FTC Sues Major PBMs for Unfair Practices Affecting Drug Costs
Pharmacy Benefit Managers (PBMs) have long been influential yet often obscure intermediaries in pharmaceutical pricing and distribution. They negotiate drug prices with manufacturers, develop formularies for health plans, and manage pharmacy networks. Today, the three largest—CVS Caremark, Express Scripts, and OptumRx—control about 80% of the market.
On September 20, 2024, the Federal Trade Commission (FTC) filed an administrative complaint against these major PBMs and their affiliated group purchasing organizations (GPOs). The complaint alleges that they engaged in anticompetitive and unfair rebating practices, artificially inflating insulin prices and impairing access to lower-cost alternatives.
The FTC's action marks a critical juncture in the struggle for fair drug pricing and access, emphasizing the need for robust enforcement and comprehensive PBM reform. The outcome could reshape the healthcare industry and significantly impact care across the United States.
The FTC's Case Against PBMs
The FTC alleges that PBMs have engaged in anticompetitive and unfair rebating practices that have artificially inflated the list prices of insulin and other essential medications. Grounded in Section 5 of the Federal Trade Commission Act, which prohibits unfair competition and deceptive practices, the FTC asserts that PBMs' rebate strategies and patient steering harm consumers and competition.
For example, the list price of Humalog, a widely used insulin product, increased from $21 in 1999 to over $274 in 2017—a rise of more than 1,200%. The FTC argues that this dramatic inflation is linked to PBMs' "chase-the-rebate" strategy, where they demand larger rebates from manufacturers in exchange for favorable formulary placement.
Another key aspect of the complaint focuses on patient steering practices. The FTC alleges that PBMs have systematically excluded lower-cost insulin alternatives from their formularies in favor of higher-priced options that generate larger rebates. This practice limits choice and forces many to pay more out-of-pocket for their medications.
Rahul Rao, Deputy Director of the FTC's Bureau of Competition, emphasized: "Millions of Americans with diabetes need insulin to survive, yet for many of these vulnerable patients, their insulin drug costs have skyrocketed over the past decade thanks in part to powerful PBMs and their greed."
The FTC seeks to fundamentally change how PBMs operate. The complaint aims to prohibit PBMs from excluding or disadvantaging lower-cost versions of drugs, prevent them from accepting compensation based on a drug's list price, and stop them from designing benefit plans that base out-of-pocket costs on inflated list prices rather than net costs.
FTC Chair Lina Khan stated, "The FTC's administrative action seeks to put an end to the Big Three PBMs' exploitative conduct and marks an important step in fixing a broken system—a fix that could ripple beyond the insulin market and restore healthy competition to drive down drug prices for consumers."
Impact on People Living with HIV
While the FTC's case primarily focuses on insulin pricing, PBM practices significantly affect people living with HIV (PLWH) and other chronic conditions. Recent cases highlight the challenges faced in accessing affordable medications due to PBM and insurer practices.
In April 2024, CVS Health failed in its latest attempt to dismiss a class action lawsuit alleging discrimination against PLWH by requiring them to receive medications via mail order, limiting access to essential pharmacy services and counseling. U.S. District Judge Edward Chen noted that CVS was on notice that this program could likely discriminate against PLWH, as plaintiffs had repeatedly requested to opt out.
In another case, the U.S. Department of Health and Human Services Office for Civil Rights (OCR) closed a complaint without penalties against Blue Cross Blue Shield of North Carolina (BCBS NC) after the insurer lowered the pricing tier for HIV medications. The original complaint alleged that BCBS NC had placed almost all HIV antiretroviral medications, including generics, on the highest-cost prescription tiers.
While BCBS NC changed its formulary, the lack of penalties raises concerns about enforcement and accountability. Carl Schmid, executive director of the HIV+Hepatitis Policy Institute, expressed disappointment: "It was incredibly disheartening and deeply concerning to see them let the state's largest insurer get away with such blatant discrimination."
These cases illustrate how PBM practices and insurer policies create significant barriers to care for people living with HIV. High out-of-pocket costs, restricted pharmacy access, and discriminatory formulary designs can lead to medication non-adherence, resulting in adverse health outcomes and increased healthcare costs in the long term.
In North Carolina, about 37,000 people are living with HIV, with Black people representing 58% of new HIV diagnoses despite being only 22% of the state's population. Nationally, according to the Centers for Disease Control and Prevention (CDC), approximately 1.2 million people in the United States are living with HIV. PBM practices that inflate drug costs or limit access exacerbate these disparities and hinder efforts to end the HIV epidemic.
PBM Practices Under Scrutiny
The FTC's complaint has brought controversial PBM practices into sharp focus, highlighting concerns long raised by patients, healthcare providers, and policymakers.
The FTC's interim staff report reveals that PBMs often prioritize higher rebates over lower net prices, leading to exclusion of lower-cost alternatives and driving up drug prices—a practice known as "rebate walls." Patient steering directs consumers to PBM-owned pharmacies, limiting choice and disadvantaging independent pharmacies.
A Congressional hearing in July 2024 further exposed these issues. PBM executives faced tough questioning about their role in rising prescription drug costs. Lawmakers pressed the executives on how PBMs have monopolized the pharmaceutical marketplace and pushed anticompetitive policies that undermine local pharmacies and harm patients.
Representative Virginia Foxx (R-N.C.) highlighted the lack of transparency, questioning PBM executives about the pass-through of rebates and fees to plan sponsors. The executives' responses did little to clarify the complex and opaque financial flows within the PBM industry.
PBMs defend their practices as necessary for managing drug costs. Phil Blando, Executive Director for Corporate Communications at CVS Caremark, stated, "We work to negotiate the lowest net cost for drugs... driving better health outcomes and lower out-of-pocket costs for consumers." However, critics argue that these claimed benefits are not reflected in patient experiences or overall drug pricing trends.
Real-World Impact on Patients and Pharmacies
Jeremy G. Counts, PharmD, a spokesperson for Pharmacists United for Truth and Transparency (PUTT), explains that the vertical integration of the Big Three PBMs allows them to limit access through restrictive networks, under-reimbursement, and aggressive patient steering. These practices harm independent pharmacies and jeopardize health by disrupting continuity of care.
Restrictive Networks and Steering: PBMs often require patients to use their own pharmacies, frequently through mail order, misleading them into believing they have no other options. Even when plans allow the use of independent pharmacies, PBMs make it tedious to opt out, effectively limiting choice.
Under-Reimbursement and Clawbacks: Independent pharmacies that serve patients despite low reimbursements face financial strain. PBMs may pay below cost or use fees and recoupment methods to claw back margins, forcing some pharmacies to turn away patients.
Barriers to Medication Access: PBMs impose onerous prior authorization processes for medications that do not provide them with high rebates, delaying care and increasing costs. Counts notes that this has become a deadly issue in oncology care.
Aggressive Patient Pursuit: For profitable medications, PBMs aggressively pursue patients and their prescriptions, sometimes transferring prescriptions without permission or shipping medications without their knowledge.
These practices not only harm independent pharmacies but also jeopardize health by disrupting access to necessary medications.
Healthcare consultant Rita Numerof calls the FTC's investigation a "pivotal moment" in reforming the industry to serve patients' best interests.
The Need for Enforcement
The lack of punitive action in cases like the BCBS NC complaint raises concerns about the effectiveness of current enforcement mechanisms. Carl Schmid of the HIV+Hepatitis Policy Institute pointed out, "Without action to improve federal and state regulation, oversight, and enforcement, such discriminatory practices will continue." The BCBS NC case demonstrates that while policy changes can be achieved through advocacy and complaints, there is often little consequence for discriminatory practices.
Counts emphasizes that "PBMs are masters at derailing legislative attempts to rein them in." He argues that FTC enforcement is critical, as PBMs often ignore laws unless compelled to comply. Counts asserts that attacking the problem from multiple fronts is essential, and FTC action provides immediate and targeted intervention.
PBM Response and Industry Perspective
In response to mounting scrutiny, PBM executives have defended their practices. During the July 2024 Congressional hearing, leaders from CVS Caremark, Express Scripts, and OptumRx maintained that they do not engage in patient steering or discriminatory practices. They argued that PBMs play a crucial role in negotiating lower drug prices and improving healthcare affordability.
David Joyner, president of CVS Caremark, stated, "We're making health care more affordable and accessible for the millions of people we serve every day."
However, these assertions have been met with skepticism. The House Committee on Oversight and Accountability, led by Chairman James Comer (R-Ky.), has accused PBM executives of making statements that contradict findings about self-benefitting practices.
Legislative Efforts: The Pharmacists Fight Back Act
In addition to regulatory actions by the FTC, legislative initiatives are crucial for comprehensive reform. The Pharmacists Fight Back Act (H.R. 9096), introduced by Representatives Jake Auchincloss (D-MA) and Diana Harshbarger (R-TN), aims to:
Establish Standard Pharmacy Reimbursement:
Proposes a reimbursement model based on the National Average Drug Acquisition Cost (NADAC) plus a state dispensing fee and an additional 2%. This model prevents underpayment to independent pharmacies and curbs price gouging by PBM-owned pharmacies.
Prohibit Predatory PBM Tactics:
Seeks to ban practices such as steering patients to PBM-owned pharmacies, exclusionary network designs, retroactive fees, spread pricing, and reimbursement clawbacks.
Mandate Rebate Transparency and Application:
Requires that 80% of all PBM-negotiated rebates and fees reduce patients' out-of-pocket costs, with the remaining 20% lowering insurance premiums.
Counts stresses the urgency of passing this legislation to save pharmacies and reduce drug pricing: "Its immediate passage is critical to stopping the pharmacy closure and drug pricing crisis in this country."
Potential Outcomes and Industry Impact
If successful, the FTC's action could reshape the pharmaceutical industry by forcing PBMs to prioritize lower net drug prices, benefiting patients with more affordable medications and increased pharmacy choice. A ruling against PBMs could set a legal precedent, opening the door for further regulatory action or private lawsuits against PBMs and other healthcare intermediaries.
Independent pharmacies stand to benefit considerably from potential reforms. If the FTC's action results in more transparent pricing practices and limitations on patient steering, these businesses may be better able to compete with PBM-owned pharmacies.
However, given PBMs' significant resources and influence, changes may be hard-fought and take time to implement. There is the possibility that PBMs may find new ways to maintain their market position and profitability.
Impact on Independent Pharmacies
Independent pharmacies are closing at an alarming rate—nine per day, with 2,275 closures so far in 2024. This trend reduces access to personalized care and diminishes competition, further consolidating PBMs' market power.
Counts conducted a study in Virginia, matching pharmacy closures against openings using data from the Virginia Board of Pharmacy. He found that "community pharmacies are closing at twice the rate they are opening, and this rate is accelerating." Without significant reform, including FTC enforcement and the passage of H.R. 9096, the pharmacy infrastructure in the United States will continue to erode.
Conclusion and Call to Action
The FTC's actions, along with legislative efforts like the Pharmacists Fight Back Act, are critical steps toward creating a fairer pharmaceutical industry that prioritizes access and affordability.
We urge readers to:
Stay Informed: Follow developments in PBM regulation and reform efforts.
Research Legislation: Contact your representatives to inquire about pending legislation.
Engage with Advocacy Groups: Support organizations like PUTT (www.truthrx.org) and the HIV+Hepatitis Policy Institute (www.hivhep.org).
Share Experiences: Raise awareness by sharing your experiences with PBM practices. PUTT is collecting stories to highlight the real-world impact of PBM practices. Visit their PBM Horror Stories page to share your story anonymously.
Collective action is essential to ensure meaningful and lasting change in drug pricing and access. The FTC's action is a significant step, but it's up to all of us to ensure this momentum leads to a more transparent, equitable, and patient-centered healthcare system in the United States.
Dire Consequences of the Change Healthcare Cyberattack
On February 21, 2024, the healthcare sector faced a seismic disruption when Change Healthcare, a cornerstone in the healthcare data exchange ecosystem, fell victim to a sophisticated cyberattack. Orchestrated by the notorious ransomware group known as ALPHV/Blackcat, this attack not only compromised the integrity of Change Healthcare's systems but also sent shockwaves across the entire healthcare landscape, affecting providers, insurers, and patients alike. Change Healthcare, now part of Optum under the umbrella of UnitedHealth Group thanks to a controversial $13 billon dollar acquisition, plays a central role in processing medical claims, verifying insurance eligibility, and facilitating electronic prescriptions for as many as half of all claims processed in the U.S. The immediate fallout from this cyberattack has spotlighted the fragility of our interconnected healthcare infrastructure and raised urgent questions about cybersecurity, patient care continuity, and the broader implications of healthcare consolidation.
As of March 6, 2024, the situation surrounding the Change Healthcare cyberattack remains critical. UnitedHealth Group has made strides in implementing workarounds and temporary solutions to restore some level of functionality to pharmacy, claims, and payment systems. While progress in providing temporary solutions is a positive development, the absence of a definitive timetable for fully restoring all affected services continues to pose significant challenges for providers, independent pharmacies, and patients alike. The financial strain on these entities persists, compounded by UnitedHealth Group's continued collection of patient premiums amidst the outage. With UnitedHealth Group's net worth standing at $433,790,000,000, the contrast between the corporation's financial standing and the ongoing struggles within the healthcare sector is stark, underscoring the urgent need for a comprehensive resolution to this unprecedented crisis.
Direct Impact on Patient Access and Care
The cyberattack on Change Healthcare has not only disrupted the healthcare data exchange ecosystem but has also led to significant patient distress and financial uncertainty. This crisis has been further compounded by the emergence of potential litigation from patients left to grapple with whether insurance will cover their treatments or medications. Patients, regardless of their plan type, are finding themselves at a heightened risk of incurring unexpected bills, exacerbating the already dire situation.
Take, for instance, the experience of Mara Furlich. Battling escalating Covid-19 symptoms and unable to get her claim processed due to the cyberattack, Furlich was forced to pay $1,600 out of pocket for Paxlovid. Similarly, one of the Community Access National Network’s (CANN) very own board members was confronted with a balance bill of over $2,000 from CVS Specialty Pharmacy for HIV medication when their Patient Assistance Program benefits were unable to be processed, illustrating the financial and access barriers erected by the cyberattack. This scenario, emblematic of the difficulties in processing Patient Assistance Programs (PAPs), underscores the significant disruptions to medication access, especially critical for managing chronic conditions.
Jen Laws, President & CEO of CANN, articulates the broader ramifications for people living with HIV (PLWH). "We've been in contact with our partners, including funders, to raise the concern around maintaining continuous access to care for PLWH, regardless of their payor," Jen states. "The reality is patients need to be aware their pharmacies, providers, and labs may be struggling to communicate and deliver timely service because of the sheer breadth of Change's reach."
This incident, alongside the litigation threats reported by Axios, underscores the acute disruptions to medication access and the financial jeopardy faced by patients. Kathy Oubre, CEO of Pontchartrain Cancer Center in Louisiana, shares similar concerns, noting the center has had to dispense drugs at risk due to the benefits verification process being down, leaving providers and patients "flying blind."
These developments signal a critical juncture in the healthcare sector's response to the cyberattack, highlighting the urgent need for systemic solutions to restore patient access to care and address the financial uncertainties exacerbated by this crisis.
The Role and Response of UnitedHealth Group
UnitedHealth Group found itself at the heart of this crisis. The conglomerate's response has been a blend of damage control and strategic measures aimed at mitigating the fallout. UnitedHealth Group's acknowledgment of the cyberattack was swift, with public assurances of their commitment to rectify the situation and restore full services. Part of their response has been the launch of a temporary financial assistance program, as outlined on UnitedHealth Group's website. This program, offering interest-free loans to affected healthcare providers, has been promoted as a means to ease the financial burden wrought by the cyberattack, facilitating the recovery of disrupted cash flows and delayed payments.
Yet, this initiative has not been universally welcomed. Criticism from the American Hospital Association (AHA) and other healthcare stakeholders has been vocal, with many decrying the financial assistance terms as burdensome, highlighting the disconnect between UnitedHealth's proposed solutions and the actual needs of the healthcare providers struggling in the cyberattack's aftermath.
The plight of Dr. Christine Meyer's primary care practice in Exton, PA, as reported by The New York Times, exemplifies the dire straits many healthcare providers find themselves in due to the cyberattack on Change Healthcare. Dr. Meyer's account of resorting to mailing "hundreds and hundreds" of pages of Medicare claims highlights the drastic measures providers are forced to take to navigate the bureaucratic maze in the absence of functional digital systems. The stark reality of having to consider cuts to essential services, like vaccine supplies, to conserve cash underscores the severity of the situation. Through Optum’s temporary funding assistance program, Dr. Meyer said she received a loan of $4,000, compared with the roughly half-million dollars she typically submits through Change. “That is less than 1 percent of my monthly claims and, adding insult to injury, the notice came with this big red font that said, you have to pay all of this back when this is resolved,” Dr. Meyer said. “It is all a joke.”
Moreover, UnitedHealth Group's continued collection of patient premiums amidst this turmoil has sparked further controversy, raising ethical questions about corporate responsibility versus profitability during a healthcare crisis. UnitedHealth Group's role in this crisis and its response to the cyberattack highlight the complex interplay between healthcare infrastructure, corporate governance, and patient care. As the healthcare sector navigates the aftermath of the cyberattack, the actions taken by UnitedHealth Group will likely continue to be a focal point for analysis and discussion, underscoring the need for robust, patient-centered solutions in the face of unprecedented challenges.
ADAPs and PAPs: Navigating the Cyberattack Crisis
The cyberattack has exposed the vulnerabilities of essential healthcare support systems, notably AIDS Drug Assistance Programs (ADAPs) and Patient Assistance Programs (PAPs). These programs, a critical safety net for providing vulnerable populations with access to necessary medications, have faced significant challenges in maintaining their operations amidst the cyberattack's disruptions.
In response, NASTAD issued guidance to ADAP administrators in an email, indicating that, due to delays in prescription fills caused by the outage, programs might need to temporarily cover medication costs directly, later seeking reimbursement from pharmacies. This measure, while ensuring that ADAP remains the 'payer of last resort,' highlights the operational and financial complexities these programs are navigating to keep access to care uninterrupted.
The repercussions of the cyberattack go beyond operational disruptions, threatening the very fabric of the healthcare safety net. The interim 'full pay' solution underscores the delicate balance between ensuring immediate access to medications and the long-term sustainability of these programs.
Amidst this crisis, the collective action of healthcare stakeholders is imperative. The NASTAD memo not only outlines immediate actions for ADAP administrators but also calls for widespread support to uphold these critical programs, encouraging ready communication to case managers and patients regarding the situation, status updates, and navigating alternative access to care as needed. As the sector continues to address the fallout from the cyberattack, the adaptability and resilience of ADAPs and PAPs are paramount in ensuring continuous care for those who depend on them most.
Reassessing Healthcare's "Too Big to Fail" Doctrine
This unprecedented disruption of critical services has exposed serious vulnerabilities associated with the healthcare sector's consolidation, particularly following UnitedHealth Group's acquisition of Change Healthcare. This event has reignited the debate over the "too big to fail" concept within healthcare, a concern that the Federal Trade Commission (FTC) had previously filed suit over due to potential risks of market dominance and a centralized point of failure.
The FTC's apprehensions about the merger highlighted fears of creating an overly centralized healthcare data exchange ecosystem, susceptible to significant disruptions from single points of failure. These theoretical concerns have been realized in the wake of the cyberattack, illustrating the tangible systemic risks of such consolidation. The incident underscores the precarious balance between efficiency gains through consolidation and the increased risk of widespread service disruptions. It should also seriously call into question prioritizing corporate profits and shareholder value over patient care and access.
The U.S. Department of Justice's recent launch of an antitrust investigation into UnitedHealth Group, as reported by The Wall Street Journal, adds a new layer to the ongoing debate. This investigation, focusing on UnitedHealth's expansive reach across the healthcare sector and its potential effects on competition and consumer choice, signals a critical moment in the U.S. government's efforts to address monopolistic consolidation practices within the healthcare industry.
Furthermore, the disproportionate impact on smaller entities, such as independent pharmacies and patient assistance programs, underlines the broader implications of healthcare consolidation. These challenges highlight the need for a healthcare infrastructure that values diversity and decentralization, fostering resilience against such cyber threats.
In light of the antitrust investigation and the fallout from the cyberattack, there's a pressing need for a comprehensive reassessment of healthcare consolidation trends. Strategic regulatory oversight, significant investments in cybersecurity, and comprehensive contingency planning are essential to mitigate the "too big to fail" risks. The healthcare system's integrity, resilience, and commitment to patient care in an increasingly digital age demand a vigilant approach to ensuring that consolidation does not compromise the sector's ability to serve the public effectively.
Call for Policy Intervention and Sector-wide Reforms
The cyberattack on Change Healthcare has catalyzed a unified call for urgent policy interventions and comprehensive sector-wide reforms from leading healthcare organizations, including the American Hospital Association (AHA) and the Medical Group Management Association (MGMA). These calls to action emphasize the critical need to fortify cybersecurity defenses, guarantee equitable patient access to care, and critically evaluate the prevailing trends of healthcare consolidation that have left the sector vulnerable.
The AHA has been at the forefront, advocating for robust support to help healthcare providers weather the storm caused by the cyberattack. Their public statement underscores the profound operational and financial challenges healthcare providers are facing, urging for greater flexibility from payers and governmental intervention to alleviate the crisis's immediate impacts.
Echoing this sentiment, the MGMA has highlighted the dire circumstances medical groups are navigating, as detailed in their communication to HHS Secretary Xavier Becerra. The association's plea for comprehensive support from the Department of Health and Human Services (HHS) reflects the broader necessity for guidance, financial aid, and regulatory leniency to ensure the sustainability of medical practices during these turbulent times.
Both organizations also spotlight the broader issue of healthcare consolidation, critiquing the increased centralization of healthcare services as a significant factor exacerbating the cyberattack's impact. This consolidation not only poses heightened cybersecurity risks but also threatens the diversity and resilience of the healthcare ecosystem. In response, there's a pressing demand for policy reforms that address both the immediate cybersecurity vulnerabilities and the long-term implications of healthcare consolidation, aiming to cultivate a more robust, diverse, and equitable healthcare system.
Urgent Calls to Action:
UnitedHealth Group must significantly expand its financial assistance program to offer real relief to the affected healthcare providers, pharmacies, and patients, ensuring the aid is substantial and derived from its vast resources, not at the expense of American taxpayers.
Regulatory bodies, including the FTC, must critically assess healthcare consolidation's impact, implementing measures to mitigate the risks of such centralization and prevent future vulnerabilities.
A united front of healthcare providers, associations, and advocacy groups is essential to demand accountability and transparency from UnitedHealth Group and similar entities, ensuring commitments to cybersecurity and continuity of care are upheld.
Legislators and policymakers are called upon to enact stringent cybersecurity regulations for the healthcare sector, emphasizing the need for comprehensive security protocols, consistent audits, and effective contingency planning.
A broader dialogue on healthcare consolidation's future is necessary, advocating for a healthcare model that prioritizes patient welfare, system resilience, and equitable access above corporate profitability.
In the wake of the Change Healthcare cyberattack, the path forward requires not just immediate remedial actions but also a deep, systemic reevaluation of the healthcare sector's structure and policies. It's time for decisive action and meaningful reform to ensure a secure, resilient healthcare system that serves the needs of all patients, safeguarding against future crises and fostering a healthcare environment where patient care is paramount.
Ripple Effect: How PBMs and Counterfeit Drugs Threaten Patients
The infiltration of counterfeit drugs into the legitimate pharmaceutical supply chain poses a significant risk to patient health and safety, particularly for those living with HIV. While counterfeit drugs are nothing new, the criminals threatening our safety have a surprising new ally: Pharmacy Benefit Managers (PBMs). A report by the Partnership for Safe Medicines unveils how criminal entities exploit vulnerabilities in the supply chain, made worse by PBMs, whose reimbursement policies often leave pharmacies on the edge of financial viability.
The fight against HIV/AIDS is significantly hindered by the infiltration of counterfeit medications into the pharmaceutical supply chain, an issue that transcends mere regulatory challenges or financial losses. It directly impacts the health and safety of people living with HIV (PLWH), undermining the global effort to manage and eventually End the HIV Epidemic.
A striking example of the severity of this issue is the investigation conducted by Gilead Sciences Inc., which was extensively covered by The Wall Street Journal. This investigation uncovered that over two years, a staggering 85,247 counterfeit bottles of Gilead's HIV medications Biktarvy and Descovy, valued at more than $250 million, had been distributed within pharmacies. These counterfeit products, the result of sophisticated criminal networks exploiting supply chain vulnerabilities, ranged from being filled with harmless over-the-counter painkillers to dangerous antipsychotic drugs, posing significant health risks to unsuspecting patients. “Harmless” is relatively qualified here because when PLWH are not receiving necessary antiretroviral medications, conditions can develop quickly with deadly consequences, medication resistance can bloom, and new transmissions can occur.
The presence of counterfeit medications not only endangers the lives of PLWH but also severely erodes trust within communities, particularly those that are already marginalized and financially strained. The breach in the supply chain security caused by these counterfeit drugs highlights a critical public health issue that demands immediate and concerted action from all sectors involved in healthcare delivery.
Addressing the Challenges Posed by Pharmacy Benefit Managers and Under-Reimbursement
PBMs are at the heart of growing scrutiny for practices exacerbating healthcare system challenges, notably impacting the economic viability of pharmacies, and facilitating the entry of counterfeit drugs into the supply chain.
Their primary role is to negotiate drug prices and manage prescription drug benefits on behalf of health insurers, under the guise of controlling costs and streamline the prescription process. The reality is, PBMs do not necessarily pass on “savings” to patients or plan sponsors and have, in truth, become a self-dealing entity working hard to maximize the profits of insurance company shareholders. PBMs often implement reimbursement policies that pay pharmacies less than the actual cost of acquiring and dispensing medications when those pharmacies are not owned by the PBM itself. This under-reimbursement pressures pharmacies, especially independent ones, to find ways to sustain their operations amidst shrinking margins. In other instances, PBMs offer higher reimbursement rates to their mail-order pharmacy and work hard to steer patients away from independent pharmacies.
This economic squeeze leads to a consequential gap in the market: the demand for medications that the legitimate supply chain cannot adequately supply at the prices set by PBMs. Counterfeiters exploit this gap, introducing fake or substandard medications into the supply chain and offering the fakes at a lower acquisition cost than legitimate wholesalers. The cycle perpetuated by PBM under-reimbursement practices not only undermines the financial stability of pharmacies but also compromises patient safety. Pharmacies, caught in the vise of financial pressures, may unknowingly procure medications from less reputable sources, inadvertently becoming conduits for counterfeit drugs. This situation is exacerbated in rural and underserved communities, where pharmacies are often the sole healthcare providers, making the impact of counterfeit medications even more devastating. These counterfeit drugs find their way into pharmacies struggling to balance financial viability with the provision of quality care. The allure of lower cost options in the face of under-reimbursement makes these counterfeit products dangerously appealing for pharmacists seeking to meet patient needs.
The financial strain on independent pharmacies due to PBM policies is further highlighted by the National Community Pharmacists Association's (NCPA) support for a class action lawsuit against Express Scripts. This legal action accuses Express Scripts and several smaller PBMs of colluding to manipulate reimbursement rates and impose higher fees on pharmacies, further squeezing their financial resources and compromising their ability to provide quality services.
American Pharmacy Cooperative, Inc. (APCI)'s initiative to engage Vanguard Inc., a significant investor in the conglomerates owning the "Big 3" PBMs, exemplifies the urgent need for systemic reform. This effort, celebrated by Pharmacists United for Truth & Transparency (PUTT), emphasizes the necessity of reforms that ensure transparency, fair reimbursement, and ethical conduct to safeguard the pharmaceutical supply chain.
Prescription Drug Affordability Boards (PDABs) and Their Impact
Prescription Drug Affordability Boards (PDABs) are quickly gaining popularity among states, being sold as an attempt to make healthcare more affordable. These boards, armed with the authority to scrutinize and cap drug prices, aim to shield the public from the soaring costs of essential medications. However, there's concern that these actions might limit access to medications for marginalized communities and create more challenges for pharmacies.
A recent webinar hosted by the National Minority Quality Forum (NMQF) brought to light the challenges PDABs face in balancing drug affordability with healthcare equity. Jen Laws, President and CEO of the Community Access National Network (CANN), voiced a critical perspective, highlighting the limitations of PDABs' current toolkit, which primarily revolves around setting upper payment limits. Laws pointed out, "The only tool that the PDABs have been provided is an upper payment limit, and they are not being encouraged to explore other tools or learn how to make investments into issues of health equity and access. When we take money out of systems, the people not represented lose out first." Few of these boards have patients appointed to them. This insight underscores the complexity of ensuring drug affordability does not come at the expense of access, particularly for those in marginalized communities.
Echoing this sentiment, Gretchen C. Wartman, Vice President for Policy and Program and Director of the Institute for Equity in Health Policy and Practice at NMQF, emphasized the need for PDABs to broaden their approach. "We must pursue efforts to ensure that PDABs are improving access to medicines, rather than constraining that access in the interest of financial risk mitigation," Wartman stated, advocating for a more holistic strategy that aligns drug affordability with comprehensive access to care.
The discussions surrounding PDABs, particularly highlighted in the NMQF webinar and our CANN blog, reveal a critical need for a nuanced approach to drug affordability that doesn't inadvertently compromise access or exacerbate vulnerabilities in the pharmaceutical supply chain. By focusing narrowly on upper payment limits (UPLs) as a primary tool for cost containment, there's a real risk of creating gaps in the medication supply that counterfeiters could exploit, further endangering patient safety and public health. This scenario underscores the importance of developing comprehensive strategies that not only address the immediate issue of drug costs but also consider the broader implications for healthcare equity, pharmacy viability, and the integrity of the medication supply chain. Policymakers and stakeholders must work collaboratively to ensure that efforts to control drug prices do not inadvertently introduce new risks, particularly for marginalized communities and the pharmacies that serve them.
A Legislative Response: The Florida Prescription Drug Reform Act
The Florida Prescription Drug Reform Act stands as a major legislative response to the pressing issues within the pharmaceutical supply chain, particularly addressing the detrimental practices of Pharmacy Benefit Managers (PBMs) that contribute to pharmacy under-reimbursement and indirectly foster an environment ripe for counterfeit drugs.
Focused Provisions:
Regulating PBM Operations: The Act mandates PBMs to obtain a certificate of authority, introducing a layer of accountability and transparency previously absent. This requirement aims to scrutinize and regulate PBM practices more closely, ensuring they operate in a manner that supports rather than undermines pharmacy financial stability.
Prohibiting Harmful Practices: Specifically targeting practices that have strained pharmacies, the Act prohibits PBMs from engaging in retroactive fee recoupments and spread pricing strategies. Such practices have historically placed pharmacies in precarious financial positions, making the supply chain vulnerable to counterfeit medications as pharmacies seek cost-saving measures.
Ensuring Fair Reimbursement: By enforcing a pass-through pricing model, the Act ensures that pharmacies are reimbursed the actual cost paid by the health plan to the PBM for medications. This approach directly addresses the issue of under-reimbursement, reducing the financial pressures that can lead pharmacies to inadvertently engage with dubious suppliers.
Implications for Supply Chain Security:
These targeted reforms within the Florida Prescription Drug Reform Act are designed to directly impact the economic pressures pharmacies face due to PBM policies. By ensuring more equitable and transparent reimbursement practices, the Act mitigates one of the key factors that have made the pharmaceutical supply chain susceptible to counterfeit drugs. It represents a significant step towards safeguarding pharmacies from the financial instability that can compromise patient safety and healthcare integrity.
In essence, the Act provides a comprehensive framework for other states and federal entities to consider, highlighting the importance of addressing PBM practices as a critical component of enhancing supply chain security and protecting patient health.
Advocating for Change: Strategic Policy Reforms and Mobilization
The challenges posed by PBMs, PDABs, and drug affordability impact not just the healthcare industry and policymakers but directly affect patients seeking affordable, safe medications. This underscores the urgency for a unified advocacy movement towards systemic reform. Drawing on the initiatives of groups like PUTT and APCI, as well as the framework set by Florida's Prescription Drug Reform Act, we have a clear path to advocate for transparency, equity, and patient access across healthcare.
Calls to Advocacy
Broadened Engagement with Policymakers, Investors, and the Public: Advocacy efforts must expand to encompass not just policymakers but also investors and the broader public. Echoing APCI’s engagement with Vanguard Inc., it's critical to advocate for investor responsibility in healthcare practices. Moreover, by leveraging the legislative model of Florida's Prescription Drug Reform Act, advocates can champion similar transparency and regulatory measures nationwide. This expanded advocacy should also include a focus on ensuring PDABs operate with a mandate that balances drug affordability with the need for access to innovative treatments.
Unified Support for Legislative and Regulatory Reforms: Stakeholders are encouraged to unite in supporting and proposing legislative initiatives that tackle the foundational issues of PBM reform and the effective operation of PDABs. Advocacy should push for laws that not only enhance drug pricing transparency and regulate PBM reimbursement rates but also ensure PDABs do not inadvertently limit access to essential medications for marginalized communities.
Active Participation in Rulemaking Processes with Strategic Alliances: Stakeholders should actively participate in the rulemaking process, forming strategic alliances to influence the regulations governing PBMs and PDABs. This collective action is vital in shaping policies that promote fair reimbursement practices, safeguard pharmacy access, and ensure PDABs contribute positively to healthcare equity.
Comprehensive Educational Campaigns to Foster Awareness and Action: Initiating educational campaigns that explain the roles and impacts of PBMs and PDABs in the healthcare system is essential. By incorporating success stories from state and federal legislative achievements and insights from advocacy efforts, these campaigns can underscore the benefits of reform for pharmacies, patients, and the healthcare system at large. The goal is to inform the public, inspire support for reform efforts, and motivate active participation in advocacy initiatives.
The path toward meaningful reform in pharmacy benefit management, drug pricing, and the equitable implementation of PDABs is fraught with challenges. Yet, the successes achieved in regions like Florida provide hope that meaningful reform is possible. By rallying for targeted policy reforms and engaging in proactive advocacy, we can drive systemic changes that ensure the pharmaceutical supply chain operates with transparency, equity, and a steadfast commitment to patient health. Together, we have the power to reshape the landscape of drug affordability and access, guaranteeing that all people receive the comprehensive care and medications they deserve.
Eye on 2024: Federal Action on PBMs, 340B, and Telehealth
2024 stands as a pivotal year in federal healthcare policy, potentially overshadowed by a highly contentious and partisan political landscape during an election year. The backdrop includes ongoing budget fights, looming cuts threatening vital healthcare programs, and a shifting balance of power in Congress thanks to at least one member being removed from office and a couple of high-profile resignations, further complicating the path to meaningful bipartisan legislation. Amidst this chaos, key focus areas such as reforms related to Pharmacy Benefit Managers (PBMs) and the 340B Drug Pricing Program, as well as telehealth expansion are at the forefront of potentially significant policy shifts, all while renewed attacks on the Affordable Care Act (ACA) add to the uncertainty of healthcare reform in an election year.
Pharmacy Benefit Managers: Pushing for Transparency and Market Reform
PBMs have come under increasing scrutiny in the U.S. healthcare system, particularly regarding their role in prescription drug pricing. Dominated by just three key players, PBMs face criticism for opaque pricing models and practices that may contribute to rising drug costs. The Lower Costs More Transparency Act of 2023 represents a bipartisan effort to enhance transparency in PBM operations, requiring detailed disclosure of pricing and costs. The future of this legislation depends on whether the Senate will adopt the House version or introduce its own bill, with several Senate committees recently advancing similar proposals.
Experts, including those from the Brookings Institution, caution that while increased transparency is a positive step, it may only modestly impact overall drug costs. The effectiveness of these reforms hinges on addressing the complex relationships among PBMs, drug manufacturers, insurers, and healthcare providers.
The current PBM model, often criticized for incentivizing high drug list prices through 'spread pricing,' is under review. Proposed reforms, like those in the Pharmacy Benefit Manager Reform Act, aim to eliminate spread pricing and ensure that rebates and savings directly benefit plan sponsors and patients.
Additionally, the PBM market's consolidation and “vertical integration” (or self-dealing by another name) raises concerns about market power and its influence on drug pricing. With a few firms controlling a significant market share, PBMs' market power could lead to disproportionate profits, underscoring the need for regulatory measures to ensure fair pricing and competition.
As the healthcare community navigates these reforms, the focus remains on ensuring that changes in PBM operations directly benefit patients, especially those in underserved communities disproportionately affected by high drug costs.
340B Program: Addressing Challenges for Future Reforms
The 340B Drug Pricing Program, essential for providing discounted drugs to healthcare providers serving underserved communities, is at a critical juncture. Facing legal challenges and calls for reform, 340B is under scrutiny, particularly regarding its operational complexities and the definition of a 340B-eligible patient. This definition, crucial in determining who accesses discounted drugs, has been a point of contention, with legal interpretations suggesting a need for broader inclusivity, as noted in Bloomberg Law's analysis.
Advocates, including those supporting people living with HIV, recognize the program's significant impact but seek more direct patient benefits, a sentiment echoed in CANN's blog. The current model's effectiveness in providing direct patient benefits, such as reduced drug prices, is being questioned.
Efforts for greater transparency and accountability are intensifying, with state-level initiatives aiming to ensure that program savings directly benefit patients, especially those with financial barriers to medication access, as highlighted in Avalere's insights. State authority to regulate 340B, however, is still in question as Arkansas and Louisiana face lawsuits around recently passed legislation.
Amidst these challenges, 340B's commitment to aiding underserved communities remains paramount. Collaborative efforts among lawmakers, healthcare providers, and patient advocacy groups are crucial to reform the program, ensuring it continues to provide equitable access to care and addresses key issues like medical debt.
Telehealth: A Defining Year in 2024
2024 is set to be a defining year for telehealth, a sector transformed by the COVID-19 pandemic. This year will witness crucial legislative decisions that could shape the future of access to telehealth services.
At the forefront are policy decisions regarding Medicare reimbursement flexibilities for telehealth, as noted in Modern Healthcare's article. Set to expire in 2024, these flexibilities are vital for the continued viability of telehealth, particularly benefiting small practices and those in rural or underserved areas.
Another key development is the anticipated update to remote prescribing rules for controlled substances. The decisions made will crucially balance the need for accessible care with the regulation of controlled substances, impacting how telehealth can be used for medication prescribing.
As 2024 unfolds, the healthcare community faces the challenge of navigating these legislative and policy changes to maximize the benefits of telehealth in patient care and access.
Budget Battles: Critical Healthcare Advocacy Amid Congressional Challenges
The intense budget battles in Congress, underscored by proposed cuts in the House L-HHS Appropriations Bill (H.R. 5894), are central to healthcare advocacy. These cuts, amounting to $767 million, pose a significant threat to essential HIV/AIDS programs, risking the reversal of years of progress in treatment and care. These programs are not just healthcare initiatives; they are vital lifelines providing necessary medications and support to individuals living with HIV.
The Coalition on Human Needs has expressed grave concerns about potential severe cuts to non-defense discretionary appropriations (NDD) for fiscal year 2024, which could drastically impact a range of vital services. In their sign-on letter to Congressional leaders, they warn that these cuts, potentially up to 9% according to the Center on Budget and Policy Priorities, would significantly harm programs essential for public health, education, environmental protection, and more, affecting diverse communities across America. The Coalition advocates for completing the FY24 appropriations process with a bipartisan approach, emphasizing the need to protect these crucial investments that support the nation's most vulnerable populations and uphold the commitment to public health and welfare.
Any major legislative changes will be at the mercy of presidential election year politics, and the congressional balance of power will only make it harder. Issues like PBM reform, or 340B reform, and Telehealth expansion will probably receive a lot of attention via hearings and news clippings, but legislative action remains in doubt.