Dissatisfied with state efforts to rein in pharmacy middlemen, an Ohio lawmaker has introduced sweeping legislation aimed at controlling prescription drug prices.

House Bill 396 by Rep. Tavia Galonski, D-Akron, would place numerous restrictions on pharmacy benefit managers, the companies hired by health insurers to manage prescription drug benefits for beneficiaries, playing a significant role in drug costs.

Galonski said it's past time for Ohio to crack down on PBMs.

"I've been waiting to see what Medicaid was going to do, what the governor was going to do and it finally got to the point" of introducing a bill, she said. "Eventually someone has to get the conversation going."

Since coming to office more than two years ago, Galonski said, pharmacists have told her they're being run out of business by PBMs that pay them low rates to fill prescriptions, often below below their actual cost. And when pharmacies close, it can make it harder for patients in urban and rural areas alike to access their medications.

Antonio Ciaccia,spokesman for the Ohio Pharmacists Association, said "the backlash against the status quo in pharmacy benefits continues, and Representative Galonski’s bill is just the latest valiant attempt to end the ongoing rip-offs that are plaguing governments, employers, and patients. The drug supply chain needs sterilized, and lawmakers have a great vehicle in order to do it with this new legislation."

Akron-area pharmacist Barry Klein said the legislation would provide much needed relief to financially squeezed independent pharmacies as lawmakers debate what to do about PBMs.

"The drug spend is higher, pharmacy reimbursements are lower, so where's the money?" Klein asked.

He said low reimbursements have forced many to sell out or close. In northeast Ohio, the Ritzman Pharmacy chain earlier this year sold 20 of its pharmacies to CVS, which said it would close 17 of them. And, Klein recently closed one of his four pharmacies, the one in downtown Akron.

The national association representing pharmacy benefit managers disputed claims that pharmacists are underpaid.

“The legislation caters to the independent pharmacy lobby, and does nothing to reduce drug costs. Over the last year, the independent pharmacies have already been subsidized approximately $138 million in Ohio," said Greg Lopes, spokesman for the Pharmaceutical Care Management Association, referring to money earmarked for pharmacists in the state budget and a recent increase in payments from PBMs.

"The sole focus for everyone in the prescription drug supply chain, including pharmacy benefit managers and pharmacists, should be making prescription drugs more affordable and more accessible for patients.”

Pharmacy benefit managers, or PBMs, negotiate discounts and rebates with drug companies and set rates paid to pharmacists. They also can impose restrictions such as effectively requiring patients to order drugs from mail-order or specialty pharmacies, many of which are affiliated with the PBM, raising concerns about self-dealing.

A Dispatch investigation launched more than 18months ago has shown how PBMs have pocketed millions in Ohio’s tax-funded Medicaid program for the poor and disabled. Medicaid spends about $3 billion a year on prescription drugs. The two companies, CVS Caremark and OptumRx, billed the state far more than they paid pharmacists to fill prescriptions for Medicaid patients.

An analysis commissioned by the state found the PBMs kept $224 million for themselves in a single year under the system known as “spread pricing.”

The PBMs say they have helped to lower drug prices and save taxpayers money. Critics question whether PBMs are passing along rebate savings and pharmacists say low reimbursements are forcing some out of business.

House Bill 396 would impose numerous restrictions on pharmacy benefit managers, including bans on:

• Spread pricing

• Retroactively denying a claim after it has been adjudicated with some exceptions, including fraud

• Reducing payments to pharmacists for dispensing a medication through after-the-fact fees and similar adjustments

• Reimbursing pharmacists an amount less than the national average drug acquisition cost, known as NADAC, which is based on data provided by retail pharmacies

The legislation also would require PBMs to report quarterly to the Department of Insurance financial details including: how much they receive in rebates from drug companies and how those funds are distributed to insurers and others; how much PBMs are paid; and how much they in turn pay pharmacists.

Insurance department spokesman Robert Denhard said the agency had no immediate comment on Galonski's bill.

"We are aware of the legislation that was introduced this week and are in the process of reviewing it," he said.

Likewise, Medicaid spokesman Kevin Walter said department officials also were reviewing the bill and had no comment.

In the past year, Gov. Mike DeWine and the Ohio General Assembly have taken several steps to crack down on PBMs in the Medicaid program.

Shortly after taking office in January, DeWine ordered Medicaid to rebid contracts with managed care companies to rein in pharmacy benefit managers, although that won't take effect until early 2021. Medicaid officials also banned the use of spread pricing and implemented a more transparent "pass-through" payment system which requires pays PBMs a set fee and requires them to pay pharmacists the same amount they bill the state.

Medicaid also hopes to better manage costs by using just one PBM across the program and implementing a single formulary of drugs covered by the program. Currently, each managed care plan hires its own PBM which decides which medications will be covered.

State Rep. Mark Romanchuk, R-Mansfield and chair of the Joint Medicaid Oversight Committee, said the panel has been closely studying PBM concerns and later this month will hear testimony from a national expert on the effectiveness of Medicaid's new pass-through payment model.

ccandisky@dispatch.com

@ccandisky