NY Medicaid Must Put Patient Access Before PBM Profits

By Tom D’Angelo, RPh and Diane Lawatsch, RPh | June 7, 2021

Despite investigations in New York State and across the country finding pharmacy benefit manager (PBM) abuses in State Medicaid programs through the use of “spread pricing”, that is overcharging the State, underpaying pharmacies and keeping the difference, PBMs and health plans succeeded in retaining control of managing the pharmacy benefit under NY Medicaid for two more years. This delay in “carving out” PBMs from NY Medicaid means patients and NY taxpayers have to wait two years before there is true transparency in drug payments due to opaque business practices by unregulated PBMs in New York. This delay will have a deleterious effect on Medicaid patient choice and access to local pharmacy care, unless NY lawmakers take action this week to pass legislation to enact a series of patient protections in the Medicaid Managed Care pharmacy program.

The SFY 2022 Final State Budget delayed a planned carve out of the pharmacy benefit from Medicaid Managed Care to Fee for Service two years to April 1, 2023. This delay allows the 16 managed care plans and their PBMs to continue to make significant profits off this program at the expense of taxpayers, community pharmacies and patient care. Even prior to this delay, community pharmacies, regardless of type or size, were struggling to remain open in areas with a high number of individuals enrolled in Medicaid due to the unsustainable, often below cost, reimbursement paid to pharmacies by managed care providers and their PBMs. Many pharmacies have closed and this could continue unless immediate relief is provided to address this untenable situation for local pharmacies on behalf of those they serve.

Further, PBMs use restrictive networks and impose other self-serving requirements, which severely limit patient choice in which pharmacists and pharmacy an individual with Medicaid Managed Care may use. This unnecessarily creates barriers to needed care, at a time when we should be doing everything we can to enable easy access to these trusted healthcare providers, whether for essential medications, vaccinations, point of care testing and other pharmacy services.

The good news is legislation sponsored by State Senator James Skoufis (D-Hudson Valley) and Assembly Health Chair Richard Gottfried (D-Manhattan), is in the Finance Committee in each house awaiting action to enact critical protections for patient access and to restore patient choice in pharmacy services under Medicaid Managed Care. This bill (S6603/A7598) has the support of dozens of Senators and Assembly Members and just needs to be given the go ahead from Legislative Leaders to be passed this week.

In particular, this legislation would give patients the right to use the pharmacy of their choosing by prohibiting Medicaid Managed Care (MMC) plans and their PBMs from using restrictive pharmacy networks for patients to access needed medications and other services. The legislation would allow any community pharmacy to participate in a Medicaid Managed Care plan network as long as the pharmacy will accept the Medicaid reimbursement rate. Twenty-seven states currently allow “any willing provider “for their MMC plan networks.

This bill will also provide patient choice in delivery by preventing PBMs, health plans and other insurers from limiting a patients’ ability to choose to receive their medications, either in-person from local pharmacy or via a delivery method as offered by their local pharmacy. PBMs currently have limits and prohibitions related to delivery in order to drive pharmacy business to their own mail order pharmacies. This bill ensures that limited Medicaid dollars are invested in patient care, local communities and local businesses rather than further lining PBM and health plan pockets.

Finally, this bill provides for a transparent and sustainable reimbursement model under Medicaid Managed Care (MMC) to ensure that community pharmacies can continue to serve those enrolled in Medicaid. The bill requires MMC plans and their PBMs to pay pharmacies at the same rate as pharmacies are paid under Medicaid Fee for Service (FFS). The FFS rate was set by the State Department of Health based on a national survey of pharmacy costs overseen by the federal Centers for Medicare & Medicaid Services (CMS) and regional cost of dispensing surveys to assure that payments reflect the true costs of procuring and dispensing drugs. 9 states have adopted similar reimbursement floors in their Medicaid Managed Care programs.

While PBMs are saying enactment of this legislation will make prescription drug costs go up under Medicaid, this is false. All this legislation will do is shift a portion of the fees paid to PBMs to pharmacies by setting a reimbursement floor based on the true costs of dispensing medications. By establishing a clear reimbursement level, the State will gain clarity and transparency, which is likely to result in a greater savings to the program by ensuring that plans and PBMs are not continuing to game the program through the use of “spread” pricing which the State prohibited in 2019. Finally, this bill would eliminate purposely-complex pricing schedules and multiple restrictive networks, streamlining and lessening PBM involvement and the associated inflated administration fees.

The primary impetus for the two-year “carve out” delay was concern about the possible impact of the shift on 340B entities that care for our most underserved communities. To be clear, this legislation will not impact 340B providers.

This legislation is good for patients, supports local communities and ensures transparency in State Medicaid pharmacy payments. Local, community pharmacies are unified in calling for enactment of this measure to preserve patient access to their medications and other needed pharmacy services in the State.

Tom D’Angelo, RPh, President of the Pharmacists Society of the State of New York and
Diane Lawatsch, RPh, Officer of the Community Pharmacy Association of New York State