The goal of the bill is to give Indiana a “seat at the table” to play a role in negotiating rebates, pricing, distribution and dispensing fees — hopefully increasing transparency and lowering prices in the process. That public-private partnership doesn’t just mean that Indiana will choose a PBM to handle its benefit. The state itself will own the PBM as part of that relationship. (Abigail Ruhman/IPB News)
Pharmacy benefits managers, or PBMs, are meant to act as a middleman between drug manufacturers and insurance companies, with the goal of lowering prices. But, some lawmakers are concerned that a lack of transparency and oversight is leading to increasing costs.
A Senate committee approved legislation that would create public-private partnerships to oversee pharmacy benefits for all state plans, such as Medicaid and state employee health plans.
The goal is to give Indiana a “seat at the table” to play a role in negotiating rebates, pricing, distribution and dispensing fees — hopefully increasing transparency and lowering prices in the process. That public-private partnership doesn’t just mean that Indiana will choose a PBM to handle its benefit. The state itself will own the PBM as part of that relationship.
The author of Senate Bill 503, Sen. Andy Zay (R- Huntington), said other states that have done this — like Kentucky and Ohio — have created strong partnerships that gave them some degree of control over the growth of pharmacy benefits managers within the health care industry.
“We are the ones that serve our communities,” Zay said. “We are the ones accountable to those dollars. And so I believed, we need to create as much competition, as much opportunity, at the point of contract, as we can.”
There are 48 PBMs registered in Indiana, but the bill does lay out some significant guidelines to ensure the state doesn’t partner with a PBM that has a competing interest. Under the guidelines, any PBM that owns a pharmacy, has a financial relationship with a drug manufacturer or is affiliated with an insurance company would not be considered.
The PBM would also not be allowed to have any investments or other financial relationships with a pharmacy, a pharmacy network or pharmacy group purchasing organization.
Phil Christofanelli, with the Pharmaceutical Care Management Association, said those guidelines could create an issue.
“The way we read that language is it possibly excludes all PBMs from being able to participate in the public bid,” Christofanelli said.
Lawmakers have raised concerns about how vertical integration in the pharmaceutical industry is contributing to rising costs for years. This refers to when one company owns multiple parts of a certain supply chain, such as a company owning a PBM, a pharmacy and a drug manufacturer.
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Earlier attempts at understanding the PBM space and the relationship it has with the state plans included an audit of the major PBMs for Medicaid and the state employees' health plan.
That audit was originally presented to the Health Care Cost Oversight Task Force last year. However, the audit was missing information because some PBMs had not shared all the necessary data. At the time, Zay pointed to this as another sign of a lack of transparency.
During the Senate Health and Provider Services Committee meeting, Zay said he was reluctant to get involved in the space because pharmacy benefits represent such a complicated space. But addressing rising health care costs requires lawmakers to control what they have the ability to control. He said this bill gives them the chance to create competition on the front end of the contract and transparency throughout the rest of the process.
“We will have full transparency throughout the process and put ourselves squarely in the middle of the rectangular and convoluted mess of pharmacy benefit managers,” Zay said.
The bill also increases transparency and oversight by requiring the attorney general’s office to designate or appoint a “pharmacy benefit compliance officer.” The compliance officer would be responsible for auditing data on the pharmacy benefits for the state plans.
If they find that the pharmacy benefit partner that the state enters into an agreement with is violating their agreement, they would be responsible for imposing a civil penalty. They would also be required to submit an annual report to the state budget committee and the Health Care Cost Oversight Task Force.
The bill now heads to the Senate Appropriations Committee.
Abigail is our health reporter. Contact them at aruhman@wboi.org.
