Keystone Today

Pending legislation in Harrisburg aims to curtail the pharmacy desert-effect in the Commonwealth of Pennsylvania, a leading cause of which the bill's sponsors say are Pharmacy Benefit Managers (PBMs).

A PBM is a third-party administrator of prescription drug programs for health insurers, self-insured employers, and government agencies. PBMs negotiate with drug manufacturers to secure discounts and rebates on medications, manage pharmacy networks, and process prescription drug claims. PBMs also provide services such as medication therapy management and mail-order pharmacy services.

A July report from the Federal Trade Commission explained how “a vertically integrated and concentrated market structure has allowed PBMs to profit at the expense of patients and independent pharmacists.”

“The FTC’s interim report lays out how dominant pharmacy benefit managers can hike the cost of drugs – including overcharging patients for cancer drugs. The report also details how PBMs can squeeze independent pharmacies that many Americans – especially those in rural communities – depend on for essential care. The FTC will continue to use all our tools and authorities to scrutinize dominant players across healthcare markets and ensure that Americans can access affordable healthcare,” FTC Chair Lina M. Khan said.

The interim report also found that PBMs “hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities.”

The State of New York is currently leading the way in regulating PBMs, and the Commonwealth of Pennsylvania looks to follow. 

One such piece of legislation aimed at protecting independent pharmacies in the Keystone State is SB1000, sponsored by State Sen. Judy Ward (R-Hollidaysburg). Robert Frankil, a member of the state pharmacy board and the executive director of the Philadelphia Association of Retail Druggists (PARD) told Altoona Times that the bill “will not prevent PBMs from working with Pharma to lower drug costs” and that PBMs “control the networks and process claims for prescriptions, and use this leverage to generate rebates that they keep.”

“SB1000 will simply require transparency of the PBMs to show where these rebate dollars go,” Frankil said. “Our contention is the PBM keeps all or most of these rebate dollars. If they do not, and they share or pass on the rebates, then just show us.”  

Pharmacy deserts continue to expand as independent and chain pharmacies close amid growing financial pressures, particularly low reimbursement rates from PBMs, which act as intermediaries between insurance providers, drug manufacturers and pharmacies.

“There are around 70 PBMs in the U.S.,” reported NPR in July 2023. “Through mergers, three of them – CVS Caremark, Optum Rx, and Express Scripts – have come to control 80% of the prescription drug market, and each brings in tens of billions of dollars in revenue annually.”

According to 2022 data, about 540,000 rural Pennsylvania residents, or 27%, lived at least five miles from the nearest pharmacy, Kyle Kopko, executive director of the Center for Rural Pennsylvania, said. In urban counties, 151,000 people (2%) lived in such pharmacy deserts.

SB1000 would require the Pennsylvania Insurance Department to create a process for hearing and resolving complaints about PBMs. It would also restrict “patient steering” by PBMs, which is the practice of directing patients to specific pharmacies or pharmacy networks based on financial incentives rather than solely on patient need or preference.

SB1000 was referred to Rules and Executive Nominations on June 12 and appeared on the legislative agenda of a July 3 meeting of that group. It has not yet come to a floor vote.

Similar legislation, HB1993, was introduced in the Pennsylvania House of Representatives in April by State Reps. Jessica Benham (D-Pittsburgh) and Valarie Gaydos (R-Aleppo).

In a July 10 Pennsylvania Senate vote, HB1993 passed with 48 “Yeas,” one “Nay” and one “No Vote.” In a Pennsylvania House floor vote the following day, HB1993 passed with 172 “Yeas,” 30 “Nays” and one exemption.

A spokesman for the Pharmaceutical Care Management Association (PCMA), a trade group for PBMs, told 6 ABC News that SB 1000 would restrict PBMs’ ability to lower prices.