Legislation to License Pharmacy Benefit Managers Delayed Until 2013

Known as PBMs, they act as middle men to siphon money out of the system, according to Rep. Jim Thompson

February 16, 2012 -- A bill that would require pharmacy benefit managers in Oregon to obtain a license, and renew it every year with the State Board of Pharmacy, has been moved out of the 2012 legislative session.

House Bill 4122 will, instead, be the subject of a workgroup in the interim. That workgroup will be chaired by Rep. Jules Bailey (D-Portland) and Rep. Jim Thompson (R-Dallas), the co-chair of the House Health Care Committee.

In an interview with The Lund Report, Thompson explained how those managers, or PBMs, fit into the pharmacy stream.

“It’s an entirely different system of doing business from the normal wholesale-buy, retail-sell program,” he said. “It’s caught up in a lot of things, like rebates from manufacturing drug companies that come in around the distribution points.”

Pharmacies buy products from one of three major national distributors and those products are put on the shelves to sell at a marked up price.

“It’s complicated by PBMs,” he continued, “who come into the system and contract to manage the system for an insurance company or for a big industry. What they do is go and negotiate prices for these drugs from manufacturers.”

He said PBMs are, essentially, middle men who siphon money out the system by simply moving dollars around.

“They contract with a pharmacy to sell the product to their patients at a set price,” Thompson said. “That has nothing to do with the price they’re paying, because nothing’s transparent. On top of that, any drug rebates they get back into the system from the drug companies they can keep.”

Earlier, two public hearings were held.

Bill Cross, representing the Oregon Society of Health System Pharmacists and Oregon State Pharmacy Association, told legislators he supported the licensing of PBMs.

“They’ve been relied upon to reduce prescription drug costs,” he said. “But they’ve come under increased scrutiny by the federal government and consumers, who’ve questioned whether they’re actually saving their client’s money.”

Cross also volunteered his organization to be part of the workgroup.

Ken Wells, of Junction City, a regional pharmacy manager for the Safeway chain and a member of the Oregon Board of Pharmacy, also testified. “House Bill 4122 will provide transparency of the pharmacy benefit managers, or PBMs, so that disclosure of cost negotiations … will allow insurance companies to ensure they’re not overpaying for the services provided.”

Wells said oversight should decrease the overall cost of insurance coverage.

“PBMs are entrusted with processing billions of dollars of prescriptions in this country,” he continued, “and have little or no oversight at the federal level or in Oregon, which is why this key legislation is necessary.”

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