Boston News Channel Digs Into PBMs, And Where the Money Is Going

The Boston 25 News Channel is conducting a month long, in-depth investigation of pharmacy benefit managers (PBMs) and the role they play in increasing drug prices. Reporter Jim Morcelli found that pharmacies are getting lower payments from the drugs they provide to people enrolled in Massachusetts's Medicaid program, even though the prices they pay for the medications have not decreased.

We have previously written about how in Ohio PBMs increased drug prices and kept the difference for themselves, costing the state government and taxpayers a lot of money. Experts think a similar practice is occurring in Massachusetts. When filling prescriptions for Medicaid patients, pharmacies used to directly bill the state government, but recently things changed. Now pharmacies send claims to PBM middlemen, which theoretically should decrease costs.

But the reality is quite different. Pharmacies say that ever since this change, they have seen a huge decline in their reimbursements. Drug prices are going up, but avenue revenue per prescription for pharmacists has been going down. Many pharmacists prefer to remain anonymous when criticizing PBMs for fear of retaliation, and they believe PBMs are inflating the costs of prescription drugs charged to the state, while cutting payments to independent pharmacies. One pharmacist said that they received a $700 reimbursement for a generic antipsychotic medication one month, and after the change they received only a $200 reimbursement.

CVS disputes these claims, saying that its markups on prescriptions are not profits and they are used to negotiate drug discounts. But pharmacies urge Massachusetts taxpayers to pay close attention to markups on prescription drugs through PBMs, and that these markups are a way for PBMs to game the system and keep the differences for themselves. We don't know how much mark-up money PBMs make in Massachusetts, but in Ohio, the state auditor found that the PBMs made almost $224 million. In response to these costs, the state government recently ended PBM contracts that allowed for those profits. Under Ohio's new model, PBMs only get administrative fees and have to bill the state the same amount they pay pharmacists.

Without accurate information and transparency about PBM practices, it is impossible to know whether they are lowering drug costs. The available evidence strongly implies they are not-instead PBMs are inflating the cost of prescription drugs charged to the state, and taxpayers, all while cutting payments to independent pharmacies. These practices make ordinary citizens pay for the drugs in multiple ways-they have to pay higher costs at the pharmacies due to these rising drug prices, and the state government has to pay more for these expensive drugs through its Medicaid program.

In order to stop this abuse and reduce drug costs, Massachusetts should follow Ohio's example, halt its contracts with PBMs, and replace them with new contracts mandating that PBMs only get set administrative fees and that they send the same bills to pharmacists and the state government.