Senate Bill 154: Pharmacy Relationships

The following article was written by Sen. Tom Patton (R-Strongsville) who recently introduced SB 154 which seeks to prohibit PBMs that have a relationship with a retail pharmacy from using that relationship to the detriment of consumers and the competitive disadvantage of other retail pharmacies in Ohio. 

On January 12, 2010 the Senate Insurance, Commerce and Labor Committee held its first hearing on Senate Bill 154, which I have introduced. 

The idea for this legislation was brought to me by retail pharmacies in my district in Northeast Ohio. I have no doubt that individual pharmacies throughout the state are equally troubled by the actions of a pharmacy benefit manager company, otherwise known as a PBM. The bill is designed to prohibit a PBM from using its wholly owned retail pharmacy to the detriment of Ohio consumers and the competitive disadvantage of other retail pharmacies throughout Ohio.

Let me explain. Initially in their evolution, PBMs acted as third-party administrators of prescription drug programs. They were primarily responsible for processing and paying prescription drug claims. They were also responsible for developing and maintaining a formulary, contracting with pharmacies and negotiating discounts and rebates with drug manufacturers. Their role was not to fill the prescription but to manage the process and the cost. The PBM could be hired directly by an employer or they could be hired by the employer's managed care organization or HMO.

In time, PBMs began not only purchasing prescription drugs; they started offering the drugs for sale direct to consumers via mail order. As we know through personal experience, purchasing a maintenance drug via mail order directly from the PBM is incentivized by smaller a co-pay or other economic benefit. 

A PBM has a very powerful relationship with the pharmacies it deals with. A PBM controls the level of reimbursement, knows what drugs are dispensed, who the customers are, the purchase price and the volume of sales. Pharmacies are dependent on the business secured through a PBM.  Thus, pharmacies must accept PBM contracts on a take it or leave it basis. 

Most recently, one PBM purchased and merged with a large retail drug store chain. As a result, this PBM can purchase directly from manufacturers, create formularies, provide mail order service, as well as, offer drugs for sale at retail in their stores. While this complex vertical integration may sound efficient and an example of the free market, it has clearly put all other Ohio retail pharmacies at a disadvantage and more importantly our consumers in potential danger.

If the company you work for has hired this PBM, obviously they know the drug and dosage that you are prescribed. Historically, you could purchase those drugs via mail order or at various retail outlets depending on whether or not your local pharmacy was part of this PBM's provider panel. While you could purchase your prescription at any location, your co-pay more than likely would vary.

Beginning in 2009, this PBM began a practice of prohibiting consumers from purchasing their maintenance drugs from other pharmacies regardless of the co-pay. Equally as troubling, they began contacting consumers at home either by letter or literally by phone instructing consumers that they can no longer go to their corner pharmacy to fill their needed prescriptions. They mandated consumers only fill their prescriptions through their own retail outlet. Again, while this might sound like the free market operating, we are not talking about cans of soup or cell phones; we are talking about life sustaining prescription drugs. 

While I might not like it, I fully appreciate the varying co-pays whether a consumer uses a mail order service versus an in-panel or out-of-panel retail outlets. I object however to this vertical integration of companies fully prohibiting the purchasing of prescription drugs from other Ohio pharmacies.

I have been made aware that this practice and the merger of the two companies are under review by the Federal Trade Commission. It is currently unclear how long this review will take and whether it will produce any relief for Ohio consumers and Ohio pharmacies.

Ohio is a very diverse state of urban, suburban and rural communities and regardless of where one lives, they should have easy and convenient access to their much needed prescription drugs.

While I'm not a lawyer, I have tried to explain this anti-competitive and anti-consumer practice that is occurring here in Ohio, as well as, other states. I fully expect in future Senate hearings committee members will hear from consumers, Ohio pharmacists and lawyers who will explain the need for Senate Bill 154 in hopes of ending this current practice.

In order to help with my advocacy efforts, I encourage you to contact your State Senator or State Representative to urge them to support SB 154.  Please get involved in this important policy debate and join the efforts of the Ohio Pharmacists Association.