A new report claims that Massachusetts taxpayers are footing the bill for $25 million in inflated charges to the state’s Medicaid program by pharmacy benefit managers and the insurers that hire them.
The report, commissioned by the Massachusetts Independent Pharmacists Association, examined pharmacy reimbursement trends and claims a lack of oversight of PBMs has enabled them to continue to hit the state, its residents and its businesses, despite recommendations from Massachusetts’ Health Policy Commission in 2019 that the state ensure PBM pricing strategies are not used to inflate profits.
“For years we have known the nefarious practices by PBMs — and insurers who allow this practice to continue — has cost residents tens of millions of dollars in unnecessary taxes, as well as inflated costs for individuals and businesses,” said Todd Brown, executive director of the Massachusetts Independent Pharmacists Association.
The report, authored by 3 Axis Advisors LLC, claims that pharmacy benefit managers are charging insurers sometimes upwards of 100% more than the recommended cost of prescriptions. This “spread pricing” serves only to increase PBM profits, the report said, and that cost gets passed along to taxpayers.
Greg Lopes, a spokesman for the Pharmaceutical Care Management Association, which represents PBMs, said spread pricing is not unique to pharmacy benefit managers.
“The health plan sponsor hiring a PBM always has the final say on contract terms; PBMs don’t choose spread-pricing contracts,” Lopes said in an email. “PBMs constantly look at the marketplace and pricing for generics and establish benchmark acquisition prices in order to incentivize pharmacies to best manage their generic drug inventory and make sure our clients don’t overpay.”
A spokeswoman for the Executive Office of Health and Human Services said that Massachusetts’ Medicaid program, MassHealth, does not contract with PBMs but does have contracts with managed-care plans that use PBMs for pharmacy claims management for both their Medicaid and non-Medicaid patients.
As part of the fiscal 2020 budget, she said, MassHealth codified requirements on managed care plans to improve PBM transparency.
Gov. Charlie Baker’s health care bill also proposed managing high drug costs by increasing state oversight and authority over PBMs through Division of Insurance certification, restricting them from including gag clauses in contracts and requiring that pharmacists ensure consumers pay the lowest cost for prescriptions. But the bill was not enacted by the Legislature.
