Pa. pharmacists say more reform is needed to stem closures

On Wednesday, a bipartisan group of state senators heard from pharmacy owners about the impacts of pharmacy benefit manager reforms and what can still be done to stop pharmacies across the commonwealth from closing.

”It’s very telling to me that we have a caucus here of folks from rural and urban areas, Republican and Democrat, and we’re coming to you in desperation,” said Sen. Judy Ward (R-Blair), Republican chair of the Senate Community Pharmacy Caucus.

One of the pharmacists sharing her experiences was Chichi Momah, the CEO and founder of Springfield Pharmacy in Delaware County.

Aside from filling prescriptions and administering vaccines, Momah’s business does tests for diseases like RSV and strep, provides special packaging for patients with memory issues, makes house calls to disabled patients, and regularly advises patients on a host of health issues — services that are especially important since the closure of nearby Crozer Medical Center and Taylor Hospital.

“Our work is hands-on. It’s constant and it is deeply personal,” Momah said.

Yet Momah said her pharmacy is struggling, and she’s often shifting funds around to keep all the pieces of her business afloat.

“We are exhausted,” she said. “We’re stretched thin and doing everything possible to serve patients with the very little resources we have.”

And the experience is not entirely unique.

According to the Senate Community Pharmacy Caucus’ Democratic chair, Lisa Boscola (D-Northampton), around 600 pharmacies in Pennsylvania — often on the front lines of community health care — have closed in the last two years. Pharmacy owners and trade groups lay the blame largely on pharmaceutical industry middlemen known as pharmacy benefit managers, or PBMs.

PBMs are companies hired by insurance providers to handle the prescription side of health insurance plans. When an insured patient picks up a script, paying only a co-pay if anything, it’s the PBM that reimburses the pharmacist on behalf of their insurance plan.

But the companies have come under scrutiny from both state lawmakers and federal regulators. Critics say they’ve contributed to the rising cost of drugs and driven down pharmacy’s bottom lines, leading to a wave of closures around the country.

One of the primary issues raised by pharmacists is the slowly dwindling reimbursement rates they receive for drugs they dispensed to covered patients. In some cases, what they receive from PBMs fails to cover the cost of stocking and dispensing the prescription.

The three largest PBMs in the country, CVS Caremark, Express Scripts and Optum Rx, are estimated to represent roughly 80% of all health care plans. Pharmacists say that leaves them stuck with the option of accepting the reimbursement rates they offer or potentially losing all customers covered by them.

Greg Lopes, a spokesperson for the Pharmaceutical Care Management Association, a Washington, D.C.-based trade group representing many of the nation’s largest PBMs, said, “PBMs recognize that pharmacies are critical to providing patients access to get their prescriptions. That’s why PBMs are supporting community pharmacies in Pennsylvania through programs that increase payments for dispensing drugs.”

Last year, Pennsylvania lawmakers passed a law to rein in PBMs and give state regulators tools to block certain practices community pharmacists said were driving them out of business. But on Wednesday, pharmacists said the measures weren’t enough to stop their stores from closing.

“Act 77 is limited in scope,” said Victoria Elliott, CEO of the Pennsylvania Pharmacists Association, a trade group representing independent and small chain pharmacies across the state. “If that were expanded, we might not be having this conversation.” 

While the law banned certain practices criticized as anti-competitive — such as PBMs funneling patients toward preferred pharmacies that are often owned by the same parent company — it did not require the middlemen to reimburse pharmacies at higher rates.

According to state Insurance Commissioner Michael Humphreys, while he expects the law to help struggling pharmacies, he said it only applies to PBMs contracted for commercial healthcare plans written in Pennsylvania. That’s roughly a quarter of plans in the commonwealth.

And some parts of the law have yet to kick in.

“We realized the delayed effect dates for Act 77 have caused confusion and frustration as Pennsylvania community pharmacies are struggling and in need of assistance,” Humphreys said.

But the hearing focused primarily on the role of prescriptions filled through Medicaid, a health insurance program run by the state, which accounts for around 11% of all prescriptions in the commonwealth.

Federal law makes it difficult to regulate many commercial health insurance plans on the state level. But lawmakers and administration officials could theoretically take action to change the practices of PBMs hired to administer prescription benefits through Medicaid.

The state Department of Human Services hires managed care organizations (MCOs) to administer Medicaid benefits. Those companies in turn hire PBMs to handle prescription benefits and reimburse pharmacies.

When a PBM reimburses a pharmacy for a prescription picked up by a Medicaid patient, pharmacists receive a sum based on both the cost of the drug itself and a dispensing fee intended to cover the costs like bottles and printed labels.

But pharmacists told lawmakers that, in some cases, the dispensing fees are as low as $1 or $3, causing particular strain for pharmacies in areas with high rates of Medicaid enrollment. 

In some cases, reimbursement rates don’t cover what the pharmacy paid for the drug. Deron Schultz, CEO of Minnich’s Pharmacy in York, said that he regularly loses money dispensing Biktarvy, a brand name HIV medication that he called a matter of “life or death” for his patients. He also listed other, more common drugs like certain blood pressure and cholesterol medications, depending on the PBM reimbursing him.

Pharmacy trade groups believe the low reimbursement rates violate at least the spirit of the contract that Medicaid MCOs sign with the state’s Department of Human Services. That contract states pharmacy reimbursements must accurately reflect the cost of a drug and “the pharmacist’s professional services and cost to dispense the prescription.”

Val Arkoosh, secretary of the Pennsylvania Department of Human Services, testified her agency is unable to see whether or not a pharmacy profits when it dispenses drugs to Medicaid patients, but does know how much the managed care organization and PBM pay them and their rationale for doing so. 

Moreover, Arkoosh stressed that her department created a grievance process for pharmacists if they believe they’re being treated unfairly by PBM’s contracted with MCOs providing Medicaid services.

“[The Pennsylvania Pharmacists Association] had the opportunity to review the draft agreement language,” Arkoosh said. “DHS received comments and several changes were incorporated into the agreement based on those.”

Lawmakers also asked panelists about the possibility of moving Pennsylvania’s Medicaid plans to what’s called a “single PBM” system. 

That’s what states like Ohio and Kentucky did when facing similar issues.

Instead of allowing MCOs to hire PBMs to handle prescription benefits, those states now hire a single PBM to act more as an administrator across their Medicaid plans. That’s allowed those states to set terms like reimbursement rates for pharmacies to ensure they aren’t losing money dispensing prescriptions.

According to reports, the move has not only helped pharmacies in those states, but saved taxpayers’ millions of dollars.

Arkoosh, however, urged some caution in using those reports as an indication of what could happen if Pennsylvania did the same. She said because the commonwealth has regulated the middlemen in ways those states hadn’t when they switched to a single PBM model for Medicaid, it’s unlikely the state would see the same level of savings.

However, she said there may still be merit and that DHS is looking into the possibility.

“That may be the right policy decision for a whole host of other reasons, but I’m not sure it’s going to save the commonwealth money,” she said. “We are deep in that analysis”

Testifying pharmacists, meanwhile, also brought up the possibility of requiring PBMs administering Medicaid plans to pay a minimum dispensing fee of around $10 for every prescription filled, on top of a reimbursement for the cost of the drug itself.

Ultimately, lawmakers said they will continue to look at the issues.

“This is an issue that we’re really going to stay focused on,” Ward said. “We will continue to have these meetings.”

The Community Pharmacy Caucus is bipartisan, as was support for last year’s effort to regulate PBMs