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Pharmacy benefit managers under...

Pharmacy benefit managers under Legislature’s microscope

By: Jeremy Pittari ,    Russ Latino - February 2, 2025

  • Legislation that requires data be collected and shared on how much money PBMs earn in rebates from drug manufacturers passed the House, awaits action in Senate.

The Mississippi House of Representatives has passed a bill that aims to provide public transparency to how much money is earned by pharmacy benefit managers (PBMs) and pharmacy services administrative organizations (PSAOs).

State Rep. Hank Zuber (R), chair of the State Affairs Committee, presented HB 1123 — authored by Speaker Jason White (R). Zuber described the measure’s goal as stopping “spread pricing.” Spread pricing occurs when a PBM negotiates a lower rate for a prescription, but charges an insurance company a higher amount than the negotiated rate. The PBM’s compensation for negotiating the lower rate is the “spread” between the two amounts.

“They’re going to be required to report the current wholesale cost for the drugs, the total rebate amount paid to each PBM and or PSAO,” Zuber told members. 

“Pharmacy benefits managers” (PBMs) were designed to reduce prescription drug costs for consumers. Because they work in conjunction with pharmacy networks that buy drugs in bulk, PBMs maintain leverage to negotiate lower prices and rebates with drug manufacturers. They also create “formularies,” which are approved drug lists designed to identify low-cost, preferred options for treating certain conditions.

According to the Pharmaceutical Care Management Association (PCMA), a trade association that represents PBMs, more than 275 million Americans have health insurance that includes PBM administered prescription drug plans, ranging from commercial health insurance to Medicare and Medicaid.

PCMA estimates that PBMs negotiation of lower drug prices will save health plan sponsors and consumers more than $1 trillion on prescriptions over the next ten years. That works out to $1,040 annually for each patient and their insurance provider.

Still, PBMs are not without critics who question whether they live up to their billing. The Biden White House targeted PBMs in recent years. Last July, the Federal Trade Commission released a report arguing that PBMs have become anti-competitive because of industry consolidation and vertical integration with pharmacies and health insurance plans.

Many independent pharmacists are also critical of the organizations. The National Community Pharmacists Associations claims PBMs actually raise drug costs for consumers because of the rebates they charge drug manufacturers to appear on their formularies. Other small pharmacies says that low reimbursement rates on prescriptions by PBMs sometimes result in tight or negative margins for independent pharmacies.

Zuber said HB 1123 will place Mississippi “on the forefront in this country whenever it comes to sunshine, transparency and reporting of drug rebate money and drug pricing.”

To make that reporting accessible to the public, the legislation requires the Board of Pharmacy to create a website to share required information. 

“Everybody will be able to see the statistics, the numbers that come back from this reporting requirement in Section 3 [of the bill],” Zuber said.

A requirement that the PBMs and PSAOs identify any and all ownership they may have in a pharmacy or pharmaceutical aggregators is also proposed in the bill. Rep. Zuber described the aggregators as a third-party brought in by PBMs as part of the relationship with states and private businesses. 

“They are a third party that is charged with nothing but keeping up with the rebate money, processing the rebate money and making sure it goes to the right people,” Zuber elaborated. 

Aggregators have at times not been subject to the state health insurance plan contracts, Rep. Zuber said, allowing leeway in whether they keep rebate money even if it is against the contractual terms outlined between a company or the state. 

This bill would also allow the Board of Pharmacy to conduct audits and investigations into PBMs, the aggregators, and PBAOs while protecting pharmacies from retaliation when the Board of Pharmacy is alerted to alleged improper conduct or if a pharmacy requests an audit be performed on a PBM or PBAO. 

During discussion of the bill, State Rep. Becky Currie (R), who chose not to have her vote recorded on the bill, said some pharmacists she has spoken to fear that the legislation will not lower prescription costs. She inquired as to why language that specifically aims to lower medication costs is not included in the bill. 

Rep. Zuber replied by saying the bill is the first step in ensuring medication prices are as low as they can be by gathering the required information. 

“Is some of the rebate money being kept by the PBMs? Is it better to go with a different kind of pricing?” Zuber asked. “But how can we do that until we get the numbers and data to verify which position we want to advocate for?”

State Rep. Stacey Wilkes (R), who opposed the measure, asked why the bill is moving forward as it is when the Independent Pharmacists Association pointed out that some aggregators operate outside of the country, leading to the Federal Trade Commission not being able to obtain information from them.

Rep. Zuber said that if an aggregator from out of the country is operating within the state of Mississippi, they are required to have a registered agent for process, who can be served and audited. 

Wilkes went on to say that the Board of Pharmacy has expressed concerns over the additional costs that would be incurred in collecting the required data. Speaker White has said he would support funding for additional staffing to meet the new expectations.

The legislation was ultimately passed by the House in 90-8 vote and will now be transmitted to the Senate for consideration.

About the Author(s)
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Jeremy Pittari

Jeremy Pittari is a lifelong resident of the Gulf Coast. Born and raised in Slidell, La., he moved to South Mississippi in the early 90s. Jeremy earned an associate in arts from Pearl River Community College and went on to attend the University of Southern Mississippi, where he earned a bachelor's of arts in journalism. A week after Hurricane Katrina, he started an internship as a reporter with the community newspaper in Pearl River County. After graduation, he accepted a full-time position at that news outlet where he covered the recovery process post Katrina in Pearl River and Hancock Counties. For nearly 17 years he wrote about local government, education, law enforcement, crime, business and a variety of other topics. Email Jeremy: jeremy@magnoliatribune.com
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Russ Latino

Russ is a proud Mississippian and the founder of Magnolia Tribune Institute. His research and writing have been published across the country in newspapers such as The Wall Street Journal, National Review, USA Today, The Hill, and The Washington Examiner, among other prominent publications. Russ has served as a national spokesman with outlets like Politico and Bloomberg. He has frequently been called on by both the media and decisionmakers to provide public policy analysis and testimony. In founding Magnolia Tribune Institute, he seeks to build on more than a decade of organizational leadership and communications experience to ensure Mississippians have access to news they can trust and opinion that makes them think deeply. Prior to beginning his non-profit career, Russ practiced business and constitutional law for a decade. Email Russ: russ@magnoliatribune.com
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