Legislation slowly wending its way through states and in Washington could mean increased payments to drugstore chains like CVS Health, Walgreens, Walmart and independent pharmacies across the country.
Though pharmacies didn’t get what they wanted last week from Congress in a year-end spending package, the door has been opened wider to legislation to benefit pharmacies while regulating pharmacy benefit managers, or PBMs, even with Republicans in control of both houses of Congress and the White House in 2025.
“PBM reform is supported by majorities in both parties, by outgoing President Biden, and by incoming President-elect Trump,” said B. Douglas Hoey, the chief executive of the National Community Pharmacists Association after Congress late last week passed a new short-term spending package that did not include PBM reform. “It may be the only issue in Washington that they agree on. Every day they delay reform, another small pharmacy will close, or be pushed closer to edge, because of the business practices of big health insurers and their PBM henchmen.”
Pharmacies are closing across the country in recent years, which their owners blame in part on a reimbursement squeeze from the PBMs that pay them. PBMs, which are considered middlemen between drug companies and consumers when it comes to purchasing medicines, administer drug benefits for employers and government health insurance including Medicaid coverage for poor Americans and Medicare benefits for seniors. In these roles, PBMs decide what pharmacists and pharmacies are paid to dispense prescription medications.
But PBMs have come under fire in recent years as the public, taxpayers and Congress question whether they are passing along as much savings as they should to health plan enrollees. And this increased scrutiny has already led to an increasing number of state legislatures and increasing payments to pharmacies.
Executives at PBMs acknowledge that change is coming.
“We’re seeing the regulatory framework change intensely,” Jason Borschow, chief executive of Abarca, an independent pharmacy benefit manager, told healthcare executives at the Forbes Healthcare Summit in New York earlier this month. “It’s already happening in Medicaid, Medicare is on the way and obviously in a free market, kind of that commercial space. The individual market space is probably the last one to be regulated, but our expectation is the regulations will happen and PBM business practices are going to be regulated by the federal in addition to state governments.”
Among the areas where Democrats and Republicans in Congress have reached common ground include provisions that would require PBMs to reimburse pharmacies at (National Average Drug Acquisition Cost) “plus the state’s fee for service dispensing fee for all Medicaid managed care programs in all 50 states,” the National Community Pharmacists Association, which represents more than 18,900 pharmacies, has said. “It would eliminate spread pricing and pay PBMs a flat administrative fee in all Medicaid managed care programs. The provision will save taxpayers approximately $1 billion over the next 10 years.”
Because CVS also owns a PBM, Caremark, it’s unclear how much potential reforms would financially hurt that business.
But other regulations making progress in states would certainly benefit the thousands of pharmacists and retail pharmacies under CVS ownership as well as other pharmacies.
As one example, dozens of states are passing legislation that expands the role of pharmacists to prescribe certain medicines. This so-called “test to treat” legislation bestows prescribing status on pharmacists.
At the Forbes Healthcare Summit, Walgreens chief pharmacy officer Rick Gates, said pharmacists have already been testing for an array of illnesses including Covid-19 and then prescribing medications.
“You test positive for covid, and we can actually prescribe right then and get you on your medication when you’re in the store,” Gates said. “Same thing comes for flu. It can be UTIs. It can be lots of other things. But that’s just the precipice I think of where pharmacy can really play a bigger impact.”
