Bill to stop ‘shenanigans’ of Medicaid drug middlemen moves unanimously to House; sponsor says bill is first of its kind in U.S.

Sen. Max Wise presents Senate Bill 50 Photo by LRC Public Information
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By Melissa Patrick
Kentucky Health News

FRANKFORT, Ky. — A bill to address payment issues between middlemen known as pharmacy benefit managers and pharmacists who fill drugs for Kentuckians on Medicaid passed the Senate unanimously Feb. 20.

PBMs act as middlemen between insurance and drug companies; they determine what drugs are offered, how much someone pays for the drug, and the payments to pharmacists.

Currently, each of the state’s five Medicaid managed-care firms contracts with a PBM to manage the state’s $1.7 billion-a-year prescription drug business. A revised version of Senate Bill 50, sponsored by Sen. Max Wise, R-Campbellsville, would require the state to hire a single PBM.

Kentucky lawmakers have been working on the PBMs’ “shenanigans,” as Wise called them, for years, with little headway.

This bill furthers those efforts with measures to combat billing practices that Kentucky pharmacists have long said are so unfair that they are putting some of the state’s pharmacies out of business.

Wise said one such pharmacy was Sacramento Pharmacy in McLean County, noting that Gregg Henry, a pharmacist and the store’s owner, had reached out to him many times over the past year about this issue.

Henry told Renee Beasley Jones of the Owensboro Messenger-Inquirer that he was closing his store after seven years because of the low reimbursements paid by the PBMs, which started in 2017. He said he lost $5,000 in January alone because of recent cuts.

“This little bitty pharmacy in this little bitty community stood up,” Henry told Jones in reference to at least two years of fighting against the PBMs. “I hope the Sacramento Pharmacy is able to put a face on SB 50. And I hope our martyrdom creates a wake-up call about the absolute necessity for the passage of this legislation.”

SB 50 addresses several PBM practices that have hurt Kentucky pharmacies.

For example, it would prohibit the state PBM from requiring Medicaid recipients to get specialty drugs from a pharmacy that is owned or operated by the PBM; require the PBM to pay the managed-care firm the actual discounted pharmacy price negotiated with the pharmacy network, or “pass-through pricing;” prohibit spread pricing, in which a PBM keeps the difference between what it bills Medicaid for medications and what it pays the pharmacy to dispense the drug; and prohibit a whole list of fees.

“This doesn’t just fix the problem. This fixes a social injustice that has been cast upon pharmacists throughout the state,” Sen. Stephen Meredith, R-Leitchfield, told the Senate.

Wise’s original bill called for a complete carve-out of pharmacy from the Medicaid program, which would have gotten rid of the PBMs in Medicaid managed care altogether.

That brought a backlash from the Kentucky Hospital Association, the Kentucky Association of Health Plans and the Kentucky Primary Care Association, which includes federally qualified health centers; all said a carve-out would hurt a federal drug-discount program known as 340B — the savings from which allows safety-net hospitals and community health centers to expand health programs to the communities they serve.

Sen. Stan Humphries, R-Cadiz, told the Senate that in southwestern Kentucky, “The loss of the 340B drug program would be detrimental to the point of closing doors for some rural hospitals.”

After much negotiation and collaboration with stakeholders, including the Cabinet for Health and Family Services, Wise said the bill protects both pharmacies and the 340B program, and is supported by the lobbying groups.

The bill also establishes a single preferred drug list, or formulary, to be used by each managed-care firm, instead of each one having its own separate list; and puts the state Department for Medicaid Services in charge of the reimbursement methodologies, including dispensing fees. An emergency clause would cause it to take effect immediately, so the state PBM will be in place when the new managed-care contracts begin on Jan. 1, 2021.

“We’re going to be the first state in the country that is going to do something like this,” Wise told Kentucky Health News. “There are going to be a lot of eyes on Kentucky.”

Rosemary Smith of the Kentucky Independent Pharmacist Alliance, which represents 500 independent pharmacists, told Kentucky Health News that it supports the bill.

“We are very much in favor of this compromise,” she said. “It’s not perfect, but it’s a step in the right direction and we know we’re going to get to where we need to be. . . . This bill will allow us to stay open.”

Smith said she and her husband have been forced to close two of their drug stores because of PBMs’ low reimbursement rates. They own Jordan Drug pharmacies in Eastern Kentucky.

The Kentucky Pharmacists Association “supports the intent of Senate Bill 50 as amended and is glad the focus can now return to PBMs’ bad actions,” it said in a statement. “We thank Sen. Max Wise for his steadfast efforts to hold PBMs accountable and protect community pharmacies and their patients across the commonwealth.”

CVS Health, an affiliate of the drugstore chain, which holds most of the state’s current PBM business in contracts with manged-care firms, criticized the bill, Deborah Yetter reports for the Louisville Courier-Journal.

“The latest version of SB 50 would be a step backwards for Kentucky’s most vulnerable citizens by fragmenting care coordination and adding additional administrative and financial burden on the commonwealth,” a spokesman told Yetter. “Access to high-value, clinically-appropriate care for Kentuckians is a key priority for CVS Health — and we look forward to working with legislators to ensure it’s delivered sustainably.”