NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every Friday.

Putting tomatoes in their proper place | NCPA Executive Update | August 17, 2018

by NCPA | Aug 17, 2018

Dear Colleague,

Doug Hoey

"Knowledge is knowing that a tomato is a fruit. Wisdom is not putting it in a fruit salad."

Growing tomatoes is not only for food; it's also for bragging rights. Maybe it's a sign of age, but this time of year I find myself occasionally drawn into conversations – willingly or not – about the quality of tomatoes grown in gardens of friends and family.

As I ponder that obsession with tomatoes, I can't help but liken it to the abundance of media and policy-maker scrutiny of PBMs. States are finally asking: Are there tomatoes in our fruit salad?

Ohio is one of those states. They looked into their Medicaid managed care program, and they found one of those big, red tomatoes that are impressive to the eyes but flat to the taste buds: the PBMs. Thanks to the efforts of the Ohio Pharmacists Association, NCPA and other pharmacy and patient advocates, PBMs have been at the top of the news in that state for months now. The Columbus Dispatch has published an investigative series of more than 40 stories detailing PBMs' impact on ever-rising drug costs. The state attorney general has threatened legal action to recoup taxpayer dollars from the PBMs. And the state auditor released results of an intensive investigation into PBMs' role in the managed care program. As a result, it came to light that PBMs were receiving more than $223 million a year from spread pricing alone. That's a lot of taxpayer money that could be used for other state needs like roads, schools, police, or maybe even lower taxes.

With all this info, what did Ohio do? They terminated the PBMs – tossed those tomatoes out of their fruit salad. The spread pricing model will have no place in Ohio's Medicaid managed care program, says the state's Medicaid agency. Kudos to Ohio Gov. John Kasich and his administration for their wise business savvy being responsive to Ohio taxpayers and small businesses. His actions will help protect patients, taxpayers, and preserve the local economic stimulation created by pharmacy small business owners.

Removing those tasteless tomatoes is great, but wouldn't it be even better if we could keep them from infiltrating the fruit salad in the first place? After all, PBMs originally served a useful purpose in processing claims. However, they have evolved far, far beyond their original roots. As one economist recently put it, due to a lack of proper government oversight, PBMs have enjoyed "unbridled power" and "sit astride the pharmaceutical pricing apparatus like modern colossuses."

Fortunately, many groups have taken notice, and one group in particular has the know-how and the power to substantively regulate PBMs. I'm talking about the National Council of Insurance Legislators, an organization whose members are state legislators serving on their respective House and Senate insurance committees. NCPA has interacted with NCOIL for a number of years advocating for greater state oversight of PBMs. These legislators are familiar with the issues impacting pharmacies and patients in their districts, and they have the ability to do something about it – in the form of model legislation.

NCOIL is currently developing a model bill to regulate PBMs. Championed by Arkansas State Sen. Jason Rapert, the model language is based on the recently enacted "Arkansas Pharmacy Benefits Manager Licensure Act." As drafted, the model bill will empower state insurance commissioners to review the adequacy of PBM networks and ensure patients have access to community pharmacy services, instead of being forced to accept mail order pharmacy only. The model also contains language prohibiting PBMs from keeping networks restrictively narrow by implementing unreasonable reimbursement rates or requiring arbitrary accreditation standards or certification requirements. Under this bill, PBMs will be free to provide claims processing services for health benefit plans but prevented from "finding ways to expand their profitability at the expense of employers and patients."

Insurance legislators from all 50 states serve on NCOIL. That means no matter where you are, your local insurance legislation expert has a hand in the development of this bill. That's why we have been working hard to support it – attending and testifying at two NCOIL meetings, meeting one-on-one with NCOIL members, submitting comments and letters of support, and working with state pharmacy associations and other partners to advocate for the model at the grassroots level.

Regulations like this in all 50 states will go a long way in protecting taxpayers and small businesses from wasteful spending on middlemen fees. That's what we're working for – and I expect our results to be, um, fruitful.

Best,
Doug Hoey

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