Study analyzing 359 million prescription AHCA drug claims documents widespread abuse
Legislators and advocates for reducing costs and improving access to prescription drugs today hailed a new independent study documenting that Pharmacy Benefit Managers (PBMs) have pocketed millions of dollars from the Florida Medicaid system – funds that should have been directed toward health care for millions of low-income residents.
The study, commissioned by the Florida Pharmacy Association and American Pharmacy Cooperative Inc. with data obtained from the Agency for Health Care Administration (AHCA) by the Small Business Pharmacies Aligned for Reform (SPAR), highlights the predatory nature of a handful of vertically integrated PBMs and managed care organizations (MCOs).
Sen. Gayle Harrell and Rep. Jackie Toledo, who have each filed legislation to rein in predatory PBMs, underscored the need for greater transparency and oversight when it comes to PBMs’ role in Florida.
“We have a responsibility to assure that there is no manipulation of prices or anti-competitive practices by PBMs and other entities that result in increased costs to patients and push our local pharmacies out of business,” said Sen. Harrell.
PBMs are shadowy prescription drug middlemen whose practices are driving neighborhood pharmacies out of business while reducing access to care for many Floridians. The State of Florida contracts with PBMs to manage Florida’s Medicaid program in order to negotiate lower drug prices. However, the new study concludes that the intervention of PBMs has actually cost the public millions of dollars by forcing patients to use PBM-affiliated pharmacies and then charging higher prescription costs.
“It’s both absurd and horrifying to think that important, life-changing medical decisions are being made by profit-driven middlemen rather than by patients working with their own physicians,” said Rep. Toledo. “The practices PBMs use to drive up profits are complex, but the solution is simple: We need to increase access to care for all Floridians while ensuring that prescription drug savings make it to the patient and not the pockets of predatory PBMs.”
PBMs negotiate in secret to determine which medications will be covered by insurance plans, and then frequently pocket the savings. A handful of PBMs have managed to take control of the vast majority of the market, forcing consumers to specific pharmacies with which they have a financial interest.
“Pharmacists, pharmacies, and communities have suffered under the rule of the PBM industry for years,” said Michael Jackson, Executive Vice President and CEO of the Florida Pharmacy Association. “The PBM industry has been given a license to operate unchecked under a cloak of secrecy and it is long past time for health care to work for Floridians – not profit-driven pharmaceutical middlemen.”
The study provides concrete evidence that PBMs use a process called “steering” to direct patients to their affiliated pharmacies by requiring that insurance plans cover certain medications only if the prescriptions are filled at those specific pharmacies. These anti-competitive actions by the PBMs restrict consumer access to the pharmacies of their choice and result in higher medication costs. Then, PBMs profit from the higher reimbursements paid to those pharmacies and end up driving neighborhood pharmacies out of business.
Over the past three years, the number of independent pharmacists in Florida has decreased by 15% and it continues to drop due to a business and regulatory climate that short-circuits the free market and allows a handful of PBMs and MCOs to control the market.
“My neighborhood pharmacy has long prided itself on providing personalized services to our customers, who we have come to know and treat like family,” said James Wright, a Cocoa pharmacist and member of SPAR. “Our customers don’t understand why suddenly they have to go to a different pharmacy to have their insurance cover the medications they need. The predatory pricing by the PBMs is hurting our business, to the point where we may be forced to close our doors before long.”
A number of bills have been filed to directly address predatory PBM practices that sidestep free-market principles and force consumers to pay higher prescription drug prices. By requiring transparency and accountability, the legislation will increase Floridians’ access to prescription medications while lowering costs.
“This issue is one I have been working on from the start of my term as Senator. I, along with many of my colleagues in the Senate believe the playing field within this marketplace needs to be level, without any unjust practices that are currently leaving our independent pharmacists in Florida on life-support,” said Sen. Tom Wright. “This initiative will shed light on changes needed now, and changes that will arise in the future to fix a very broken system.”
“Florida’s taxpayers shouldn’t be subsidizing profits for pharmaceutical middlemen,” said Sen. José Javier Rodríguez. “It’s time for the Florida Legislature to join the dozens of other states who have made meaningful reforms to the PBM industry and take swift action to fix this broken system. Floridians deserve nothing less than transparency and accountability from those overseeing the health care of our state’s most vulnerable residents.”
The independent study by 3 Axis Advisors reviewed more than 359 million prescription drug claims within Florida’s Medicaid program between 2012 and 2019. The information from AHCA was coupled with data from more than 100 pharmacies to determine the impact PBMs have on the portion of the health care system paid by Florida taxpayers through the Medicaid program.
The firm has previously evaluated the structure of PBMs in New York, Illinois, Michigan, and Ohio. Their research has helped uncover hundreds of millions of dollars in hidden PBM charges in state Medicaid programs.
Among the study’s findings:
- Approximately 20-25% of Florida Medicaid payments to MCOs are for pharmacy services, placing a massive amount of money in the hands of a small group of such organizations.
- Despite accounting for only 0.4% of prescription claim volume, specialty pharmacies affiliated with MCOs and/or PBMs captured 28% of the available pharmacy dispensing margin in 2018.
- There is strong evidence of PBMs and managed care organizations steering certain drugs to select pharmacies and “clawing back” those payments retroactively. According to Medicaid data, one pharmacy in North Miami was responsible for 25% of all managed care claims in Florida for a particular dermatological cream in 2018, receiving a total profit margin over the National Average Drug Acquisition Cost of more than $1.8 million.
- The annual cost to the state due to PBMs choosing not to adhere to AHCA’s preferred drug list is approximately $30 million due to lost rebates. This cost could be virtually eliminated with greater adherence to the AHCA’s standard formulary.
- The reality is that closed and restricted networks, especially in underprivileged areas, put pharmacies that are not affiliated with PBMs and MCOs at an additional risk of failure.
“Our team has analyzed drug pricing data in numerous other states, but this study is more exhaustive and comprehensive than any we’ve ever produced. The sheer volume of claims analyzed provides an unprecedented view behind the shadowy curtain of pricing in the prescription drug supply chain,” said Antonio Ciaccia, co-founder of 3 Axis Advisors. “The implications outlined in this study show some extremely concerning trends that highlight the warped incentives, pricing distortions, and conflicts of interest currently embedded in state Medicaid programs. While this analysis is focused on the Florida managed care and PBM experience, this report is an alarm bell for state and federal officials across the country that reveals there’s much more to prescription drug costs than meets the eye.”
The prices that PBMs reimburse for the same drug at the same time can vary widely. For the drug Aripiprazole, which is prescribed for bipolar disorder, CVS, the pharmacy preferred by the PBM was reimbursed $11.18 per unit, while an independent pharmacy was reimbursed 53 cents a unit and a Publix pharmacy was reimbursed 24 cents a unit.
“It’s beyond comprehension to me that I can exercise my best medical judgment to prescribe a certain medication after carefully considering the options and how it will affect my patient. Then some middleman with minimal medical training can step in and say, ‘No, our insurance deal will only cover a different medication’ simply based on a financial consideration,” said Dr. Paresh Patel, a Tallahassee oncologist. “There are many things wrong with the health care system, but this is one of the most flagrant violations of trust and patient care that I have ever seen.”
The report can be viewed HERE.
