Department of Insurance will lead effort to rein in monopolistic behavior and excessive pharmaceutical costs

Insurance Commissioner Trinidad Navarro announced today that the Delaware Department of Insurance will begin the process of building and enforcing regulations regarding Pharmacy Benefit Managers (PBMs) as a new law goes into effect. The new authorities of the department will ensure consumer access to affordable medications and protect local pharmacies from the predatory behaviors exhibited by the PBM industry through measures of transparency and corporate accountability.

“Alongside members of the General Assembly, advocates, pharmacy representatives, and industry stakeholders, we have been working towards this goal for years. We have heard the voices of those who have had to travel hundreds of miles for their children’s medications. We have heard the plight of the local pharmacies, the way they have been financially devastated by PBM’s preference of their own chains. We have watched as other states were taken advantage of by these companies and cheered those states on as they took action to stop predatory practices. We have seen partners in this fight retaliated against by these companies, and we mourned as more and more neighborhood pharmacies had to close their doors,” said Insurance Commissioner Trinidad Navarro, referencing the work of the Pharmacy Reimbursement Task Force and other legislative initiatives and discussions. “Now, with these new powers, we say ‘No more.’”

HB 219, sponsored by Rep. Andria Bennett, Sen. Spiros Mantzavinos, Senate President Pro Tempore David Sokola, and Rep. Mike Smith, was passed by the General Assembly unanimously and recently became law, bringing Delaware’s oversight of the multi-billion-dollar industry on par with leading states.

PBMs act as intermediaries for prescription drug plans, influencing what medications will be covered and the costs of those drugs for both consumers and pharmacies. These companies bring in billions through manufacturer rebates, limiting generic drug offerings, and retaining negotiated savings, while costs for consumers continue to rise. The largest PBMs operate their own pharmacy chains, and their consolidated market power has, prior to this law, allowed them to pay unaffiliated pharmacies unsustainably low reimbursement rates – rates lower than it costs the pharmacy to dispense the drug to a consumer. PBMs’ move toward monopolization has contributed to waves of independent pharmacy closures across the nation, especially in rural, inner city, and under-served areas that already crave equity and access.

“I have worked on this issue for years and have seen firsthand how pharmacy benefit managers’ predatory practices have increased consumer costs while decreasing consumer access and driving out small, unaffiliated pharmacies. With healthcare cost emphasized throughout the pandemic, it is more important than ever to have these protections in place,” said Rep. Andria Bennett, the prime sponsor of HB 219 and chair of the Pharmacy Reimbursement Task Force. “This new law passed the General Assembly unanimously, and it did so because there are two things we all agree on: that the cost of prescription drugs is far too high, and that billionaire corporations should not be above the law.”

The new law aims to solve many issues of access and inequal treatment through use of the National Average Drug Acquisition Cost for pharmacy reimbursement, prohibiting inequal payments to unaffiliated pharmacies, and providing the Department of Insurance the ability to investigate PBMs, enforce consumer protection measures, and incentivize corrections through increased regulatory authority. In order to better understand PBM’s existing processes, the department recently began introductory Market Conduct exams on registered PBMs, known to be the first investigations of this kind in the nation. These initial examinations will not result in fines or enforcement actions, but will highlight areas for improvement, including those that are not compliant with the new law, and will require corrective action plans.

Rep. Mike Smith – a prime sponsor of HB 219 – stated, “This is an exciting moment for Delaware. This was a collaborative effort to support Delaware’s small, independent pharmacies and all Delawareans. At the end of the day, consumer protection won, and I’m proud of the work we did to bring accountability to PBMs.”

“Reducing prescription drug prices will directly improve the health and welfare of our neighbors,” said Sen. Spiros Mantzavinos, Senate prime sponsor of HB 219. “This new law will provide for greater oversight of the pharmacy benefit manager industry, allowing for more consistent prescription drug prices and ensuring expanded access to the medications Delawareans rely on. I am proud to have helped champion HB 219 alongside Rep. Bennett and look forward to Delawareans reaping the benefits of this expanded oversight.”

While independent pharmacies faced retaliation from the multi-billion-dollar giants, including through costly audits, they continued to advocate for change. Now, they are celebrating the new law and the protections it holds for their customers.

“The true beneficiaries of this new PBM oversight will be the patients. They have always deserved health care that is accessible, affordable and transparent – not barriers to care, higher costs and excuses while PBMs lined their pockets. Having the Delaware Insurance Commissioner’s office oversee PBMs will greatly assist underserved and vulnerable populations who struggle to afford their medications, and who have experienced barriers to patient care,” explained Kevin Musto, R.Ph., FAPhA, an independent pharmacist.

The Delaware Pharmacy Society also shared their enthusiasm for the new law. “We are tremendously delighted with enactment of HB 219, which increases transparency and equity in pharmacy benefit management. It is our belief that this law will result in increased access to health benefits for Delawareans, provided at the most accessible health care providers – pharmacies. This law makes Delaware a pioneer in controlling health care costs,” they stated.

In the coming months, the Department of Insurance will draft relevant regulations, receiving input from stakeholders during that process. After draft regulations are developed, they will be published, and the public will have 30 days to comment.

DOVER, Del. – State Auditor Kathy McGuiness has supported the National Community Pharmacists Association (NCPA) as it pushes for federal legislation to address pharmacy benefit managers’ (PBMs) predatory practices.

“It is heartrending to watch people have to decide between paying for their life-saving medications and buying food for their families,” McGuiness said. “It’s especially painful to see when you know that their prescription drug prices are being artificially inflated to line the bloated pockets of CVS, Express Scripts Inc. and OptumRx.”

McGuiness, a licensed immunizing pharmacist, has released two special reports so far on the impact that PBMs are having in Delaware. These reports – titled “Lack of Transparency & Accountability in Drug Pricing Could be Costing Taxpayers Millions” and “Predatory Practices: Survey Says Middlemen Destroying Delaware’s Independent Pharmacies” – have garnered national attention and helped to shine a light on how PBMs have overcharged Delaware taxpayers by millions of dollars.

Through predatory practices such as Direct and Indirect Remuneration (DIR) fees and spread pricing, PBMs are strangling independent pharmacies’ ability to stay open and serve as the first line of defense when their customers are hurt or sick.

“This is a critical issue that affects the lives of all Delaware residents,” McGuiness said. “That’s why I sent a letter to President Biden and Delaware’s federal delegation – Senators Tom Carper and Chris Coons, and Representative Lisa Blunt Rochester – asking them to support federal legislation to curb these harmful PBM practices.”

NCPA CEO B. Douglas Hoey, MBA, a pharmacist, thanked McGuiness for her support.

“Pharmacy DIR fees and spread pricing policies are among the most egregious PBM tactics we know of. This is an excellent moment for Congress and the Biden administration to end these ploys once and for all,” Hoey said. “We’re grateful to Auditor McGuiness for her important work on this and in fighting more broadly for increased PBM transparency and reforms.” 

The American Pharmacists Association (APhA) also said it supports national movements to regulate PBMs.

“Unique among any other party in health care, pharmacy benefit management companies are accountable to no one in how they conduct their business,” said APhA Executive Vice President and CEO Scott Knoer, also a pharmacist. “As a result, prescription drug costs are artificially high, generating inflated profit margins for the PBMs. This threatens patients’ access to pharmacists’ care in local communities. 

“APhA supports state and federal legislation and regulations that brings transparency to their clandestine activities and holds them more accountable.”

McGuiness has been a staunch advocate for raising public awareness of PBMs – and for demonstrating to legislators that healthcare is a critical issue for everyone.

“I will continue the fight to ensure taxpayer dollars are used efficiently, effectively and as intended,” McGuiness said, “and to protect Delaware’s residents from fraud, waste and abuse of their money.”

Learn about the Delaware Auditor’s Office at https://auditor.delaware.gov.

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Contact:       

Anna Nuzzolese, Executive Assistant

302-857-3907

Anna.Nuzzolese@delaware.gov

DOVER, Del. – A survey of Delaware’s independent community pharmacists on the impact of pharmacy benefit managers (PBMs) reveals predatory practices are potentially devastating these small businesses, State Auditor Kathy McGuiness said today as she released a new special report.

“Your community pharmacists – who are your first line of defense when you are sick or hurting and need to talk – are struggling to keep their doors open,” said McGuiness, who is a licensed immunizing pharmacist and former small-business owner. “Our survey results show that these prescription drug middlemen, known as PBMs, are strangling these critically important community businesses.”

McGuiness’ office surveyed independent community pharmacy owners across Delaware in June regarding how practices by PBMs are affecting their businesses.

“The results were astounding,” McGuiness said. “The big three PBMs – CVS, Express Scripts Inc. and OptumRx, which control approximately 80 percent of the PBM market share – are using tactics that eat away at the thin profits these small-business owners fight to earn.

“What’s even worse is that the PBMs are trying to place Delawareans’ healthcare in the hands of big-box retail establishments.”

Among the survey results: 

• PBMs’ use of one specific kind of fee that is imposed on pharmacies after a prescription sale has exponentially increased over the last few years. Known as DIR fees, these reduce or eliminate a pharmacy’s profit on a prescription transaction, and they are financially ravaging independent pharmacies. 
• Delaware’s independent pharmacists report being squeezed by PBMs through lower reimbursements, exclusionary formularies and preferred pharmacies. By restricting increasing numbers of patients to mail-order-only pharmacies, PBMs are limiting access to medications. 
• Delaware’s independent pharmacies suffer from similar problems noted in the 2019 National Community Pharmacists Association (NCPA) survey, which observed that greater oversight is needed “over the PBM corporations that contract with the state to manage prescription drug benefits for its Medicaid program and state employees.”

Read the new special report, “Predatory Practices: Survey Says Middlemen Destroying Delaware’s Independent Pharmacies,” on our website here.

Learn about the Delaware Auditor’s Office at https://auditor.delaware.gov.

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Contact:       

Anna Nuzzolese, Executive Assistant

302-857-3907

Anna.Nuzzolese@delaware.gov

Expanded oversight of Pharmacy Benefits Managers possible

Legislation to further regulate the Pharmacy Benefits Manager industry was passed by the General Assembly in late June and sent to the Governor with unanimous bipartisan support.

HB 219, sponsored by Rep. Andria Bennett, Sen. Spiros Mantzavinos, Senate President Pro Tempore Dave Sokola, and Rep. Mike Smith, would bring Delaware’s oversight of the multi-billion-dollar industry on par with other states. Insurance Commissioner Trinidad Navarro and the Delaware Department of Insurance were proud to work with the sponsors on this bill and share their goals of ensuring access to affordable pharmaceuticals and protecting local pharmacies.

A Pharmacy Benefits Manager (PBM) acts as an intermediary for prescription drug plans, influencing what pharmaceuticals will be covered, and the consumer and pharmacy costs of those drugs. These companies hold massive power and bring in billions through manufacturer rebates, limiting generic drug offerings, and retaining negotiated savings while costs for consumers continue to rise. The largest PBMs operate their own pharmacy chains, and their consolidated market power allows them to pay unaffiliated pharmacies unsustainably low reimbursement rates – rates lower than it costs the pharmacy to dispense the drug to a consumer. PBMs’ move toward monopolization has contributed to waves of pharmacy closures across the nation, especially in rural, inner city, and under-served areas – areas that already crave equity and access.

HB 219 aims to solve many of these issues through efforts such as required use of the National Average Drug Acquisition Cost for pharmacy reimbursement, prohibiting inequal payments to unaffiliated pharmacies, and providing the Department of Insurance the ability to investigate PBMs, enforce consumer protection measures, and incentivize corrections through increased regulatory authority.

“With more consumers and local pharmacies facing dire financial situations, and more PBM wrongdoing coming to light, we must act with urgency in reining in this industry. In a developed nation, it is unconscionable that a mother would have to go hundreds of miles to get her child’s medication affordably, and no pharmacy should have to fight for months on end for the right to provide their clients needed pharmaceuticals without going bankrupt,” said Insurance Commissioner Trinidad Navarro, referencing passionate resident testimony provided at the bill’s legislative committee hearings.

“We need the authority to enforce consumer protections, to require price transparency and cost containment, and to ensure that these big corporations can’t exclude the small businesses and local pharmacies that have served our community for decades. I’m so thankful for the sponsors of HB 219 for working so hard on this needed legislation, and I am grateful that every single member of the General Assembly supported the effort.”

“For too long, pharmacy benefit managers’ egregious predatory practices have put profits above consumers. With this legislation, we are implementing critical reforms that will improve the oversight of this murky industry and ensure everyday Delawareans are not taken advantage of in such a vulnerable way,” shared Rep. Andria Bennett, the prime sponsor of HB 219 and chair of the Pharmacy Reimbursement Task Force. “I’m grateful for the outpouring of support this legislation has received both in the General Assembly and from individuals and small businesses throughout our state. We owe it to residents to fight for their best interests by increasing affordability and access to needed medication. That’s exactly what we’re doing with HB 219.”

“I served alongside Rep. Bennett on the Pharmacy Reimbursement Task Force and have seen firsthand how the middlemen between drug makers and pharmacies can drive up costs for consumers and even threaten the financial viability of independent pharmacies throughout our state,” said Senate President Pro Tempore Dave Sokola. “HB 219 will give Delaware the tools it needs to properly regulate this industry to ensure we’re controlling the costs of life-saving medication and protect the pharmacies who serve them.”

Rep. Mike Smith stated, “I was proud to co-sponsor this measure and help shepherd it through the House. This is ultimately a consumer protection bill with the intended goal of ensuring citizens have affordable access to prescription drugs. It is my hope that the Governor will sign this legislation without further delay.”

“Reducing prescription drug prices is one of the most important things we can do to help improve the health and welfare of our neighbors,” said Sen. Spiros Mantzavinos, the Senate prime sponsor of HB 219. “I am proud to have helped champion this legislation that will provide greater oversight of pharmacy benefit managers, a little-known industry that has a huge impact on whether you can get the medication you need and at what cost. I want to thank Rep. Bennett for her hard work on this legislation and I look forward to it being signed into law soon.”

The legislative effort was supported by consumers and independent pharmacists throughout the state, and the Delaware Pharmacist Society, who spoke passionately about the need to regulate PBMs.

“Not only have PBMs failed to manage the cost of prescription medications, which is the reason they were created, but they have artificially inflated medication prices, causing patients to struggle to afford their medication, while they continue to line their pockets. And, while Independent pharmacy strives to find ways to assist patients with chronic diseases, those who are underserved and vulnerable populations, PBMs put profits over patient care and have created barriers for patients to utilize our services, while forcing them to utilize more cumbersome and costly options,” explained Kevin Musto, R.Ph., FAPhA, Independent pharmacist.

“The Delaware Pharmacist Society is elated that patients as well as pharmacists may soon be able to appeal inadequate prescription drug reimbursement, and that unregulated PBMs would have to answer to the Insurance Commissioner’s office on their business practices,” said Dr. Kim Robbins, Executive Director of the Delaware Pharmacist Society. “Pharmacists have tried to fight PBMs individually and have been unsuccessful. PBM reform will allow the Insurance Commissioner’s office to protect consumers.”

New regulations increase oversight of Pharmacy Benefit Managers

Excessive pharmaceutical costs are a concerning trend occurring across the nation, and today the Delaware Department of Insurance has finalized new regulations for Pharmacy Benefit Managers (PBMs) to proactively combat the issue. The regulations go into effect on August 11 as part of implementing HB 194, and come after extensive stakeholder discussions.

PBMs administer prescription drug plans for health insurers, large employers, Medicare Part D plans, and other groups, determining the list of medications that a plan will cover and the consumer costs of those drugs. These companies hold massive negotiating power and receive billions of dollars in rebates from manufacturers, but to date have widely not used their power to reduce the costs of medications and insurance. The new regulations from the Department of Insurance will begin an increasing level of oversight and transparency, allowing the department to investigate companies, require corrective actions, and to suspend, deny, or revoke a PBM’s registration if they are acting in violation of the Code.

“Increasing the affordability of prescriptions and healthcare increases their accessibility, creating a healthier Delaware. These steps towards regulating this multi-billion-dollar industry will save residents money, and could save residents lives,” said Insurance Commissioner Trinidad Navarro. “I want to commend Pharmacy Reimbursement Task Force co-chairs Sen. Sokola and Rep. Bennett, as well as Chair of the former Interagency Pharmaceuticals Purchasing Study Group Rep. Seigfried, for their passion and hard work towards these regulations and their inclusion of a diverse array of stakeholders throughout the process. Our work on this issue is just beginning, and we are grateful for your partnership.”

The Pharmacy Reimbursement Task Force and the former Interagency Pharmaceuticals Purchasing Study Group each demonstrated the General Assembly’s focus on lowering the cost of care, working on a range of issues surrounding protecting Delawareans from excessive medication costs, negotiating and lowering drug prices, and creating price transparency and corporate accountability.

“One of the most important things we can do as elected officials is work to keep prescription drugs affordable and accessible, particularly for our most vulnerable residents,” said Sen. David Sokola, D-Newark. “I’m proud of our work on the Pharmacy Reimbursement Task Force and proud to have helped develop regulations that will increase transparency around a little-known sector of our health care industry. These regulations from Commissioner Navarro and his team at the Department of Insurance represent a solid beginning to the work I look forward to continuing in 2021.”

The department and the General Assembly plan to work together to advance legislation regarding PBMs in the future. A related bill was proposed during this year’s session, but it did not advance due to the compressed legislative timeline during COVID-19.

“High prescription drug costs can debilitate a person’s finances, hindering how they save and plan for daily and long-term expenses. We owe it to consumers to fight for their best interests, increasing access and affordability to needed medications,” said Rep. Andria Bennett, who sponsored HB 194 to regulate PBMs. “Pharmacy benefit managers should put the consumer first, not profit. That’s why we fought to increase transparency and oversight: so Delawareans are not taken advantage of in such a vulnerable way. Commissioner Navarro’s regulation will provide even more transparency and comfort to our residents, and I thank him for his commitment to them.”

“Pharmacy Benefit Managers are companies that have, through the years, gained significant control over the supply, demand, and cost of pharmaceuticals – around 80% of the market – with little to no regulation at all. They are, in essence, governing both the cost and flow of medicines between people in need of medication and the manufacturer, health insurance company, community pharmacies, and the company providing medication benefits. This has led to higher costs for residents who don’t really have a choice in whether to pay for lifesaving medication,” said Rep. Ray Seigfried, a former Christiana Care senior vice president.

“My colleagues and I pushed HB 194 to require registration of all PBMs doing business in Delaware as a first step to reining in these managers. Commissioner Navarro’s regulations create standards such as having access to books and records of their operation, contract templates, and staffing. It provides the right to denial, suspension, or revocation. This order will provide the first step to begin opening the door to greater transparency. I thank Commissioner Navarro and his team for taking these important steps forward.”

Registration of Pharmacy Benefits Managers Regulation