VPM: Spanberger Calls For Oversight Of Pharmaceutical Middlemen


Catherine Cary has worked at Bremo Pharmacy, a Henrico family business started by her father, for her whole career. Now president and CEO, she’s seen the market price of drugs rise steadily in that time.

“For many years, a lot of the price of the medication was shielded from the public because their insurance was paying for it,” Cary said.

Now, she says more people see those costs directly – either because they’re uninsured, or their plan has them bearing a higher portion of the price. But it’s not as simple as changing insurance coverage or price inflation by drug manufacturers, Cary says Pharmacy Benefit Managers, or PBMs, are a big part of the problem.

PBMs are third-parties overseeing health plans for a variety of organizations and programs – private companies, federal and state bodies, Medicare Part D and more. They operate between pharmacies and insurers and have come to dominate a significant part of the American medical supply chain. The top three PBMs are run by Fortune 15 companies.

Generally, the stated goal of PBMs is to help consumers and insurance companies by providing competitive price points for name brand and generic medication – but it doesn’t always work that easily.

“I think that sometimes the way that they control costs doesn’t necessarily benefit the patient, it benefits them,” Cary said.

A Call for Transparency

Virginia Rep. Abigail Spanberger (D-7) told VPM that, with continuously rising out-of-pocket costs, the country’s drug pricing issue is overdue for a fix.

“It’s an overwhelming source of fear and anxiety for the people I represent,” Spanberger said. “I’ve heard it across the board.”

Spanberger said PBMs are a large, but relatively unknown, part of the problem – so she reintroduced a bipartisan bill this week that would register those companies and require oversight on where their money goes. A similar version of the bill passed the House of Representatives with a unanimous vote in 2019, but was left in a Senate committee.

Some states, including Virginia, have recently instituted their own regulations, but drug pricing is a national problem.

“You have local community pharmacists who desperately want to help their patients, and they are watching prices rise year after year and they don’t necessarily know why,” Spanberger said.

Cary sees that at Bremo. For instance, PBMs independently audit transactions and charge remuneration fees after medications have been dispensed to insured customers. The charges  often concern what Cary calls “technicalities.” For example, a $6,000 charge for a lack of written paperwork – even though much of Virginia’s pharmaceutical system is virtual.

There’s little federal data at this time  to quantify what Cary is talking about – hence the bill – but a new report from the Centers for Medicare and Medicaid Services found that PBMs raised retroactive costs to pharmacies for providing drugs to Medicare Part D participants alone by 91,500 percent from 2010-2019. State-level investigations have yielded similar results.

There are other confusing practices, too.

One of their major responsibilities is to manage formularies or the lists of prescription drugs available in insurance policies. PBMs organize rebates and offer discounted pricing for certain brands.

Sometimes, generic drugs that serve as cheaper and often equally effective alternatives don’t come with pharmacy rebates or just don’t turn up on formularies because the PBM gets their own rebate for buying brand name.

“Is that kickback shared with the patient?” Cary asked. “Those are the question marks.”

Cary said even from her perspective, there are a lot of unknowns – largely because of the lack of state and federal oversight on PBM cash flows.

“It’s very complicated,” she said. “It’s my field, and I have a hard time understanding it.”

Spanberger’s basic point is that there is a clear need to regulate and oversee any company with the size, revenue and influence of PBMs. She points to ExpressScripts – a company that brought in a self-reported $100 billion in 2016.

That’s more than what Johnson & Johnson, the country’s largest pharmaceutical manufacturer by revenue, made in the same year. But Spanberger says the way that money is circulated is something of a mystery.

“Without transparency in what those fees and rebates are, it becomes very, very difficult for me as a legislator to fully understand the scope of the problem.” Spanberger said.

Christina Barrille, executive director at the Virginia Pharmacists Association, also pointed to growing antitrust concerns regarding PBMs.

“You’ve seen this vertical integration model where you have insurance companies that are buying Pharmacy Benefit Managers that also own pharmacies,” Barrille said.

She pointed to the PBM CVS Caremark, and said there’s no federal law compelling them to offer the same negotiated prices and rebates to non-CVS pharmacies, like Bremo – and although independent pharmacists have called out unfair practices, the lack of data is still an issue in understanding the problem.

Cary is hopeful increased oversight would alleviate some of the burden on her and other independent pharmacists and change some of the PBM activities she sees as unethical.

“The type of practices that, you know, just make you shake your head and say ‘no, you’re not preventing fraud, waste and abuse, you’re drumming up money from legitimate claims that were paid to pharmacies to take care of patients.’”

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