Like a solar flare suddenly erupting, in the last week of its session after little attention to the issue the Louisiana Legislature appears poised to enact significant and almost unprecedented legislation aimed at levelling the playing field for pharmacies and potentially aiding consumers of their products even as one pharmacy holding company threatens to leave the state over this.
Two bills would impact pharmacy benefit managers, an entity that has become popular over the last decade. Conceptually, these are supposed to induce efficiency into the system that saves money, by negotiating deals among drug manufacturers, insurers, and pharmacies which include creating formularies, negotiating rebates from drug manufacturer, processing claims, administering pharmacy networks, reviewing drug utilization, and managing mail-order specialty pharmacies.
But a good portion of that doesn’t appear to be directed into consumer’s pockets. The field is somewhat concentrated with the so-called Big Three – CVS Caremark, Express Scripts and OptumRx – disproportionately charging more for specialty generic drugs through affiliated pharmacies, while costs were lower for the unaffiliated. Having available networks of pharmacies also facilitates a practice known as “spread pricing,” or billing their plan sponsor clients more than they reimburse pharmacies for drugs. Along with Prime Therapeutics, the four control 70 percent of the specialty prescribing market and the Big Three have 80 percent of the total prescribing market.
However, the market-warping power goes on steroids if the PBM also owns the dispensing pharmacies. That is the case with CVS Caremark, the holding company for the PBM and the CVS Pharmacy chain with over 100 locations in Louisiana; the other three largest PBMs are owned by insurance companies. Note that insurers as owners have a countervailing pressure on higher drug prices in keeping costs down to make premiums and policy terms more competitive while no such balance exists for CVS.
Thus, it is most aggrieved by HB 264, Republican state Rep. Mike Echols’ bill that would prohibit steering of business to a PBM’s pharmacies, stop spread pricing, mandate a certain portion of savings go to employers and consumers, and increase reporting requirements for closer compliance monitoring. HB 264 awaits for a concurrence vote after the Senate added the amendments about savings and transparency, a good portion culled from SB 194 by Democrat state Sen. Jimmy Harris.
But CVS is more panicked by Democrat state Rep. Dustin Miller’s HB 358. It began as a fairly innocuous attempt to include pharmacists in telemedicine, but with the author’s approval became broadened to include in its conference report an outright ban on a PBM owning pharmacies in direct or indirect fashion. That makes it like a law passed earlier this year in Arkansas, which last month drew a lawsuit by CVS and Express, which a trade group has joined. That bill awaits Seante concurrence with the conference report.
Such is its consternation that CVS sent out to its loyalty cardholders text and e-mail messages claiming unspecified legislation would cause it to close its Louisiana pharmacies. It asserts that availability could decrease and prices increase as a result. Mobilizing quick public support seems to be its most desperate tactic, as it won’t receive assistance from GOP Gov. Jeff Landry who has spoken negatively against PBMs in the past and appears poised to sign both bills.
In some ways, this marked an extension of a battle between Democrat former Gov. John Bel Edwards and Landry. Years ago, the Edwards Administration steered a sweetheart deal to CVS as the PBM for a large portion of state employees with a contract that appeared to lock in inflated prices for their having to use CVS pharmacies. Landry ended up suing to try to prevent the deal. It continued and is up for renewal this year, although early indications are it won’t be as skewed in favor of CVS as it had been. These bills as statute would add another dynamic to any new 2026 deal.
Yet that tactic seems unlikely to succeed. Other pharmacies such as Walgreens seem to manage just fine without owning a PBM, and it is a remarkable allegation that CVS can’t operate profitably enough to stay open without a PBM. In the final analysis, this is an empty threat, and HB 358 gives until the end of 2026 for CVS to figure out a solution that no doubt plausibly allows it to stay in business in the state – and especially as it is having to close stores elsewhere for genuine economic reasons, it will do its utmost to keep them open in Louisiana.
When government intervenes so heavily into a market, as in the case of health insurance (and doubly so by it providing that to its employees), more than extremely minimal regulation is justifiable where a free market has been legislated out of existence. These bills seem realistically able to make sure no entity takes advantage of such a regulated space, and deserve passage.
No comments:
Post a Comment