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Legislative Reform: Opportunities for action at both state, federal levels on issues important to retail pharmacy

Momentum appears to be growing around several legislative and regulatory issues that are important to retail pharmacy, including PBM reform at both the state and federal levels.
Mark Hamstra

Momentum appears to be growing around several legislative and regulatory issues that are important to retail pharmacy, including pharmacy benefit management (PBM) reform at both the state and federal levels and preserving some of the functions that pharmacies added during the pandemic.

Even with a divided Congress presiding over the legislative branch in 2023, the industry is optimistic that the progress that has been made in these areas during the last few years can continue this year and beyond.

“The pharmacy issues are extremely bipartisan,” said Chris Krese, senior VP of congressional relations and communications at the National Association of Chain Drug Stores. “We find that these issues are broadly supported by Democrats, Republicans, and Independents alike, and we look forward to working with the Congress and with the administration to advance all these issues on a bipartisan basis.”

PBM reform remains high on the agenda for pharmacy associations, as retailers seek to preserve the ability for patients to patronize their local retail pharmacy and to have greater visibility into the pricing practices of these entities.

NACDS describes the legislative and regulatory issues it is tackling as the “access agenda,” which Krese defines as patients’ “ability to get the convenient and equitable access to pharmacies that they expect.”

“There are a host of policy issues that affect that,” he said. “Certainly, an issue that tops the list is pharmacy benefit manager reform.”

The industry in the last few years has seen significant progress on PBM reform but is continuing to press for more reforms, particularly around transparency and pricing practices, Krese said, while the current political climate favors this type of legislative and regulatory action.

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“Right now, there is significant interest at the federal and state level to address the issue, and that really flows from the recognition of how important it is to patients,” Krese continued. “There’s a real sense at this point that the PBM middlemen and those who hire them have gotten to the point that they’re manipulating the pharmaceutical benefit market to a degree that it’s impacting patients.”

He cited the unanimous U.S. Supreme Court decision of 2020, Rutledge v. Pharmaceutical Care Management Association, which paved the way for states to begin legislating on the issue of PBM reform themselves. Since then, there have been more than 100 new laws enacted at the state level around PBM reform, he said, and more efforts are in the works.

That decision was itself based on a state-level case in Arkansas in which the Pharmaceutical Care Management Association, which represents PBMs, had sued to prevent the state from forcing PBMs to reimburse pharmacies for prescription drugs at rate “equal to or higher than the pharmacy’s wholesale cost,” according to one description of the law.

That ruling, and another, PCMA v. Wehbi, created the opportunity for allowing states to exercise greater control over PBM practices, and several states have since followed suit, often in the interest of better managing their own Medicaid programs by increasing transparency.

Pennsylvania, for example, late last year expanded the ability for the state to audit PBMs that service the state’s Medicaid managed care organizations.

These state actions often also serve retail pharmacies not only by increasing the transparency of PBM pricing practices but also by helping ensure that patients can continue to patronize their local pharmacist to receive their prescriptions.

New Jersey in October introduced S.B. 3199, which seeks to prohibit PBMs from steering patients to pharmacies that the PBM owns and prohibiting PBMs from charging a pharmacy a fee for network enrollment or collecting point-of-sale or retroactive fees from pharmacies. That bill has been referred to the state’s Senate Commerce Committee, according to law firm Mintz.

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“We expect states to continue engaging in efforts to increase oversight of PBMs,” Mintz said in a recent blog post. “We will continue to monitor and report on relevant legislative activity.”

“There’s a real sense at this point that the PBM middlemen and those who hire them have gotten to the point that they’re manipulating the pharmaceutical benefit market to a degree that it’s impacting patients.”
— Chris Krese, senior VP of congressional relations and communications, National Association of Chain Drug Stores

Independent pharmacy’s agenda

Retail pharmacy access is also a key focus of the National Community Pharmacists Association, said Anne Cassity, VP, federal and state government affairs at the association. “You saw how important patient access was, especially during COVID and the rollout of the vaccines,” she said.

PBMs have disrupted patient access to independent community pharmacies in particular, Cassity said. NCPA’s focus is to bring about changes in the pharmacy payment model that make it both more transparent and reflective of a drug’s actual acquisition cost. “You can't operate any business if you're getting paid below what you even acquired the product for — in this case, prescription medications,” she said.

One goal of the NCPA, Cassity said, is to reintroduce a bill called the Medicaid Managed Care Transparency Act, which was introduced in 2021 by Reps. Earl L. “Buddy” Carter (R-Ga.) and Vicente Gonzalez (D-Texas). The bill aims to prohibit “spread” pricing in all state Medicaid managed care programs and require that pharmacies be reimbursed at specific rate, such as the national average drug acquisition cost (NADAC), plus the state's current fee-for-service dispensing fee.

“Prescription drug prices are way too high,” said Carter, a pharmacist himself, when he introduced the legislation. “With this bill, we can radically decrease drug prices and put power back into the hands of the patients.”

While NCPA would like to see PBM reform take place at the national level, the association has been working with individual state governments on the issue during the past several years.

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She said there could be more activity in California this year around PBMs.

“They've done some really great reforms in Medicaid, but they struggled a little bit with PBM reforms,” Cassity said.

A bill seeking to prevent PBMs from steering patients to their own pharmacies was passed by large margins in both state chambers last year, but Gov. Gavin Newsom vetoed the legislation, SB 524, saying it “lacked clarity.”

“I know that there’s going to be another push there,” said Cassity.

Cassity said she expects activity around PBM reform in several other states as well in 2023, including, potentially, Florida, which has been stubbornly resistant to PBM reform, Cassity said. She noted that Gov. Ron DeSantis signed an executive order last year that includes more oversight of PBMs.

In a statement on the Florida state government website, Katie Scanlon, senior director of pharmacy administration at Publix Super Markets, was among those who spoke out in favor of the initiative.

“We appreciate Gov. DeSantis’ leadership in championing the initiative for lower prescription drug costs for Floridians,” she said. “It is a critical step in the right direction to ensure our residents and customers have access to their medications at the lowest price available to all, dispensed from their community pharmacist of choice.”

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Much of DeSantis’ proposal reads like a wish list for retail pharmacy, calling for an end to steering of patients by PBMs to their own affiliated pharmacies, prohibiting mandatory mail-order prescription fulfillment, prohibiting “clawbacks,” or direct and indirect renumeration (DIR) fees on pharmacies for a variety of reasons, and calling for greater transparency on the part of PBMs.

“You can't operate any business if you're getting paid below what you even acquired the product for — in this case, prescription medications.”
— Anne Cassity, VP, federal and state government affairs, National Community Pharmacists Association

Federal action on PBM reform

The U.S. Congress has also expressed bipartisan interest in addressing PBM reform, Krese pointed out.

“Legislators realize that they're going to be held accountable as to whether they could do things to improve their constituents’ way of life, and certainly their healthcare and their finances all figure into that,” said Krese. “PBM reform is a great way to get those things done.”

Last year Reps. Bruce Westerman (R-Ark.) and Anthony Gonzalez (R-Ohio) introduced the Fair Care Act of 2022, which included several provisions that would have addressed PBM pricing practices, including charging retroactive fees to pharmacies and requiring the U.S. Comptroller General to conduct a study on the role of PBMs in the pharmaceutical supply chain.

Sen. Chuck Grassley (R-Iowa), who has long advocated for PBM pricing transparency, last year joined with Sen. Maria Cantwell (D-Wash.) to introduce S.4293, the Pharmacy Benefit Manager Transparency Act of 2022, which the two said “sought to ban deceptive unfair pricing schemes, prohibit arbitrary claw backs of payments made to pharmacies, and require PBMs to report to the Federal Trade Commission how much money they make through spread pricing and pharmacy fees.”

The legislation won the support of the numerous industry trade groups, including NCPA, the American Pharmacists Association, the American Pharmacy Cooperative and the Iowa Pharmacy Association, plus some retail pharmacy operators, including Hy-Vee and Hartig Drug.

“That bill did gain a lot of traction, and we’re hoping to get it reintroduced, or something very similar reintroduced,” said Cassity. “Anything that brings transparency, whether it's in the commercial market or in the public market, is extraordinarily important.”

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While the Grassley-Cantwell bill focused on transparency for commercial insurers, NCPA is also hoping to see more action this year around Medicare Part D reforms as well. In 2022, the Centers for Medicare and Medicaid Services (CMS) issued a final rule related to Medicare Part D for contract year 2024, which requires Part D plans to include all DIR fees at the point of sale.

Cassity said more reforms around Part D need to be introduced.

“We're going to be focusing on a bigger Part D reform package, including additional DIR reforms, but also addressing things like patient steering,” she said.

Cassity said there’s also industry concern that some PBMs are reimbursing their own or affiliate pharmacies at higher rates, which NCPA would like to see addressed in Part D reform.

“Reforms in public, taxpayer-funded programs are extraordinarily important, to make sure they're fair, to make sure they're transparent, and to make sure that beneficiaries get the access that they need and deserve,” said Cassity.

CMS has limitations on how much it can do with PBM reform, she said, which means that the kinds of reforms sought by NCPA may need to come from Congress.

Another issue on NCPA’s agenda for 2023 is a recent contract for TRICARE, the government health insurance program for uniformed service members, their families, National Guard and Reserve members and their families, retirees and their families, survivors, and certain former spouses.

Thousands of pharmacies were excluded from the network because of the extraordinarily low reimbursements that were offered by Express Scripts, which is administering the pharmacy program for the Department of Defense, Cassity said. “There’s been a lot of interest in this in Congress, and some concerns,” she said. “We’re hoping potentially for some oversight hearings.”

The incoming chairman of the House Armed Services Committee, Rep. Mike Rogers (R-Ala.), has been very vocal about the contract, Cassity said. “That’s not a bad person to have on your side when you’re addressing this issue.”

She also said the industry also has other pharmacy champions who have assumed more important roles in the House, including Cathy McMorris Rodgers, the new chair of the Energy and Commerce Committee. “She's been a huge proponent of pharmacies, and not just pharmacies, but patient access to pharmacies,” said Cassity.

In addition, Rep. James Comer (R-Ky.) is the new chairman of the House Oversight Committee, who Cassity said has been “really engaged” in pharmacy issues. As the ranking member last year, he held a roundtable to discuss PBM reforms, she said. 

Senate Finance Committee Chair Ron Wyden (D-Ore.) has also been a leading advocate for retail pharmacy, she said. In January of this year, he praised CMS for outlining the timeline and mechanisms for Medicare drug price negotiation policies.

“I think we're teed up pretty well,” said Cassity. “It just depends on what Congress decides to do [in 2023] and what they can get done.”

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Extension of the PREP Act

Another key focus of NACDS in the year ahead is to push for the Public Readiness and Emergency Preparedness Act (PREP Act) to be extended for pharmacy services. The PREP Act allows pharmacy technicians and interns to administer certain vaccines.

Krese said NACDS is pushing for the Pres. Biden administration to extend these pharmacy services until October of 2024.

“This is really important, because we are hearing more and more about the imminence of the public health emergency ending, and the move to commercialization for vaccines, and testing, and antivirals,” he said. “When those two things happen — the end of the public health emergency and the commercialization of these countermeasures — the PREP Act is going to end for pharmacy services. That’s going to impact patients, and it's going to impact pharmacies.”

For example, the PREP Act allows pharmacy technicians to provide flu vaccinations to adults. which most states otherwise do not allow. If pharmacy technicians are no longer allowed to give flu shots to adults that would be the equivalent of removing about 40% of the nation’s vaccination capacity, Krese said.

That will result in longer lines and longer wait times for patients seeking vaccines, and potentially the loss of access to vaccines for some patients in some locations.

“Plus, it’s just very difficult to plan a pharmacy workforce when you don't know a few months down the road what certain professionals in your pharmacies are going to be able to do or not do,” said Krese.

NACDS would like to see states replicate the PREP Act at the state level during the extended time that the PREP Act remains in effect, he said.

The recent confluence of flu, COVID and another virus, RSV, reinforce the need for these expanded services, Krese said. “I think a lot of policy makers unfortunately forget that you can’t just turn these services on and off.”

In addition, NACDS is also advocating for legislation at the federal level that would set up a reliable payment mechanism in Medicare for pandemic-related services.

“We had tremendous success in 2021 and 2022 in building support for this legislation,” said Krese. “What we need to do in this next Congress is get this over the goal line so we can make it a reality.”

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