePasquale’s interest in health care in Pennsylvania. PerformRx is committed to ensuring that Pennsylvanians get the right care at the right time. Our company has demonstrated this focus in the way we do business in Pennsylvania," the company wrote in a statement. "PerformRx has delivered high-quality, cost-effective pharmacy benefit management services since 1999. Our model has always been about transparency and quality. Our holistic approach to pharmacy benefit management has a proven record in reducing overall health care cost while improving outcomes and enhancing the health experience of our clients’ members."

DePasquale’s report, however, argues that PBMs have expanded beyond their role as administrators for prescription drugs to create preferred drug lists detailing what prescriptions are covered. Payment for medication not covered through a PBM can be denied and, according to testimony cited in the report, that practice could get in the way of doctors trying to provide care.

PBMs can shield from the public their decisions on which medications to cover, their reimbursement to community pharmacies compared to pharmacies with which they are affiliated, and the total amount of business they do in a year, according to the report.

A lack of state and federal oversight was also cited as a problem.

The Department of Human Services regulates contracts with health providers, also known as managed care organizations, which in turn contract with PBMs. In a statement, the department said it cannot regulate contracts between PBMs and the pharmacies they work with.

In its statement, the department noted that it had received a number of complaints from independent pharmacies claiming that payments for pharmaceuticals to members of managed care organizations were not adequate.

“The department investigated every complaint, and we found no evidence of managed care organization non-compliance with the terms and conditions of their agreements with DHS,” the department wrote.

DePasquale also said that during interviews with state pharmacists, he had been told that some PBMs utilize gag rules that keep pharmacists from telling patients they are overpaying for prescription drugs.

"That’s not only patently anti-consumer, it’s so egregious that even the White House has spoken out against gag rules,” DePasquale said.

Another point in the report is that PBMs in Pennsylvania do not adequately reimburse locally owned pharmacies. 

In its response to the report, CVS Caremark, said that it has always worked to bring down drug costs for its clients and patients, has never applied gag rules and is not to blame for rising drug prices.

"CVS Caremark does not engage - and has never engaged - in the practice of placing gag rules on our network pharmacies that would prevent them from informing a patient about a lower cash price for a drug," the statement said, also noting that any increase in drug costs are the fault of drug companies.

ESI and OptumRx were not available for comment as of press time.

DePasquale concluded the report with a list of 10 recommendations to remedy the problems found in the audit. They include passing legislation to ban gag rules and having the state directly manage its Medicaid prescription drug benefits.

The following story was edited on Dec. 18 to include responses from the state Department of Health.

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Ioannis Pashakis

Ioannis Pashakis

Ioannis Pashakis covers health care and Lancaster County. Email him at ipashakis@cpbj.com.

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