At Corner Drug Hometown Pharmacy in Baraboo, owner Janet Fritsch said she loses $40 when she dispenses Orencia, an injection for rheumatoid arthritis, to some patients. For the generic form of Vyvanse, for attention deficit hyperactivity disorder, her loss is $200.
Thad Schumacher, owner of Fitchburg Family Pharmacy, said his reimbursements were less than his drug purchase costs for 23% of prescriptions in a recent six-month period, for a loss of $100,000.
“I don’t see how you can fill negative-margin scripts forever and stay in business,” Schumacher said.
Fritsch, Schumacher and other pharmacists say the low payments come from pharmacy benefit managers, or PBMs, which act as brokers between drug makers, insurers and pharmacies, some of which they own. The companies help determine which drugs people take, where they get them and how much they pay.
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A bill to regulate PBMs in Wisconsin would reduce drug costs by limiting the money PBMs get from the drug supply chain, according to supporters, including pharmacists, patient groups, doctors, clinics and drug companies. But employer groups, insurers and PBMs oppose the measure, saying it would drive up costs by restricting their ability to negotiate drug discounts and control drug use.
“Drug spending in Wisconsin will soar,” said Sean Stephenson, state affairs director for the Pharmaceutical Care Management Association, which represents PBMs.
The bipartisan bill targets an obscure but ubiquitous sector of health care that the Federal Trade Commission is investigating, Congress is looking to reform and the Biden administration is trying to limit. The Wisconsin bill, parts of which have been adopted in other states, would expand on a 2021 state law that requires PBMs to be licensed and curtails some of their practices.
As television ads illustrate, drug companies blame PBMs for restricting patient access to drugs, while PBMs and insurers blame drug makers for high prices. Nationwide, drug spending went from $372 billion in 2013 to $603 billion in 2022, according to IQVIA, a consultant that studies the industry.
The three largest PBMs control about 80% of the market and are parts of conglomerates that include insurance companies and pharmacies. CVS Caremark is owned by CVS Health, which includes Aetna. OptumRx is part of UnitedHealth Group, and Express Scripts is owned by Cigna.
Madison-based Navitus, owned by SSM Health and Costco, is a smaller PBM that has more than 600,000 members in Wisconsin, including state employees.
The state’s 2021 law requires PBMs to report rebates from drug manufacturers and the percentage they keep. It prohibits their contracts from including gag clauses preventing pharmacists from telling patients they can sometimes save money by paying for drugs without using insurance. It requires advance notice of changes to drug lists allowed by insurers and sets basic parameters for PBM audits of pharmacies, done through contracts to prevent fraud and abuse.
“These provisions were a start, but to be blunt, they actually did little to protect patients,” state Rep. Michael Schraa, R-Oshkosh, lead Assembly sponsor of the new bill, said at a public hearing in December.
Sen. Mary Felzkowski, R-Tomahawk, the other lead sponsor, said “some of the practices and tactics” of PBMs “have caused significantly more harm to our health care ecosystem than the savings they generate.”
Felzkowski said she’s worried about the viability of independent pharmacies that many people in her rural district rely on. Wisconsin has 254 independent pharmacies, down from 374 a decade ago, according to the National Community Pharmacists Association. The state has a total of 856 pharmacies, including those in chains and at large retail stores, down from 918 in 2014.
Payments and fees
The bill, introduced in November, would require PBMs to pay pharmacies for at least their cost of acquiring drugs. If payments are less, pharmacies could refuse to fill prescriptions. Any pharmacy would be eligible to be in a PBM network, and incentives such as lower copays couldn't be used to steer patients to certain pharmacies, such as mail-order or specialty pharmacies owned by PBMs.
Dispensing fees to pharmacies, to cover overhead costs, would have to match those provided by the state’s Medicaid program, which are $10.51 per prescription at high-volume stores and $15.69 per prescription at low-volume stores. PBMs say their average fee is $2.
PBMs would have to pay safety-net providers who get deeply discounted drugs, such as Madison-based Access Community Health Centers and the HIV services organization Vivent Health, the same rates as other pharmacies. Approved drug lists couldn’t be changed mid-year and PBMs would have to act in a health plan’s best interest. Audits, which pharmacists say are sometimes predatory, would be further restricted.
The bill incorporates another measure, introduced in March, that would let patients apply coupons and other financial assistance from drug companies toward their annual deductibles and out-of-pocket limits, which some insurers and PBMs don't allow.
“Countless patients with chronic and complex conditions that require specialty medications depend on copay assistance to access life-saving treatments and manage their health,” said Rob Gunderman, CEO of the Coalition of Wisconsin Aging and Health Groups.
Wisconsin Manufacturers and Commerce is among several business groups opposing the bill, saying that for PBMs to help employers manage drug costs, they “must be free to work in the marketplace without unnecessary government regulation.”
Insurance groups — including one representing Madison-area Dean Health Plan, Quartz and Group Health Cooperative of South Central Wisconsin — said the bill “will do nothing to address the root causes of high drug costs, and will only serve to hamstring payer efforts to provide affordable access to prescription drugs.”
Brent Eberle, chief pharmacy officer at Navitus, said the bill would raise costs for its members by more than $110 million a year, in part by removing pressure on pharmacies to negotiate low drug purchase prices from wholesalers.
Eberle and others representing PBMs and insurers said drug company copay coupons mask the true cost of expensive drugs, enabling drug makers to keep prices high. That's why PMBs and insurers say they don't want to count the assistance toward deductibles.
“The manufacturers aren’t doing this out of the goodness of their heart,” Eberle said. “They’re adding that copay assistance back into the cost of the product.”
Pharmacy challenges
Schumacher, the pharmacist in Fitchburg, said PBMs especially create challenges when reimbursements are below cost for drugs that are in short supply, which has been the case with obesity drugs such as Ozempic, Wegovy and Mounjaro.
Small pharmacies sometimes have those drugs on hand when chains don’t because of streamlined ordering, he said. That draws customers who want to fill just those prescriptions and not others on which the pharmacies make money. Under their contracts, the pharmacies can’t say no, leaving patients unaware of the underlying problem.
“The PBMs are insulated,” he said. “There won’t be a push on them to change anything until the consumer pushes back on their employer, and their employer pushes back on insurance, and insurance pushes back on the PBM.”
Fritsch, board chair of the Pharmacy Society of Wisconsin, said PBM incentives or requirements for people to use mail-order pharmacies cause confused patients to come to her with questions about how to take drugs they got through the mail, even though she didn’t fill the prescriptions.
Such in-person, one-on-one counseling will go away if independent pharmacies continue to close, she said.
“If PBMs don’t have to answer to anyone, if they can do whatever they want, all we’ll be left with is the pharmacies run by PBMs,” Fritsch said. “The rest of us won’t be able to compete.”
Editor’s note: This story has been updated to correct the nationwide drug spending amount in 2022.
A bill to regulate pharmacy benefit managers in Wisconsin would reduce drug costs by limiting the money PBMs get from the drug supply chain, according to supporters.