Lawmakers must end PBMs’ tax-funded excess profits

State lawmakers should be working on ways to bring transparency to prescription-drug pricing, and Sunday’s Dispatch report on secret practices of pharmacy benefit managers shows why.

For months, pharmacy owners have been telling reporters that PBMs — hired to negotiate price rebates with drug manufacturers and save money for insurers and patients — instead rake off much of the savings for themselves, shorting taxpayers and starving the pharmacies.

Sunday’s analysis by reporters Catherine Candisky and Lucas Sullivan, editor Darrel Rowland and librarian Julie Fulton confirms those complaints — showing that, for its middleman role in Ohio’s Medicaid program, pharmacy benefit manager CVS Caremark takes home a substantial cut of the taxpayer dollars involved.

PBMs can do this because their contracts with the private managed-care companies that handle most of the state’s Medicaid business have gone largely unexamined by state regulators. This must end. PBMs can fulfill a useful role without free rein to maximize profits at the public’s expense.

PBMs boost their revenues through wide gaps between what they charge insurers, including Medicaid, for certain drugs and how much they reimburse the dispensing pharmacies. For example, CVS Caremark, the PBM used by four of the five Medicaid plans, charged taxpayers $8.64 per pill for Vyvanse, a drug to treat attention-deficit/hyperactivity disorder, but paid a pharmacy only 67 cents.

The Ohio Pharmacists Association says such practices are driving pharmacies out of business.

But weak regulation allows PBMs to keep their pricing practices secret, and pharmacies say they’re pressured by PBMs not to reveal price information.

However, thanks to 40 Ohio pharmacy owners who agreed to share the information with The Dispatch anyway, we have real numbers. Their willingness to risk their relationship with the giant PBM is an indicator of their frustration.

Looking only at the 2017 Medicaid transactions of the 40 independent and small-chain pharmacies — about 120,000 prescriptions — CVS Caremark took in more than $1.6 million after paying pharmacies. That sample of pharmacies may or may not be representative, but given that they handle less than 1 percent of the state’s Medicaid prescriptions for the year, CVS Caremark’s take from Medicaid is at least in the tens of millions.

The damage from unchecked price-setting isn’t confined to taxpayers’ wallets. A May 21 story explained how CVS Caremark sent communities into a panic last fall when it suddenly slashed by as much as 80 percent the amount it reimbursed pharmacies for generic Suboxone, a drug that helps opioid addicts through withdrawal.

Pharmacies were losing as much as $100 on every such prescription they filled. Some couldn’t afford to carry it any more, sparking fears of a wave of overdoses.

An outcry by advocates prompted state officials to intervene, and CVS Caremark soon raised its reimbursement for the drug — in some cases, so much that one pharmacy went from losing $100 on each prescription to making $80.

That sort of volatility on a critical medication, with no credible explanation from the PBM, demands government intervention.

The Ohio Department of Medicaid is conducting its own analysis of pricing by PBMs. It should share the results as soon as possible and help the General Assembly fix a system that clearly isn’t working.