Spread Pricing & Dispensing Fees: Potential Legislation Tackles PBM Practices

The financial pressures faced by pharmacies, particularly regarding Medicaid and Medicare Part D reimbursements, are reaching a critical point. In an interview with Pharmacy Times, Kaite Krell, MPH, Director of Congressional Affairs at the National Community Pharmacists Association, discussed the Protecting Pharmacies in Medicaid Act as well as other potential legislation that could address concerns with pharmacy benefit managers (PBMs).

Pharmacy Times: Several pharmacy associations, including NACDS and NCPA, have endorsed the Protecting Pharmacies in Medicaid Act. What specific provisions of the act do you believe are most crucial for addressing the current challenges faced by pharmacists in their dealings with PBMs?

Kaite Krell, MPH: Yes, so the core pieces [are] prohibiting spread pricing and that full pass-through in all of the Medicaid managed care programs, limiting payments solely to an administrative fee. Those go hand in hand, and then [there is] also that survey reporting and the dispensing fee that is attached to the payments. Those, I think, are the biggest pieces. And so, it is helpful for the transparency’s sake of that pass through and administrative fee, and then for the pharmacies keeping their lights on, getting paid an accurate number. That NADAC survey reporting plus the dispensing fee payment allows the pharmacies to have all of the background and the assurances of the fact that month to month, they should about know what they're getting paid, which helps them keep their businesses going and make sure that they can meet their demands to see patients. And then the spread pricing and the pass-through and administrative fee and opening up the transparency there allows the government to see what they had actually been paying, and how they can better implement Medicaid and the Medicaid managed care programs.

Pharmacy Times: Beyond spread pricing, what other PBM practices do you believe significantly contribute to the financial pressures faced by pharmacies, and how might future legislation address these issues?

Kaite Krell, MPH: So, those are fairly easy questions. On my end, some of the biggest ones are the contracts that all of our pharmacies have to enter into with the PBMs. If these contracts were, like, you went into an actual legal negotiation and you were able to both redline and come to a compromise, it would be one thing, but these are take-it-or-leave-it contracts, and our pharmacies are often getting paid below that average acquisition cost of these drugs, right? They are getting paid below cost to acquire a drug. They're either getting paid no dispensing fee or little dispensing fee, and so they are literally losing money on buying some of these drugs and giving them to their patients. But they have to say yes, or they lose out on all of the patients in that PBM’s sphere.

So, they changed the name of this in Congress—it is now SB882 that was just reintroduced by Senators Blackburn, Hassan, Lankford, Warner, Marshall, and Welch, and it is the Patients Before Middlemen Act. They took 2 pieces of legislation that Senator Blackburn had introduced last year and combined it into 1. One of them tackles the contracts in Medicare Part D specifically, and it would require the PBMs to have reasonable and relevant contracts, which would be determined by the Centers for Medicare and Medicaid Services on what is a reasonable and relevant contract. And then if they violated those contracts, the pharmacies would have a pathway to go and report the PBMs on those violations. And so, it would be a huge step forward. There would be penalties involved with violating those contracts, they would have to follow those rules, so it would be night and day hopefully. And in the amendment legislation that passed last year and then was included in this new reintroduction, it would also say that payments fall under reasonable and relevant contract terms. And so that would encompass not just, you know, is it bad language? Are they being reasonably paid? And again, we don't need to be making billions and billions of dollars as pharmacies, but we do need to be making enough money to keep our lights on, and so hopefully that would help some of the areas over in Medicare Part D.

Another thing that would be absolutely wonderful if Congress could reintroduce this—it was introduced last year by Representative Buddy Carter—there was legislation that had patient steering and tackled the fact that PBMs are allowed to state within their contract which drugs can be bought at which pharmacies. And so, if there is a drug that is more likely to have a profit, it is more likely to be maybe a specialty drug or a drug that they require you to buy at their affiliated pharmacies or through their mail order, and it means that all of the drugs you lose money on, they then send over to the community pharmacies, and the community pharmacies get to lose money on those drugs, whereas they get to keep the money on all of the drugs that are profitable. Which then just continues the cycle of our community pharmacies losing money and not being able to make quotas, make their ends meet. And so, we could really tackle the steering affiliate pharmacy language moving forward and have that reintroduced. I know there are current conversations ongoing about doing that and then really working on reasonable and relevant contracts for the pharmacies.

That would just be 2 huge steps forward to make sure that patients are able to get their drugs at their local pharmacies, because their local pharmacies can account for how they're running their businesses and really, really know if they're going to be able to keep their lights on. Going back to the number that he had stated, how many [pharmacies] had closed from June of 2023 to June of 2024, we had nearly 448 community pharmacies close. It's more than 1 a day, and it's unsustainable. That's tens of thousands of patients who lost their pharmacy and their access to health care. And it's only going to continue if they can't make a profit on anything, and they can't keep paying their staff.