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With Iowa losing pharmacies, lawmakers advance new rules

Bill establishes stronger requirements for pharmacy benefit managers


Iowa House lawmakers advanced a bill Tuesday aimed at reducing prescription drug costs for Iowans by strengthening some requirements for pharmacy benefit managers.

A three-member subcommittee forwarded the bill for further discussion by the Iowa House Commerce Committee. The legislation proposed by the Iowa Insurance Division, among its provisions would require pharmacy benefit managers to “owe a duty a good faith and fair dealing” with Iowa pharmacies.


House Study Bill 536 would also require pharmacy benefit managers — known as PBMs, the companies that function as intermediaries between insurance providers and drug manufacturers — to use the National Average Drug Acquisition Cost when determining what price to reimburse pharmacies for dispensing medications. The federal Centers for Medicare and Medicaid Services-calculated value attempts to capture the average price wholesalers charge to pharmacies.


Pharmacists have said they are selling many common, brand-name prescriptions at a loss because PBMs reimburse them less than a pharmacy's cost to acquire the drug. Using the national average would standardized the information PBMs and the Iowa Insurance Division use when looking at drug costs, supporters said.


“This provides a nationally recognized way of pricing prescription drugs,” said state Rep. John Forbes, D-Urbandale, a retired pharmacist who once owned Medicap Pharmacy.


Lawmakers said the bill would aid independent community pharmacies that have struggled because of PBM practices.


“We think that transparency is much needed,” said Seth Brown, director of public affairs with the Iowa Pharmacy Association. “The publicly available metric … is also very welcome for our members.”


The proposed legislation would also prohibit retaliation by a PBM against a pharmacy or pharmacist for filing a complaint with the insurance division. And they could no longer charge certain fees to pharmacies not yet in their network.


PBMs “think pharmacies should be paying them to have the privilege of doing business with them,” Forbes said, and in the process are “nickel-and-diming” community pharmacies out of thousands of dollars.


A Maquoketa pharmacy has led a lawsuit that claims CVS Health and its Caremark pharmacy benefit manager violated antitrust laws and illegally collected fees from pharmacies that fill Medicare prescriptions. Should the community pharmacies prevail, CVS would have to return hundreds of millions — if not billions — of dollars its PBM recouped from independent pharmacies over the past four years, Axios reported.


Forbes cited the lawsuit for including the retaliation provision.


“Basically it says if a pharmacy does that, the PBMs come back and say, ‘We’re going to kick you out of the network’ or ‘We’re going to do a bunch of extra audits on your pharmacy,’” he said.


PBMS play a major role in negotiating drug prices and reimbursements for pharmacies, but operate with little transparency and oversight, lawmakers, pharmacists and patient advocates argue.


PBMs determine which pharmacies will be included in a prescription drug plan's network and how much those pharmacies will be paid for their services. PBMs also regulate which drugs are covered under a specific plan and set copays, negotiate rebates with drug manufacturers and process prescription medication claims, for a fee, for insurance companies, among other roles.


Three of the companies — CVS Caremark, Express Scripts and Optum Rx — collectively control about 80 percent of the market.


Doug Struyk is a lobbyist representing the Pharmaceutical Care Management Association, which represents pharmacy benefit managers. He raised concerns with the retaliation provision in the bill, saying the association worries it would prohibit “a simple nonrenewal of a contract” should a pharmacy file a complaint.


“And the PBM is not able to make decisions based in their business interest because they’re simply lumped into this catchall provision that any time someone’s filed a complaint, if you don’t renew the contract, that’s in bad faith,” he said. Additionally, he said the bill would prevent PBMs from recouping costs of vetting pharmacies asking to join their network.


Mike Triplett, who represents Express Scripts, a subsidiary of Cigna Healthcare, questioned why lawmakers have not looked at legislation dealing with pharmacy services administrative organizations. They’re connected with the country’s three largest wholesalers and provide a range of services to independent pharmacies including supporting the evaluation and execution of contracting with PBMs.


“You have been legislating and regulating PBMs since 2007,” Triplett said. “To my knowledge you’ve not done anything to legislate or regulate PSAOs in Iowa. … There are complaints made against PBMs that we are not reimbursing what was acquired through a PSAO. That’s the other half of the equation we would encourage you to look at.”


Pharmacies across Iowa have closed at an alarming rate over the past decade-plus, partly because insurance payouts don't cover drug costs.


Nearly 100 pharmacies across the state have shut their doors since 2008, according to research from Michael Andreski, associate professor of pharmacy at Drake University, in a recent study conducted in collaboration with The Health Professions Tracking Center at the University of Iowa Carver College of Medicine.


Independent pharmacies saw the largest hit with 87 stores closed from 2008 to 2022, a 38 percent decrease. Rural pharmacies saw a 19 percent decrease, with 72 shutting their doors, according to the study.


Forbes said he’s hopeful the bill and other forthcoming legislation will help keep rural pharmacies in Iowa in business.


“Now, the PBMs are going to say if a bill like this passes, you’re going to see prescription drug costs go up,” he said. “ … And I just hope you really look into it and see what’s happening across this state in rural areas, where you’re going to see a large, large number of pharmacies close in the next 12 months.”


Reporter: Tom Barton

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