A new audit on Oregon pharmacy benefit managers (PBMs) recommends that the state enact legislation that focuses on patient and pharmacy protections, and increases transparency in the prescription drug supply chain.
The state released the audit on Monday, which examines PBM business practices in the state. PBMs were established in the 1960s to help process health insurance claims for prescription drugs. Since then, they have grown into powerful intermediaries between insurers, manufacturers, pharmacies, and governments.
Oregon spent approximately $767 million on retail prescriptions for Oregon Health Plan coordinated care organizations (CCOs) in 2021. While there have been state and federal efforts to control drug prices, those efforts have primarily focused on drug manufacturers while PBM practices—including a lack of transparency—have largely been overlooked, according to the audit.
The audit identified areas of concern, including the current structure of Medicaid PBMs in the state and the Oregon Health Authority’s (OHA) monitoring controls over CCOs and their contracted PBMs. The current structure lacks transparency and is overly complex. As a result, it is difficult to determine the value provided to the program and to residents. Understanding the true cost of prescription drugs is difficult in the state.
“Transparency and accountability are obscured by nondisclosure agreements and proprietary information. The current system does not support local community pharmacies, which are a critical component of healthcare for all people in Oregon, not just those receiving Medicaid benefits.”
— Oregon PBM audit
Oregon’s regulation of PBMs is limited and fragmented. The Department of Consumer and Business Services monitors PBMs operating in the commercial insurance space, but not in Medicaid. Medicaid PBMs are subcontractors of CCOs, and OHA does not have direct supervision over them. Statutory changes are needed in order to provide the state with direct oversight of all PBMs, the audit states.
Other states have passed laws increasing protections for patients and community pharmacies related to PBMs. Protections include uniform preferred drug lists, fair pharmacy reimbursements, increased transparency, and changes to state Medicaid PBM models.
Kentucky prohibits PBMs from reducing the amount reimbursed on a claim to effective rates. Arizona requires PBMs to disclose the methodology for maximum allowable cost lists to provider pharmacies.
Some states require the use of National Average Drug Acquisition Costs as a basis for reimbursement, when available. In some states these middlemen have been removed entirely from their Medicaid coordinated care programs. Oregon has no such provisions in statute.
Oregon lawmakers passed House Bill 2725 during the 2023 legislative session, which prohibits PBMs from retroactively denying or reducing drug payments on claims after adjudication unless both the pharmacy and the PBM agree that payment was incorrect due to a clerical error. That could help the state address clawbacks, which are fees PBMs charge pharmacies after completing a sale.
But Oregon State Pharmacy Association Executive Director Brian Mayo told State of Reform that lawmakers need to do more to regulate PBMs in the state. He was disappointed lawmakers did not pass HB 3013 this year, which would have imposed new requirements on PBMs and modified the procedure for pharmacies to appeal PBM payments on reimbursement claims.
HB 3013 also would have required PBMs to be licensed by the Department of Consumer and Business Services (DCBS) and protected against retaliation for pharmacies who file complaints against PBMs.
“Patient access issues are real, and they’ll now continue at a greater pace. While the mega-middlemen rake in the big bucks, patients are having a hard time finding care, and pharmacies are struggling to remain viable.”
— Mayo
Audit researchers analyzed 316,755 Medicaid claims to assess how pharmacy reimbursements may vary. They found that frequently dispensed drugs like metformin and omeprazole tended to have much lower estimated pharmacy profits than less frequently dispensed medications. For the 13 drugs tested, the average estimated profit was $7.16 per claim, which likely is not enough to cover labor and other operating costs.
The audit makes several recommendations for the state to implement in order to have reasonable assurance that PBMs are providing good value to Medicaid, which include:
- Expanding contract provisions to more proactively monitor and enforce compliance and further develop monitoring processes that will give OHA reasonable assurance that CCOs and PBMs are in compliance.
- Assigning staff without a conflict of interest to monitor CCO and PBM compliance.
- Implementing a different PBM model in Medicaid coordinated care, such as a single PBM or fee-for-service approach.
- Mandating a universal preferred drug list and requiring prior authorization criteria for Medicaid coordinated care.
- Implementing uniform and fair pharmacy reimbursement policies for Medicaid coordinated care.
- Requiring PBMs operating in Oregon to act as fiduciaries to the health insurer/CCO they contract with and to the insured under a specific health plan.
- Requiring PBMs and CCOs to provide aggregate data to DCBS on a yearly basis.