Editorial: Pharmacy middlemen merit tougher regulations, scrutiny

If Indiana hasn’t already launched an investigation into the less-than-transparent world of pharmacy benefit managers, it should.

These huge companies—including Express Scripts, OptumRx and CVS Caremark—operate as middlemen among pharmacies, drugmakers and health insurance plans to negotiate prescription drug prices.

They say they are saving consumers billions of dollars a year by demanding lower prices. But they are less than forthcoming about how big a slice of the pie they are keeping for themselves. And, as IBJ’s John Russell reported last week, that lack of transparency has caused critics to accuse them of siphoning off billions that should go to patients as savings at the pharmacy counter.

Several states are investigating the industry or have reached settlements with a pharmacy benefit manager, also known as a PBM, which has repaid millions of dollars after being accused of overcharging state Medicaid or Medicare plans.

Trade journals such as Modern Healthcare and Fierce Pharma have reported that Indiana is among the states rumored to be investigating the industry. But Hoosiers don’t know that for sure because Indiana Attorney General Todd Rokita’s office hasn’t responded to IBJ’s request to discuss the issue.

Indiana lawmakers have attempted to regulate the industry, but their regulations haven’t really taken hold.

Legislation was passed in 2020 to allow for the implementation of licensing rules and reporting requirements for PBMs. But the Indiana Department of Insurance still hasn’t finalized the rules, so little oversight is actually occurring.

The Legislature also ordered the state Medicaid program to audit its pharmacy benefit manager. But that hasn’t happened yet, either.

If Indiana officials would get on the stick, perhaps they could actually do something to help control the health care costs they so loudly bemoan.

Certainly, Indiana’s hospital and insurance prices need to be examined, as legislative leaders already have pointed out.

A letter sent by House Speaker Todd Huston and Senate President Pro Tem Rodric Bray earlier this year asked Indiana hospital and insurance executives to come up with a plan to lower “out-of-control” health care costs. The letter noted that expenses charged by Indiana hospitals to cover their overhead and keep the doors open are the fifth-highest in the country, according to a 2020 study by the RAND Corp.

An easy first target that could immediately make a difference in lowering health care costs would seem to be the pharmacy benefit middlemen.

Several state Medicaid programs already have reached settlements with St. Louis-based insurer Centene over its PBM practices. It has agreed to pay $13.7 million to New Mexico, $27.6 million to Kansas, $88 million to Ohio and $55 million to Mississippi. The Federal Trade Commission also has launched an inquiry into the PBM industry.

Hoosier consumers and taxpayers also deserve assurances they aren’t being overcharged.

That’s why we urge Indiana’s Republican legislative leaders to rev up regulations on PBMs and encourage their favorite attorney general to give the industry a hard look as well.•

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