Arkansas Governor Sarah Huckabee Sanders has signed a bill barring pharmacy benefit managers from also owning pharmacies,
According to Sanders, PBMs take advantage of this lax environment to inflate drug prices and cut off access to critical medications.
"These massive corporations are attacking our state because we will be the first in the country to hold them accountable for their anti-competitive actions, but Arkansas has never been afraid to be a conservative leader for America," said Sanders.
Arkansas Attorney General Tim Griffin concurred, saying PBMs have taken advantage of their position as price negotiators to benefit the pharmacies they own and operate. They do this, he said, by distorting the market and forcing out smaller, independent pharmacies.
"And Arkansas consumers lose because we pay higher prices for drugs we rely on every day," said Griffin.
WHAT'S THE IMPACT
Pharmacy benefit managers negotiate drug prices between pharmacies and insurance companies. But the governor's office maintains that for years they've been snatching up pharmacies with an eye toward inflating pharmaceutical prices and pushing competitors out of business.
The American Medical Association released data in September showing that the four largest pharmacy benefit managers in the country control roughly 70% of the national market. The analysis, based on 2022 data on commercial and Medicare Part D prescription drug plan (PDP) enrollees, also found a high prevalence of vertical integration of PBMs with health insurance companies.
CVS Health is the largest PBM (with a 21.3% market share), followed by OptumRx (20.8%), Express Scripts (17.1%) and Prime Therapeutics (10.3%).
Sanders previously announced $1.5 million in fines against four major PBMs that routinely skirted Arkansas law – the largest pharmaceutical enforcement action in Arkansas history. Just this week, Griffin led a bipartisan group of 38 other state and territory attorneys general in writing a letter to congressional leadership requesting action to prevent anti-competitive PBM practices.
"Over the past few decades, horizontal consolidation and vertical integration have transformed PBMs from useful administrative service providers into market-dominating behemoths that control the industry," the letter read. "The PBMs' affiliated pharmacies are major players in the market – representing three of the top five largest pharmacies in the United States by revenue. In addition to owning pharmacies, PBMs also contract with non-affiliated pharmacies, including independent pharmacies, to create pharmacy networks that control where their members can get their drugs and at what prices.
"This creates the situation where the PBMs – through ownership of affiliated pharmacies – are contracting with and have power over their own pharmacies' competition. The PBMs then use their place as middlemen to exert this power in ways that harm independent pharmacies."
THE LARGER TREND
The "Big 3" pharmacy benefit managers – CVS Caremark, Express Scripts and OptumRx – mark up specialty drugs at their affiliated pharmacies by hundreds or even thousands of percent, according to an interim staff report published by the Federal Trade Commission in January.
Such significant markups allowed the largest three PBMs and their affiliated specialty pharmacies to generate more than $7.3 billion in revenue from dispensing drugs in excess of the drugs' estimated acquisition costs from 2017 to 2022, the report found.
These PBMs netted significant revenue at a time when patient, employer and other healthcare plan sponsor payments for drugs steadily increased on an annual basis, the FTC said.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.