Ohio needs PBM reform to help patients, local pharmacies

The Federal Trade Commission (FTC) recently issued an interim report reflecting two years of intense scrutiny of Pharmacy Benefit Managers (PBMs). It concluded that their vertical integration business model and practices increased patient pharmacy costs and drove independent pharmacies to close in communities. Ohio has been a national leader in reforming the unscrupulous practices of these PBM “middlemen” and their integrated relationships with insurers and large retail pharmacies, and our state must continue this leadership role by implementing further reforms in the state.

The interim report corroborates what myself, my joint sponsors, and others have identified to be glaring failures in the prescription drug supply chain that eliminate access to healthcare and raise costs for patients. At this point, any arguments against the conclusions of the report should be considered invalid at best and deceptive at worst.

I have proposed two pieces of legislation that are currently before the Ohio General Assembly that attempt to further PBM reform to benefit patients, employers, and local independent pharmacies. House Bill 509, which I am joint sponsoring with Representative Rachael Baker, would simply require PBMs to pass along the rebates and discounts the PBMs extract from drug manufacturers to patients at the pharmacy counter.

As many reports have correctly pointed out, the PBMs are typically pocketing those manufacturer rebates and discounts for themselves. Patients currently in their mandated deductible phase of insurance coverage or who are subjected to certain co-insurance cost mandates during this coverage period are not receiving the cost benefits of these rebates and discounts. HB 509 simply allows patients to share in these rebates or discounts and lower their prescription drug costs. Several states, including Indiana, West Virginia, and Arkansas, have already passed similar “Share the Savings” legislation.

HB 505, which I am joint sponsoring with Representative Brian Stewart, will simply address the unfair reimbursement and business practices that PBMs and insurers are inflicting on local, independent pharmacies that are causing many of our “main street pharmacies” in communities around Ohio to close. Both Representative Stewart and I know first-hand that local pharmacists in our district are sounding the alarm. They are good business people who have been providing care for our neighbors over decades that now fear the loss of their livelihoods and the health of their patients.

As the FTC interim report notes, “the rates in PBM contracts with independent pharmacies often do not clearly reflect the ultimate total payment amounts, making it difficult or impossible for pharmacists to ascertain how much they will be compensated.”

These PBM business practices that include insurers and large, retail pharmacies are bad for patients, employers, and local independent pharmacies for many reasons. According to the FTC report, this “vertical integration” model means that the top 3 PBMs processed nearly 80% of the 6.6 billion prescriptions dispensed by US pharmacies in 2023, while the top 6 PBM’s processed more than 90%.

This business model only incentivizes PBMs to require patients to use their affiliated businesses (like specialty pharmacies), thereby disadvantaging independent pharmacies and driving up prescription drug costs for patients. Both the Wall Street Journal and New York Times have done excellent investigations that show the problematic nature of the vertical integration model of PBMs, insurers and retail chain pharmacies as well.

As someone who has negotiated health benefits for employers and others in the past, I have seen the rapid increase in these disturbing business practices that are harming patients and the viability of small businesses, such as independent pharmacies. Ohio needs to continue to press not only for accountability and transparency from PBMs, insurers and large retail pharmacies but continue our leadership efforts to reform PBM practices that will benefit patients, employers, and independent pharmacies without raising costs.

I strongly feel that both HB 509 and HB 505 are steps in addressing the multiple PBM business practices problems identified in the FTC report and I encourage my colleagues to work with me to bring common sense reforms to PBM practices in Ohio. I also would recommend that my colleagues and the public read the FTC report to learn more about this complex issue. Our constituents are counting on us to help reform our health care delivery system so we can lower costs for all Ohioans. I am confident both HB 509 and HB 505 will greatly help in this effort.