House moves to limit middlemen’s cut from drug sales, pass savings to consumers

House Speaker Ron Mariano, pictured here in at the State House in early June, says the House will move to prevent Pharmacy Benefit Managers from making a fortune on the backs of patients. (Nancy Lane/Boston Herald)

Massachusetts lawmakers are pushing for a change in the way prescription drug prices are calculated by taking aim at “pharmacy benefit managers” or PBMs.

At present, according to state House Speaker Ron Mariano, the way the prescription drug industry is structured serves only to line the pockets of PBMs, while many patients struggle to afford life-saving medications.

“Many folks in Massachusetts face cost barriers in access to the medications they are prescribed, especially for many of our most vulnerable residents who live with chronic disease. This bill aims to reduce the out-of-pocket cost of certain lifesaving drugs and ban certain business practices that are commonly used by PBMs to increase their own profits at the expense of patients,” Mariano, of Quincy, said in a statement.

According to the House Speaker’s office, An Act promoting access and affordability of prescription drugs would ban “many of the industry’s worst business practices; increasing transparency into PBMs and drug manufacturers through the Health Policy Commission (HPC) and the Center for Health Information and Analysis (CHIA); and reducing or eliminating copays for certain chronic conditions.”

“Critically, this legislation also builds on the four major health care bills that the House has already passed this session, all of which are focused on increasing access to quality, affordable health care for people across the Commonwealth,” Mariano said.

The bill’s introduction comes on the heels of a report by the Federal Trade Commission that shows the “undue influence” that PBMs — the middlemen between pharmaceutical manufacturers and healthcare providers — exercise over the cost of prescription drugs.

According to the report, the nation’s three largest PBMs manage pricing on four out of every five prescription drugs, and the top six are in charge of nine out of 10.

“PBMs are at the center of the US pharmaceutical system. However, their outsized influence comes not only from the expansion of their traditional, middlemen administrative services in processing patients’ pharmacy prescription claims, but also from decades of consolidation and vertical integration across the healthcare delivery system,” the report reads, in part.

CVS states, however, PMBs play “a critical role in the health care system by negotiating low net costs.”

If adopted and made law, the bill would impose a three-year license requirement and a $25,000 PBM licensing fee. It would mandate audits of PMBs by the Massachusetts Division of Insurance during each three year period, and “provides for periodic audits by health insurers who contract with PBMs.”

The bill would prohibit the industry practices of paying pharmacies less for drugs than health insurers agree to cover and keeping the difference, otherwise known as “spread pricing,” and prohibit “point of sale fees and retroactive fees” while imposing a 10% surcharge for PMBs who violate the rules.

The bill requires insurers and PMBs to send 80% of rebates received by either entity to consumers at the point of sale.

The House bill, according to the chair of the Joint Committee on Health Care Financing, Watertown’s state Rep. John Lawn, shines “a light on pharmacy benefit managers, whose deceptive business practices increase drug prices, decrease transparency, and harm consumers and independent pharmacies.”

Mariano said the full House will vote on the measure on Wednesday. A similar bill has already passed through the state Senate.