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From billionaire Mark Cuban to independent store owners, criticism for pharmacy benefit managers is plentiful

At first glance, billionaire entrepreneur Mark Cuban may seem to have little in common with an independent pharmacy owner.

But they have one shared adversary: pharmacy benefit managers. They claim the drug price negotiators are putting mom-and-pop drugstores out of business.

Pharmacy benefit managers — known as PBMs — are third-­party intermediaries between drug manufacturers and insurance providers. PBMs reimburse pharmacies for the prescriptions customers buy with insurance, but independent pharmacy owners accuse them of reimbursing far less than the actual cost of medications.

As local pharmacies, like the soon-to-be-shuttered Mainline Pharmacy chain, have struggled and even collapsed, many have blamed PBMs for their woes.

“It’s awful what is happening with independent pharmacies,” Cuban told TribLive via email.

A Mt. Lebanon native, Cuban is best known as minority owner of the NBA franchise Dallas Mavericks and as one of the stars on the ABC reality series “Shark Tank.” He’s also one of the founders of Cost Plus Drugs, an online discount pharmacy.

Cost Plus, he says, is joining the fight against PBMs by partnering with independent pharmacies to pay them more for filling prescriptions. Cuban is advocating for brand manufacturers to pay pharmacies directly every time they fill a prescription.

“The fact that they are not getting reimbursed for even their out-of-pocket costs for a medication is horrible,” Cuban said. “The fact that a PBM can come in and charge them incremental fees is even worse.”

Cuban and local independent pharmacists aren’t the only ones fighting what they see as unfair practices by PBMs. New bipartisan legislation in the Pennsylvania Senate, sponsored by Blair County Republican Judy Ward, Philadelphia Democrat Christine Tartaglione and numerous other lawmakers, would put regulations on PBMs and give pharmacies a route for airing their grievances.

“My local community pharmacies, I have several of them and quite a few in my district, and since I’ve been elected nine years ago, I’ve been hearing about this issue. It’s just gotten worse and worse,” Ward said. “This is cutting off a lifeline for people in rural communities. … It’s very important to the people I represent to keep these pharmacies going.”

Legislative steps

According to Ward, Senate Bill 1000 directs the state insurance department to develop a process for hearing and resolving pharmacy complaints about PBMs.

It also would ban certain practices in PBM contracts, including “patient steering,” in which a pharmacy benefit manager directs a patient to use a preferred pharmacy by approving only certain pharmacies. Another prohibited practice would be “spread pricing,” in which PBMs reimburse a pharmacy for a prescription and then bill an insurer or an employer that provides health insurance a higher price for the same prescription.

PBMs also would have to report the amount of rebates and payments they get from drug manufacturers, as well as how they distribute them.

Ward said the bill, currently in the Health and Human Services Committee, was based on Tennessee legislation signed into law in May 2022.

“We’re up to 30 senators, bipartisan, who’ve signed on. This tells you it’s a huge problem,” Ward said. “I think the pharmacists have realized that something needs to happen legislatively to help them.”

Lawmakers also received input from the Pennsylvania Pharmacists Association, a trade group, to fit the bill to Pennsylvania, she said.

“PBMs currently have little oversight at the state level and engage in a number of practices that have direct negative impacts on pharmacies and patients themselves,” said Diane Powell, spokesperson for the Pennsylvania Pharmacists Association. “As pharmacies continue to close, it’s becoming a health care issue.”

PBMs defend work

PBMs became more prevalent in the industry in the 1990s. While many criticisms have been leveled at them, the companies tout their ability and role in lowering prescription drug costs for patients.

When a manufacturer makes a drug, PBMs negotiate with the maker to lower the list price of the medicine. The manufacturer pays rebates to PBMs in order to get better spots on the list of preferred drugs for insurance plans, known as a formulary.

The drug manufacturer sells the drug to wholesalers, wholesalers sell it to pharmacies, and the pharmacies sell the drug to a customer, who pays a copay.

The customer pays their insurance, as insurance companies pay PBMs to manage drug costs. The PBMs pass some of the rebates to the insurance companies, and the PBMs negotiate with the pharmacy and pay the reimbursements for the drug.

Josh Fredell, vice president of PBM and specialty product at major pharmacy benefit manager CVS Caremark, said one reason why pharmacies don’t make as much profit on some prescriptions as others is that PBMs usually try to promote use of generics when possible, and generics usually have better reimbursements than brand-name drugs.

“The growth we’re seeing is in expensive brands that may not be reimbursed as well as generics,” he said. “That market of managing both brands and generics is starting to shift and change. Not only with brand drugs, but pretty expensive brand drugs. That unique dynamic in terms of the pricing is putting pressure on the market overall.”

When asked about the plight of local pharmacies, Greg Lopes, a spokesperson for the industry group Pharmaceutical Care Management Association, said many things factor into pharmacy closures.

“Pharmacy benefit managers are supporting community pharmacies in rural areas, including Pennsylvania, through programs that increase reimbursements,” Lopes said in a statement. “PBMs recognize the vital role pharmacies in Pennsylvania play in creating access to prescription drugs for patients. A strong relationship between PBMs and pharmacies means a better experience and more affordability for patients, which is our top priority.”

According to Lopes, the Pharmaceutical Care Management Association will fight the proposed Senate bill.

“The legislation would significantly increase prescription drug costs for Pennsylvania patients,” he said. “We firmly oppose it and will oppose any bill that restricts PBMs’ ability to lower drug costs for health plans and patients.”

Fredell says CVS Caremark wants to continue to see “a healthy, robust retail pharmacy network across the board, independent and chains,” but also has a responsibility to help its clients, employers or insurance companies, manage their drug spending levels.

“It’s not good for our clients to have affordability but no pharmacies for their customers to use,” he said. “Access is very important.”

Too little, too late?

Some pharmacies see the bill as a good sign. David Cippel, president of Klingensmith’s Drug Stores — with seven locations in Leechburg, Kittanning, West Kittanning, Ford City, New Bethlehem, NuMine and Rimersburg — said he looks forward to the bill being passed.

“We wouldn’t be faced with earning nickels and dimes on prescriptions,” he said. “We are further along (with legislation) this session than we have been in the last 10 years at the state level. We’re as close as we ever were.”

He is encouraged by the idea that the bill would create an avenue for state insurance officials to have oversight over PBMs.

“As it stands right now, we have no recourse,” he said. “There should be some form of transparency, that if we do have an issue, the insurance commissioner can look into it.”

Other pharmacies are unsure the legislation will make enough of a difference to save their businesses. Peter Maida, co-owner and pharmacist at Norvelt Pharmacy in Mt. Pleasant, describes the bill as a drop in a bucket.

“If you want to know how little the corporate world thinks of you, own one pharmacy and do it all your life. We have a lot of anxiety right now. … (PBMs) don’t care if Norvelt Pharmacy stays in business,” he said of his pharmacy, which has been in his family for multiple generations. “We needed help five years ago, 10 years ago.”

Maida fears that Norvelt will have to close if nothing changes.

“It’s my wife and I, we’re both the pharmacists, and now we’re only open Monday through Friday,” he said, noting that he has had to reduce hours recently.


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