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'To me, that's fraudulent': Bipartisan Ohio lawmakers vow to fix loophole exploited by PBMs

The Columbus Dispatch

A bipartisan duo of Ohio legislators are outraged that the measure they sponsored more than two years ago to ban a controversial tactic by pharmacy benefit managers might not work as planned.

And they vow to fix the problem that they say hurts pharmacies nationwide.

"We will not simply watch the PBMs destroy the industry as they take unwarranted profits," said Rep. Scott Lipps, a Republican from near Cincinnati who chairs the House Health Committee.

His Democratic colleague, Rep. Thomas West of Canton, agreed:

“I’m tired of the game, and I just hope we get to the bottom of it and move forward.”

How Pharmacies are forced to swallow drug middlemen 'clawbacks'

In 2019, Lipps and West united to eliminate a practice dubbed "clawbacks" by pharmacy benefit managers, who are middlemen in the drug supply chain. Three PBMs, multibillion-dollar companies that are part of some of the largest corporations in the world, dominate more than 75% of the business.

Since the big PBMs are near-monopolies, they essentially can dictate terms of complex contracts needed by local pharmacies to obtain prescription drugs. In recent years, as revealed by The Dispatch, the PBMs have built clawbacks into contracts.

What that means is that, even months after a drug transaction is supposedly finalized, the PBM can "claw back" additional revenue from the pharmacy if the PBM determines it didn't receive enough money initially. Pharmacists, some of whom already are financially beleaguered, say they can't afford an additional, unexpected hit that takes away as much as 7% of their annual revenue.

Spokespersons for the PBMs say all of these "effective rate" contracts are meant to lower drug prices for consumers. The PBMs blame pharmacy services administrative organizations, which are hired for a couple of hundred dollars a month by pharmacies to handle the transactions under the PBM contracts.

But pharmacies, such as Fruth, which serves southern Ohio, West Virginia and Kentucky, operate without the administrative organizations and still are charged clawbacks by the PBMs.

If problem lies with state law, 'We're going to get to the bottom of this'

The legislation sponsored by Lipps and West, which eventually was rolled into the state's two-year budget bill passed in July 2019, was among the first in America to combat clawbacks.

But now it appears the law might have two weaknesses that prevent its enforcement:

1. The law requires the managed-care organizations hired by the state Medicaid department to obtain clawback information from the PBMs they hire for the $3 billion-a-year prescription drug program for Ohio's poor and disabled. But whether the state also has jurisdictions over the PBMs to force such reporting is an open question.

2. The law centers on clawbacks on Medicaid "claims." In theory, since clawbacks by their very nature come retroactively after a claim is finalized, the law may not apply.

Medicaid Director Maureen Corcoran has been studying these issues since she was interviewed by The Dispatch in early summer... Continue Reading


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