A publication of the Kentucky Center for Public Service Journalism

Legislature sends governor Medicaid drug measures to help independent pharmacies and consumers

By Melissa Patrick
Kentucky Health News

A bill to allow pharmacists to tell their patients the least expensive way to pay for their medications and one to put the state back in direct charge of its Medicaid drug program have received final passage and are on the desk of Gov. Matt Bevin.

Sen. Wise

A revised version of Senate Bill 5, sponsored by Sen. Max Wise, R-Campbellsville, would put the Medicaid department in charge of setting the reimbursement rates for pharmacists. These rates are now set by pharmacy benefit managers, hired by the Medicaid managed-care organizations that handle Medicaid for the state — but with no accountability to state Medicaid officials.

“The Kentucky legislature has spent an inordinate amount of time over the past several sessions of the General Assembly trying to play the role of policeman between PBMs and pharmacists,” Wise told the Senate. “The House committee substitute gives the Kentucky Medicaid department clear authority to police pricing terms and contracts.”

Wise has said he filed the bill because PBMs are paying independent pharmacies such low fees for dispensing prescriptions that many are at risk of closing. The fees are as low as 85 cents per prescription. The Centers for Medicare and Medicaid Services says it should be around $10.64, plus the cost of the drug being dispensed.

The pharmacy chain CVS has a PBM subsidiary that contracts with four of the five managed-care organizations. The chain has asked some independent pharmacies to place a value on their businesses and consider selling.

The original bill called for independent pharmacists to be paid this amount, but the Cabinet for Health and Family Services said this mandate would cost $36 million a year. That prompted the House to change the bill to say the Department for Medicaid Services would determine reimbursements.

The bill also allows the department to regulate contracts between the managed-care organizations, PBMs and pharmacists; requires more transparency in how the PBMs spend the $1.7 billion a year they get to process prescriptions; and gives the department and the Department of Insurance authority to penalize the MCOs and PBMs for noncompliance.

Rep. Meredith

The amended version of SB 5 passed the House 97-0 on March 20 and passed the Senate April 2 by a 37-0 vote.

House Bill 463, sponsored by Rep. Michael Meredith, R-Brownsville, would prohibit PBMs from requiring clients to make a co-payment that is higher than an optional cash-payment amount, and keeps PBMs from penalizing a pharmacy for telling patients if that option is available.

The practice of charging a co-pay that is higher than the full cost of the drug is called a “clawback,” because the PBM “claws back” the extra money from the pharmacy. For example, if a patient’s co-pay is $10, but the drug costs only $5, the PBM may require the pharmacist to charge $10 and not say it can be bought more cheaply; the PBM pockets the difference.

A recently published study at the University of Southern Californiausing data from 2013, found that customers overpaid for their prescriptions 23 percent of the time, with an average overpayment of $7.69, which totaled $135 million during a six month period, Kaiser Health News reports.

Meredith told the House that the PBMs support HB 463. It passed both houses without opposition.

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