December 13, 2022
By: Dwayne Page
Leveling the playing field!
Many independent pharmacies here and across the state are happy about new laws adopted in 2021 and earlier this year by the Tennessee Legislature and signed by the Governor intended to level the playing field somewhat between independent pharmacies and the larger chains by ensuring adequate compensation for all in obtaining and dispensing medication products. Proponents of the new law say it gives customers more access to their pharmacy of choice and allows smaller pharmacies to better compete.
The new Pharmacy Benefit Manager (PBM) Reform bill was adopted by the State House 82-9 and 32-0 in the State Senate.
State Senator Mark Pody said he likes the new law.
“I wanted to help any way we could to give more of a free market and more choices for our individual patients, clients, and constituents,” he said.
A Pharmacy Benefit Manager (PBM) is a third-party administrator of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans. According to the American Pharmacists Association, “PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims.” PBMs operate inside of integrated healthcare systems, as part of retail pharmacies and as part of insurance companies.
“There are a few companies that control about 80% of all pharmacies in going through how they are to be billed, etc. and some actually own their own pharmacies. They negotiate with employers and insurance companies and actually steer clients and customer to their pharmacies.,” said Senator Pody. “This bill levels the playing field and says that any pharmacy that wants to equal the same price that others are willing to pay, they are automatically accepted into the network. This will help employers, patients, and everybody lower their costs of prescriptions and make it a little more competitive for some of our independent pharmacies so that their customers don’t have to go to a big chain store if they don’t want to,” said State Senator Pody.
“For example, lets say if it cost $50 to fill a prescription by one of the PBM pharmacies or one of their own private stores, independent pharmacists willing to bill the same amount or even less have been cut out of participating in the network. Customers under that system were forced to go to the pharmacies with which the PBM had negotiated. This new law means that any independent pharmacy, even if its just one store will have the same opportunity as larger stores,” added Pody.
“No one should be forced to use a healthcare provider not of their own choosing. One of the terms used now in healthcare is “quality of care”, and these PBM practices simply do not support a high quality of care for patients,” said local pharmacist Susannah Cripps Daughtry.
It is important to note that any laws enacted in Tennessee, or any other state cannot be enforced on federally funded programs, such as Medicare-D Plans.
In a prepared statement, a local independent pharmacist said “PBMs were created as middlemen to reduce administrative costs for insurers, to validate a patient’s eligibility, administer plan benefits, and negotiate costs between pharmacies and health plans. Overtime, PBMs have been allowed to operate virtually unchecked. A lack of transparency in PBM practices has led several states to implement legislation to try to level the playing field for pharmacies and patients”.
“PBMs have an outsized role in the pharmacy supply chain,” the statement continued. “PBMs determine which pharmacies will be included in a prescription drug plan’s network. These networks often limit patient choice by excluding pharmacies that may be willing to accept the contractual terms if given the opportunity to participate. This may be acceptable to PBMs, but not to the patients who rely on meaningful access. PBMs also decide how much patients will pay for their prescriptions and how much pharmacies will be paid for their goods and services. Some PBMs incentivize plan sponsors to require plan beneficiaries to use a mail order pharmacy or a retail pharmacy usually owned and operated by the PBM”.
According to the local independent pharmacist, PBMs also “determine which pharmacies patients may choose by creating provider networks, determine which drugs patients can be prescribed by creating drug formularies, and determine how much patients pay at the pharmacy counter for their medications. As one government investigation found, with their unique position in the pharmacy supply chain, PBMs often employ controversial utilization and management tools to generate revenue for themselves in a way that is detrimental to patients, pharmacies, and health plan sponsors. The nontransparent nature of the traditional PBM business model can often lead to patients paying more out of their pockets for prescription medications, but PBMs work hard to convince patients otherwise,” said the local pharmacist.
“One such tool is ‘patient steering’ in which a PBM will require a patient to either use a particular pharmacy, usually a subsidiary of the PBM, or utilize mail order pharmacy services in order to receive their pharmacy benefits. This means patient access and community pharmacy reimbursements for medications dispensed are determined by their competitors, restricting those pharmacies’ abilities to compete for customers. This anti-competitive practice allows PBMs to avoid competition with independently owned community pharmacies for patients’ business. This practice also allows the PBMs to usurp a patient’s authority to make his or her own healthcare decisions. It forces patients to make healthcare decisions based on the insurer or PBMs bottom line instead of the patient’s own best interests,” said the local pharmacist.
“Independent community pharmacies are rooted in the communities where they are located and are among America’s most accessible healthcare providers,” the statement continued.
In 2018, the local pharmacist said the top three PBMs controlled approximately 77% of the market. At that time, CVS Caremark, the PBM owned by CVS Health, covered nearly 34% of insured patient lives across the United States.
According to the Tennessee Pharmacists Association, summary points of the new Tennessee law include:
Medication Product Reimbursement
Following the proper appeals process, PBMs shall reimburse contracted pharmacies no less than the actual cost for a prescription drug or device.
The reimbursement appeals process of a PBM must be approved by the Tennessee Department of Commerce and Insurance.
If a pharmacy wins an appeal, the PBM must reimburse the proper rate within 7 days and the PBM must pay or waive the cost of any transaction fee to reverse and rebill the claim.
If a pharmacy loses an appeal, the PBM must demonstrate where a pharmacy can obtain the product currently in stock at a price that is less than the challenged rate within 7 days. If the PBM cannot produce this information, they must reimburse at the actual cost of the pharmacy.
This does not apply to TennCare.
Professional Dispensing Fee
PBMs shall pay a professional dispensing fee at a rate not less than the current TennCare dispensing fee IF…the pharmacy would qualify for an enhanced dispensing fee for low-volume pharmacies (currently at $11.98), which is currently defined by TennCare standards as less than 65,000 prescriptions per year.
The TDCI is authorized to promulgate rules to properly enact this provision. TPA has already been in communication with various third-party payers to determine a proper verification for an enhanced dispensing fee to a pharmacy, which is a question already raised by PBMs.
Patient Access to Pharmacy of Choice & Anti-Steerage Provisions
PBMs cannot interfere with the right of a patient to choose a contracted pharmacy, nor offer financial or other incentives to utilize a pharmacy owned by or financially beneficial to the PBM or covered entity.
PBMs must allow pharmacies the opportunity to be in-network if they are licensed in the state AND are willing to accept the same terms and conditions for at least one of their networks in the state.
PBMs cannot prevent a pharmacy from participating in a preferred or non-preferred network of pharmacies.
PBMs cannot charge patients different co-payments or provide any inducement or financial incentives for using any pharmacy within a given network.
Definitions
Clarification for ‘covered entity’ – includes plans governed by the Employee Retirement Income Security Act of 1974 (ERISA), while excluding Medicare Part D plans.
Role of the Tennessee Department of Commerce and Insurance:
The TDCI will institute external appeals process for any appeal denied by a PBM.
There is clear determination that this law applies to ERISA plans.
Any violations of this law can be clearly enforced by the department.