Washington senators debate role of PBMs during consideration of bills to further regulate their practices


Shane Ersland


The role pharmacy benefit managers (PBMs) play in Washington’s pharmaceutical industry was hotly debated while senators heard testimony for bills during a Senate Health and Long Term Care Committee meeting on Friday.


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Sen. Patty Kuderer (D-Bellevue) sponsored Senate Bill 5213, which would impose certain requirements on PBM business practices. PBMs were created in the 1960s to perform the administrative transaction of processing prescription claims between insurers and pharmacies. They also set reimbursement rates for pharmacies.

“PBMs were created as middle men, primarily to help insurers contain drug costs,” Kuderer said. “But instead they compete with independent pharmacists, and that actually adds to the cost of drugs. PBMs contract with health plans, employers, drug manufacturers, and pharmacies. And all of this activity goes unchecked.”

Some of the regulations SB 5213 would place on PBMs include: 

  • They would not be able to require a covered person to obtain prescriptions from a mail-order pharmacy unless the prescription is for a specialty drug, and must receive affirmative authorization from the covered person before filling that prescription through a mail-order pharmacy.
  • They would not reimburse a network pharmacy in an amount less than the contract price between the PBM and the person the PBM has contracted to provide those pharmacy benefit services.
  • They may not deny, restrict, or reduce the payment to a participating provider for a medically-necessary, provider-administered drug on the basis that the provider has obtained the drug from a wholesaler or pharmacy.
  • They must not require a covered person to pay more for a drug than the PBM reimburses the pharmacy.

Kuderer said PBMs decide patient copays and coinsurance amounts, what drug a patient is going to getoften overriding the prescriberand decide how and where the patient is going to receive prescriptions. 

“They regularly steer patients towards out-of-state PBM-owned mail-order pharmacies,” Kuderer said. “The purpose of these practices is to drive patients to the PBM’s pharmacies, even to the point of enrolling patients in their mail-order system without their knowledge or consent.”

Kuderer said she herself was involuntarily enrolled in a PBM mail-order system. 

“This is anticompetitive on its face,” she said. “The ultimate goal here is to increase their corporate profits, and that means higher drug costs for all of us.”

Janine Terrano, CEO of Topia Technology: Visibility and Data Security Company, testified in opposition to SB 5213. She said the bill is perilous for consumers and her business. 

“The role of PBMs is essential to making prescriptions more affordable,” Terrano said. “Of course big pharma and independent pharmacies are against PBMs because they reduce their excessive profits and return these savings to the consumer. This legislation targets PBMs and weakens them while increasing the power of big pharma and independent pharmacists who charge excessive prices.”

Hi-School Pharmacy President Jack Holt said pharmacies need the legislation enacted in order to establish more transparency, restore the viability of community pharmacies, create equity between pharmacies, and protect their ability to serve the state’s most vulnerable. 

“While it’s technically true that 90% of all Americans live within five miles of a pharmacy, that does not equate well in a state such as ours, which has many rural and suburban areas,” Holt said. 

PBMs are currently engaging in a prevalent practice called “spread pricing,” Kuderer said. 

“They can charge payers like health plans more than they pay the pharmacy for the medication, and the PBM keeps the spread, or difference, as profit,” she said. “The (Washington State Health Care Authority) said they saved $156 million by prohibiting spread pricing. They also mentioned the structure for PBMs needs to be revisited, which is what we’re doing here today with this bill.” 

Sen. Ann Rivers (R-La Center) is the prime sponsor for SB 5445, which would require health carriers to calculate an enrollee’s coinsurance or deductible obligation for a prescription drug based on the price of the drug, minus all rebates received for it. It would have a requirement stating that PBMs can only derive income for PBM services provided to a health carrier through a fixed management fee. 

Rivers said the number one complaint she has received from constituents for many years is regarding the high costs of pharmaceuticals. She said many people have to choose between paying their mortgage or rent, or buying their pharmaceuticals.

“Year after year we’re told PBMs are part of the cost saving solution,” Rivers said. “But what we have come to know is that they are actually a cost driver. We know this because people are paying more for their deductible, they’re paying more at the store for their pharmaceutical.”

Dr. LuGina Mendez-Harper, a pharmacist for Prime Therapeutics, a PBM owned by 18 Blue Cross Blue Shield plans, also testified in opposition to SB 5445. She discussed some of the work PBMs conduct in the industry.

“Payers choose to contract with a PBM,” Mendez-Harper said. “Then we negotiate on their behalf with manufacturers to get rebates, which is a discount off the list price of a drug. We pass those rebates back to the insurers, and the insurers use that to collectively help their members with [the] costs of all their healthcare and drugs.”

She said the company’s primary issue with the bill is that the number of patients and the drugs it would impact would be limited. 

“It doesn’t help uninsured patients, people on Medicare or Medicaid, or [those] on self-insured plans,” she said. “It only applies to brand-name drugs that have a rebate available. And that’s a smaller percentage of the total brand-name drugs that are out there. This is going to have a limited impact.”

Jennifer Ziegler, a lobbyist for the Association of Washington Healthcare Plans, also testified in opposition to the bill. She discussed the role of PBMs in relation to rebates.

“Rebates are often only available on prescription drugs where there is competition in the marketplace for that drug,” Ziegler said. “So not everyone has the opportunity to have the benefit of a rebate. That is one of the biggest reasons we make the decision to do a negotiation that spreads the value of that rebate across the full set of members of our plans, rather than having it only be available in specific circumstances.”

Nathaniel Brown, director of advocacy at the Chronic Disease Coalition, said the bill would have a positive impact on the lives of chronic disease patients who regularly have trouble affording their medications. 

“Due to their massive growth and scale, and market consolidation, PBMs now touch every part of the drug supply chain,” Brown said. “And we know Washington patients are not benefitting from the system as it was initially designed. We need better oversight of PBMs to understand more about  how costs are negotiated, and to ensure rebates are passed down to patients. This bill helps achieve both of those goals.

Studies have shown that pharmaceutical rebates for branded drugs average 48%, so when the rebate is not passed on to the patient, they’re essentially paying twice what the insurance company pays. This isn’t fair and it’s not cost effective for Washington in the long term because unaffordability leads to worse health outcomes as patients skip treatments or ration their medications.”

No action was taken on either bill, as they will be reviewed again in future hearings.