A bill
that seeks to control the rising cost of prescription drugs while also offering
financial help for many small, independent pharmacies in Illinois cleared the
General Assembly May 31 and has been sent to Gov. JB Pritzker for his
signature. The bill, known as the Prescription Drug Affordability Act, would
put new regulations and impose new fees on a large but little understood
segment of the prescription drug industry — pharmacy benefit managers, or PBMs.
“This really restricts the
ability of PBMs to extract large amounts of money out of the prescription drug
system,” Sen. Dave Koehler, D-Peoria, the bill’s chief Senate sponsor, said in
an interview.
PBMs act as a kind of
third-party intermediary in the insurance industry who manage prescription drug
benefits on behalf of insurance plans. They do that by negotiating prices with
drug manufacturers, setting reimbursement rates paid to pharmacies, developing
formularies or “preferred drug lists” and maintaining pharmacy networks where
insured individuals get their prescriptions filled.
But they have also come under
criticism in recent years for being too closely integrated with some of the
nation’s largest retail pharmacy chains and for helping drive up the cost of
prescription drugs, often at the expense of smaller, independent community
pharmacies.
“They extract extra profit from
patients through opaque and often predatory tactics,” Pritzker said in calling
for the legislation during his State of the State address in February. “Not
only are they driving up health care costs for Illinois families by hundreds of
millions of dollars per year, but they are also putting small, local,
independent pharmacies out of business.”
Many large PBMs, such as CVS
Caremark, a subsidiary of CVS Health, also either own or are affiliated with
large retail chain pharmacies. Critics of their practices argue they use their
position to steer patients to their own pharmacies, often to the detriment of
smaller, independent pharmacies. That has resulted in what some people call
“pharmacy deserts” in many small towns, rural areas and low-income urban
communities.
“PBMs routinely reimburse my
pharmacy below cost for brand-name prescriptions, medications where they’re
already pocketing massive rebates from drug manufacturers,” David Bagot, an
independent pharmacist from Petersburg who is also president of the Illinois
Pharmacists Association, told a Senate committee. “Meanwhile, they pay their
own affiliated pharmacies – including PBM-owned community, mail-order and
specialty pharmacies – much higher rates for the same medications.”
The bill would prohibit PBMs
from steering insured patients to their own affiliated pharmacies, either by
requiring them to use a particular pharmacy or by forcing the patient to pay
more for their medications if they use a different outlet.
It would also prohibit the
practice of “spread pricing,” or charging an insurance plan one price for a
given drug while reimbursing pharmacies at a lower rate for that same drug and
pocketing the difference.
In addition, the bill calls for
levying a $15 per-enrollee fee on PBMs to pay the cost of administering the
bill and to fund grants to provide financial support for community pharmacies
in rural counties, low-income communities and medically underserved areas.
The bill calls for funding $25
million a year for those grants, which would be administered by the Department
of Commerce and Economic Opportunity. The fee, however, could generate as much
as $170 million a year, according to some estimates, meaning it could produce significant
excess revenues.
Rep. Natalie Manley, D-Joliet,
the lead House sponsor of the bill, said the numbers in the bill will likely be
adjusted in the future once it becomes clearer how much money the fee generates
and how many community pharmacies meet the qualifications to receive grants.
“I imagine we’re going to know
pretty quickly once the Act becomes law how many pharmacies are going to need
relief,” she said during floor debate in the House.
The bill also would require
PBMs to remit 100% of the money they receive in the form of rebates from drug
manufacturers to the insurance plan sponsors. And it would require them to
disclose to state regulators how much they receive in rebates each year.
Pharmaceutical industry
lobbyists argued many provisions of the bill, including the fee levied on PBMs,
will actually end up being passed on to insurance plans and consumers, thus
resulting in higher prescription drug prices.
“This is not a prescription
drug affordability bill,” said Lori Reimers, lobbyist for the Pharmaceutical
Care Management Association. “Costs will rise. When you give more money to
pharmacies, when you restrict tools that lower cost, the cost of insurance and
health plans are going to go up on your constituents.”
Reimers noted that since 2016,
Illinois lawmakers have enacted 20 new laws pertaining to PBMs including laws
granting the state Department of Insurance regulatory powers over PBMs, all
with the intent of bringing down drug prices.
“And I don’t think anybody’s
here saying that drug prices have gotten lower yet,” she said. “But here we are
with a much bigger bill.”
The bill passed the Senate with
bipartisan support, 56-1. Sen. Dave Syverson, R-Cherry Valley, cast the only no
vote.
It passed the House 115-1, with
Rep. Jeff Keicher, R-Sycamore, casting the only no vote and Rep. Jay Hoffman,
D-Swansea, voting “present.”
Pritzker said in a statement
after the final House vote that he looks forward to signing the bill.
“For far too long, pharmacy
benefit managers’ business practices have operated with little regulation,
transparency, and accountability,” he said. “Illinois is putting an end to
that. We will lead the nation in bringing transparency to PBM drug pricing.”
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