Malibu’sDuma Plaza Pharmacy is stillopen,butstruggling
By Barbara Burke
Special to the Malibu Times
“Patients are at risk of losing their local pharmacies that they depend on, such as possibly the Dume Plaza Pharmacy, due to unfair pricing practices by Pharmacy Benefit Managers (PBMs),”Congressman Brad Sherman said in response to aMalibu Timesrequest asking him to address the underlying regulatory and economic causes of independent pharmacies closing in Southern California and elsewhere.
“The prospect of millions of patients being stranded without their pharmacy while PBMs rake in profits is as outrageous as it is imminent,”Sherman said.“High drug prices have long been frustrating for millions of hard-working Americans, and that is why my colleagues and I helped pass the Inflation Reduction Act, which took a substantial step towards lowering drug costs.”
That legislation did help millions of Americans. However, it does not addressPBMs’role ina multitude ofindependent pharmacies facing imminent peril.To be clear, other market forces are also contributing to obstaclesfaced by independent pharmacies, such as customers buying their prescriptions online or receiving home delivery, both of which result inthosecustomers not going into a pharmacy where they mightpossiblypurchase over-the-counter items such as cosmetics and sundries.
Buthere’sthe thing — to obtain a clear understanding regarding the role of PBMs in the demise of many independent pharmacies,it’simportantto realize thatthere’sa good chance that the mail-order or online pharmacy where one orders their prescription is owned by — you guessed it — a PBM or its affiliated entities.
Moreover, data analytics establish that the three largest PBMs affect more than 180 million lives or roughly 75 percent of the market, and those PBMs are so profitable that they are now among the Fortune 25 companies.
Seventy-five percent of the market! Query:Isn’tthat anticompetitive?
According to the California Pharmacists Association, PBMs have a disproportionate market influence. News reports establish that when Cigna posts billions in profits, it attributesa lotof those profits to pharmacy benefit manager Express Scripts. The combined revenues of the largest California health insurers and their PBMs consistently outpace the combinedrevenueof the FAANG companies: Facebook, Amazon, Apple, Netflix, and Google.
The association posits that with that kind of market influence, employers, government entities, and otherhealth-care purchasers need to havetransparency into PBM practices, many of which add hidden costs that lead to higherhealth-careprices for consumers.
The role of PBMs in setting pharmaceutical pricing
The prices that customers pay for prescriptions and the payments pharmacies receive from insurers are largely determined byPBMs, the entities that negotiate reimbursem*nt rates from drug manufacturers to insurers.
PBMs determine which pharmacies they mandate or steer patients to use.Theydeterminewhich pharmacies are in their network andthe amount thatthe pharmacieswill be reimbursedfor a prescription.Further, they have been cutting reimbursem*nt rates to boost theirownprofits, many experts allege.Hence,Sherman’sfocusingon pursuing Congressional action.
A white paper issued by the National Community of Pharmacists Association is well wortha read. The title explains the gist of the article:“The Truth about Pharmacy Benefit Managers — They Increase Costs And Restrict Patient Choice And Access.”
Delving further, the article provides some astounding facts, including that“PBMs raise drug costs by almost 30 percent due to the rebates they charge manufacturers to be on their formularies.PBM rebates, which amounted to $143 billion in 2019, add nearly 30 cents per dollar to the price consumers pay for prescriptions.”
Wow!
When exploring why PBMs prohibit patients from visiting the pharmacy of their choice, one discovers that PBMs are owned by or own the pharmacies they direct patients to use. Query:Isn’tthat anticompetitive?
Whether PointDume Pharmacy will ultimately close is unclear — its owner did not respond toMalibuTimes’calls, and Kathryn Natalia, the managing director who runs the daily operations of Point Dume Village, which is owned by Marquis Property Company, said she had not received notice that the pharmacy was closing.
However, for several months, residents have noticed that the shelves in the pharmacy are bare, and some have expressed extreme frustration because the pharmacy could not fill their prescriptions and did not return calls. WhenMalibu Timesstops by, sometimes the pharmacy is open. However, recently, it has often been closed.
Sowhat’sa citizen to do? Call your congressman!
“Iremain committed to working with my colleagues to lower prescription drug costs by expanding upon the success of the Inflation ReductionAct,and support local independent pharmacies by passing new legislation that would employ measures for more transparency in drug pricing, better regulating PBM pricing practices andmore.”Sherman said.
States can also take a role in regulating PBMs — they could prohibit them or limit their involvement to only having an administrative role in Medicaid and other state-funded programs, as well asin stateemployees’health benefit plans. The U.S. SupremeCourt’sopinion inRutledge v. Pharmaceutical Care Management Association,issued in 2020, instructs that ERISA does not preclude astate’sability to regulate the relationships between independent pharmacies and PBMs. The SCOTUS decision held that a state could require PBMs to reimburse pharmacies at a fair and reasonable rate and at a ratethat isno less than the rate paid to the large retail pharmacy chains affiliated with the PBMs.
Unlike other states, California failed to pass proposed legislation addressingPBMsbusinesspractices
AB 913, Pharmacy Benefit Managers failed to pass in the CaliforniaLegislature’slast session.
Thebill’ssummaryinformsthat existing law, the Pharmacy Law, establishes the California State Board of Pharmacy within the Department of Consumer Affairs to license and regulate pharmacists.Further, existing law provides for the licensure and regulation of health care service plans by the Department of Managed HealthCare,and for regulation of health insurers by the Department of Insurance.
Further, existing law—known as the Knox-Keene Health Care Service Plan Act of 1975, requires a pharmacy benefit manager under contract with a health care service plan to, among other things,register with the Department of Managed Care.
The proposed — but failed — bill would require the California Board of Pharmacy to license and regulate pharmacy benefit managers that manage prescription drug coverage provided by a health-care service plan or health insurer.
The bill proposes that PBMswould have tofile a report to the board. Further, they would be prohibited from contracting to prohibit or restrict a pharmacy orpharmacistsfrom disclosing to an enrolled patient or insured health care information that the pharmacy or pharmacist deems appropriate.Finally, the bill would require the board to promulgate necessary regulations and prepare annual reports to the Legislature, with aggregate data received by PBMs.
A majority of states have passed bipartisan legislation regulating PBMs. Twenty-five states require licensure, 15 require registration, and two require certification.
What’sup, California?
The association advocates legislation that would require PBMs to be licensed by a regulatory body that has authority to enforce laws and it would require PBMs to file an annual transparency report with the regulatory body, informing about its aggregate costs, fees, rebates, and other financial reports.Ideally, the association maintains,California law should limitPBMs’abilitiesto steer patients to their preferred pharmacies and prohibitthe use ofuntrue, deceptive, or misleading advertisem*nts.
While lobbyists lobby and legislators dawdle, like many independent pharmacies, Point Dume Pharmacy is barely hanging onand thosein Malibu who used to count on it are stuck in traffic as they travel — often in congested beach traffic — all the way to central Malibu just to get their prescriptions.
