Lawmakers explored ways to reduce taxpayer burden to the insurance plan that covers state employees, but the conversation largely turned toward scrutinizing the practices of drug middlemen.
“Over the last 10 years, the cost of pharmaceuticals to the state health insurance plan to the taxpayers has increased 60%,” House Insurance Committee Chairman Hank Zuber said. “That is unsustainable. We cannot continue down that path.”
The health insurance plan, which covers about 200,000 state employees and retirees, is overseen by the Department of Finance and Administration, but benefits are administered by Blue Cross & Blue Shield of Mississippi and CVS Caremark to deliver drugs to enrollees.
Pharmacy benefit managers, commonly called PBMs, are subcontractors often hired by health plans or employers to manage drug benefits, negotiate drug pricing with manufacturers and reimburse pharmacists.
Part of PBMs’ job involves negotiating rebates and other discounts from drug makers, and in exchange they provide preferred placement to a drug makers’ product.
Over the last few years, as consumers have started to pay more for prescription drugs and independent pharmacies are claiming they are losing money selling drugs, the role of PBMs have come under increased scrutiny.
Representatives of PBMs say they save taxpayer dollars by controlling the annual price to administer insurance benefits. But critics of PBMs say the process — however well intentioned the goals — have become distorted to enrich the pocketbooks of managed care organizations.
One thing is for certain — managed care corporations make large profits. CVS Health and UnitedHealth are among the richest companies on Fortune 500’s annual list.
Michael Power, director of state affairs of the Pharmaceutical Care Management Association, estimated that the various PBMs with which the state contracts save Mississippi about $1 million each year.
“You think the share that the state would receive would be just a little bit larger than just a $1 million, wouldn’t you?” Senate Medicaid Chairman Kevin Blackwell said.
“I don’t have those numbers before me from the state, so I can’t,” Power answered.
“Well, I would,” responded Blackwell, R-Southhaven.
PBMs say that drug manufacturers have the ultimate responsibility to set drug prices, and nothing is stopping them from selling their products to wholesalers at a cheaper rate.
But Zach Poss, government relations representative for PhRMA, told lawmakers that to play ball in the larger game of having a successful business, manufacturers must cooperate with PBMs to gain a prime spot on their list of approved drugs.
As a result of the back-and-forth dance between the manufacturers and PBMs, bipartisan federal and state leaders have started to surmise that manufacturers are incentivized to keep list prices higher to give rebates to PBMs.
The hearing also turned to the national conversation surrounding the pharmaceutical industry and who is to blame for the increasing cost of drugs at the pharmacy counter.
Sen. Josh Harkins, a Republican from Flowood who is a realtor, compared the pharmaceutical industry to selling real estate in Mississippi.
The Rankin County lawmaker said that if he intentionally influenced buyers and sellers of a certain piece of property to try and obtain a greater commission fee, he would likely have his real estate license revoked for misconduct.
“You negotiate on behalf of the plan with the manufacturer,” Harkins said. “You also negotiate with the pharmacist. So you’re on both ends. You’re negotiating a price to buy the product and set the price of the product. You’re also setting the price for what the pharmacies are dispensing it for.”
The legislative hearing comes at a time when State Auditor Shad White’s office has signed an agreement with a data analytics firm to collect a large swath of information on the PBM — CVS Caremark — that helps administer the state health insurance plan.
Zuber, R-Ocean Springs, said he intends to conduct more hearings before the 2023 legislative session to try and find a long-term solution to reducing the money the state pays for the state health insurance plan.