As state legislatures grappling with budget shortfalls search high and low for every possible angle to cut costs, big insurance companies and pharmacy benefit managers have managed to convince a handful of states to transition their Medicaid programs into a “Managed Care” model.
The insurers and PBMs promise the legislatures big savings – though it’s not clear they will deliver – and encourage the states to hand over taxpayer dollars for Medicaid to Fortune 500 companies and cut independent pharmacists and their customers out of the loop.
In the private sector, benefits managers should take a careful look at their existing contracts with their pharmacy benefit manager to make sure the contracts are transparent and any savings are being passed from the PBM to the employer. The oldest trick in the PBM playbook is to encourage benefits managers to sign misleading contracts which prohibit the plan sponsor from knowing how much the PBM is reimbursing the pharmacist. That lack of transparency allows the PBM to overcharge the employers for prescription drugs and pocket the difference as profit.
Now, partnerships between lucrative PBMs and insurers in the public sector are showcasing a different vicious element of the PBM model. The new managed care system encouraged by the PBMs has driven pharmacy reimbursement rates increasingly lower, forcing many pharmacies to close and vastly reducing patients’ access to care.
As the Texas Tribune recently reported, since Texas transitioned to a managed care system in March, 26 independent pharmacies have closed or been sold to retail pharmacy chains. Additionally, the average reimbursement fee paid to pharmacists for Medicaid prescriptions fell from $7.13 to $1.53. Throughout the year, the problem is only likely to get worse as independent pharmacies feel increasingly squeezed and are forced to close. That means Medicaid patients have less freedom to choose their pharmacy and pharmacy customers who depend on rural, independent pharmacies for access to care will have to find another way to get their medications.
When Kentucky transitioned its Medicaid program to a managed care system in November, independent pharmacists experienced an 80 percent reduction in professional fees and draconian cuts to drug reimbursement. The three managed care organizations that took over Kentucky Medicaid are trying to balance the entire budget on the backs of independent pharmacists because other healthcare providers were able to negotiate collectively for better rates. As Florida begins a similar transition to managed care in July, we can expect the same results.
For years, the PBM industry has been a thorn in the side of employers and pharmacists looking to provide customers with quality access to care and medications. The most recent power-grab for Medicaid is yet another example of why the industry needs more regulation.