Health care middlemen continue to gouge Ky. taxpayers
Across the commonwealth, thousands of pharmacists work around the clock to help bridge the gap between patients, providers and treatment. The role of the pharmacist within our health care system is an essential one, for certain—but in Kentucky, it is at risk of becoming obsolete.
In fact, the relationship a patient has with a pharmacist is often the most consistent that many Kentuckians have with a medical provider. This is particularly true for the chronically ill segment of our population that relies on Medicaid. Each year, approximately $1.69 billion goes toward pharmacy spending for Kentucky’s Medicaid managed care population—not an insignificant amount. Wanting a clearer and more precise accounting of exactly how that money is being spent, the General Assembly passed Senate Bill 5 during the 2018 legislative session. As a result, the Cabinet for Health and Family Services (CHFS) published a report in February titled, “Medicaid Pharmacy Pricing: Opening the Blackbox.”
This report should be on the radar of every Kentucky taxpayer because the dollars and cents to which it refers are coming from you. It has proven to be an important first step in pulling back the veil on certain largely unknown middlemen in our health care system who are negatively impacting patients and threatening to put pharmacists out of business. These middlemen, known as pharmacy benefit managers, or PBMs, have a huge impact on what we, as individuals and taxpayers, pay out-of-pocket for our medications.
In Kentucky, Medicaid managed care organizations (MCOs) contract with PBMs to administer pharmacy services to Kentucky’s Medicaid population. In this role, PBMs wield significant influence in determining what Kentucky pays for prescription medicines for the nearly one million people on the state’s Medicaid program. If Kentucky legislators and public officials do not take further action to rein in PBMs, they will continue to engage in unfair practices and exploit loopholes at the expense of patients, providers and taxpayers.
In particular, the CHFS report highlights a highly problematic—and costly—practice that has been exacerbated by profit-driven PBMs: spread pricing. In a spread pricing model, the PBM charges the MCO an agreed-upon price for prescription medications. Too often, however, the price the PBM pays to the pharmacy for that same prescription is less than the price charged to the MCO.
Simply put, PBMs are overcharging the commonwealth for prescription drugs in order to pad their bottom line. And it is working just as they intend it to, as PBMs’ profit margins continue to climb at the expense of Kentucky taxpayers and the chronically ill Medicaid population.
PBMs have even gone so far as to profit from Kentucky’s opioid addiction crisis. Buprenorphine, one of three FDA-approved medications to treat substance use disorder, is one of the most widely prescribed drugs among Kentucky Medicaid enrollees. Researchers found that in the first quarter of 2019, the actual cost of buprenorphine was $2.01 per unit, yet Kentucky MCOs were charged $4.22 per unit. That means PBMs pocketed $2.21 on 1.8 million units of the most prescribed version of the drug. That’s a profit of $4,021,803 or 48 percent in just one quarter of one year!
Furthermore, in 2018, Medicaid reported that of the $957.7 million paid to PBMs by the MCOs, $123.5 million was not paid to pharmacies, but was pocketed by PBMs to pad their bottom lines instead. Meanwhile, independently owned pharmacies across Kentucky are struggling to keep their doors open.
While Senate Bill 5 brought the issue of spread pricing to light, it was just the first step in a long march. More work remains to be done to stop this exploitative and unfair practice once and for all. We must have better guardrails in place to ensure PBMs are playing by the rules. Otherwise, prescription drug spending—for which hardworking Kentuckians are footing the bill—will unnecessarily continue to rise, and pharmacists will continue to suffer losses as PBMs profit at their expense.
Danny Bentley is the state representative for House District 98. He is a ranking member of the House Health and Welfare Committee and a retired pharmacist. He can be reached at the toll free LRC message line (800-372-7181).
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