Pharmaceutical Industry Opposes California Efforts to Ban Discriminatory PBM Practices – State of Reform

Sen. Richard Pan (D-Sacramento) sponsors a invoice this would prevent Pharmacy Benefit Managers (PBMs) from discriminating against 340B covered entities for which they are legally required to provide discounted prescription drugs.

As the Senate Health Committee recently voted to advance the bill, bringing it closer to a full Senate vote, drugmakers expressed concern about the legislation during a hearing, saying that ‘it did not correspond to the original requirements of the program and unfairly restricted their capacity. to impose what they consider to be reasonable price constraints.

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Created in 1992 by the Public Health Services Act, the Program 340B allows covered healthcare facilities serving low-income patients to purchase certain outpatient prescription drugs from manufacturers at a reduced cost. Manufacturers contract with the federal government to distribute discounted drugs to these facilities in exchange for their payment by Medicaid and Medicare.

Covered entities are required to use cost savings from the program to invest in their facility’s ability to care for patients, which Pan says is “crucial” for safety net providers because these facilities don’t have not much Medicaid guaranteed reimbursement for operating expenses.

“This is a program that has been around for a long time…to ensure patients can continue to get the services they need that are often not explicitly funded through other means. [It’s] an effort to ensure that the services provided by safety net providers are not cut off,” Pan said during the hearing.

Pan noted that more than 15 other states have implemented similar laws to protect entities covered by 340B, and that more than a dozen other states-including Coloradoare also considering legislation to do so.

Nicole Thibeau, director of pharmacy services at the Los Angeles LGBT Center, described some of the PBM contracting practices that she says discriminate against 340B-covered entities.

“The biggest challenge facing our pharmacy today is not the global pandemic, but rather a deluge of attacks by PBMs and drugmakers,” Thibeau said.

She explained that many PBMSs and manufacturers have “forced” her pharmacy into 340B-specific contracts that reduce the reimbursement she receives for the drugs. These contracts— which Thibeau said the pharmacy has no way to dispute — also requires the facility to only use mail-order pharmacies, which she says puts patient safety at risk.

“It undermines the intent of the 340B program and takes money out of the safety net to line the pockets of highly profitable businesses,” she said.

Numerous 340B entities contract with nearby pharmacies to expand their service area, or because they do not have an in-house pharmacy. Current law does not require 340B underwriting requirements to be applied to these contracted pharmacies. Manufacturers say 340B underwriting requirements should not apply to pharmacies with which a 340B entity contractsbut only to the entity itself.

“Mandatize [that] manufacturers ship 340 billion drugs at 340 billion prices to contract pharmacies that benefit contract pharmaciesthousands of which are located outside the state of California— not patients,” PhRMA spokesperson Asher Lisec said during testimony against the bill.

Lisec said imposing the requirements would prevent manufacturers from imposing “reasonable restraints” on drug sales, saying the 340B program does not legally require the program’s pricing provisions to apply to pharmacies under contract with establishments 340B.

This position reflects the sentiments of drug manufacturers who are demanding in litigation in progress against the federal government alleging that the Health Resources and Services Administration cannot compel manufacturers to offer $340 billion in rebates to contract pharmacies.

Bill Head, representing PBM’s national trade group, the Pharmaceutical Care Management Association, also testified in opposition on behalf of PBM. According to him, the bill’s provision to prevent plans and PBMs from requiring pharmacies to disclose which drugs they dispense are 340B drugs unnecessarily prohibits manufacturers from tracking distributions of 340B drugs. This hampers manufacturers’ ability to ensure pharmacies are not fraudulently dispensing 340B drugs to patients not covered by the program, he said.

Head quoted the 2020 Memorial Health Settlement in which the healthcare system was fined for overcharging Medi-Cal for $340 billion in drug purchases.

The bill passed the committee with a 9-1 vote and will soon receive a vote from the full Senate.

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