SPRINGFIELD – As part of an effort to rein in the rising cost of prescription drugs in Illinois, Democratic state lawmakers introduced bills Wednesday to impose state regulations on a little-known industry, pharmacy benefit managers, or PBMs, who negotiate drug prices and benefits on behalf of insurance plans.
Speaking at a statehouse rally with scores of pharmacists from around the state, House Majority Leader Gregory Harris, of Chicago, and Democratic Sen. Andy Manar, of Bunker Hill, blamed that industry not only for manipulating drug prices, but also for pushing independent community pharmacies out of business — charges the PBM industry denies.
“So we’re here today to work on legislation that will outlaw predatory pricing practices, that will stop insurers and PBMs from disadvantaging local pharmacies and local pharmacists, and to make drugs more affordable to families and consumers across the state of Illinois,” Harris said at the rally.
PBMs generally work on behalf of health insurance plans to negotiate drug prices and develop what are called “formularies” — rules that determine what drugs will be covered for particular conditions, and in some instances, under what conditions those drugs will be covered.
In addition, in the case of high-cost drugs, PBMs will often set a “maximum allowable cost” that limits how much pharmacies will be reimbursed for a particular drug.
Independent pharmacies complain those maximum allowable costs are often less than the wholesale price they pay to manufacturers to obtain the drug. They also allege that certain PBMs have direct ties to large, retail chain pharmacies, such as CVS Health, which operates the nation’s largest chain of retail pharmacies and provides pharmacy benefit management services.
Harris and Manar introduced companion bills Wednesday — House Bill 465 and Senate Bill 652 — that would put PBMs under regulation by the Illinois Department of Insurance.
They would also put several restrictions on PBM operations, such as prohibiting them from putting a drug on a maximum allowable cost list unless there are at least three lower-cost generic equivalent drugs available on the market.
“No one regulates PBMs in the state of Illinois,” Harris said during an interview after the rally. “And this has been true across the country. In the last two years, this has become such an issue in so many states that, I believe now, 25 states are regulating PBMs and adopting similar principles we have here to cut down on the predatory pricing practices.”
An association that represents PBMs, the Pharmaceutical Care Management Association, portrayed the controversy as merely one branch of the prescription drug industry attacking another.
“We agree with…Harris that more can be done to address rising drug prices,” the association said in a statement. “However, legislation HB 465, promotes the special interest agenda of the independent drugstore lobby while having adverse effects on drug costs for Illinois consumers.”
The association has also argued that it is not to blame for the closure of small, independent pharmacies. Those pharmacies, it said, are at a natural competitive disadvantage because they do not have the purchasing power to negotiate the same kind of prices with wholesalers that PBMs can negotiate.
Harris said the next steps for the bills will be for House and Senate leaders to assign them to committees that will hold hearings on the issue later in the session.