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Pharmacy benefit managers sue over first-of-its kind Arkansas law

Pharmacy benefit managers sue over first-of-its kind Arkansas law

The national association representing pharmacy benefit managers is suing the state of Arkansas over a first-of-its kind law governing payments to pharmacies for generic drugs.

The law requires benefit managers to pay pharmacies the amounts those pharmacies spent to buy generic drugs from wholesalers, according to invoices. Before the law's passage, pharmacies had complained that benefit managers often paid them less for generics than what it actually cost the pharmacies to buy them from wholesalers, leaving them at a loss. The law was passed earlier this year and went into effect last month.

The Pharmaceutical Care Management Association argues the new law will remove pharmacies' incentive to shop around for low drug prices, consequently raising drug prescription drug prices and hurting consumers, benefit plans, employers and insurers.

Pharmacy groups, however, say the practice of paying pharmacies less than cost for generic drugs pads the pockets of benefits managers at the expense of pharmacies and patients.

The lawsuit, filed in federal court Thursday, seeks to stop the state from enforcing the law, saying the act is unconstitutional at the state and federal levels. The lawsuit also alleges Act 900 is pre-empted by federal law and Medicare Part D.

Stephanie Kanwit, special counsel to the benefit manager association, said it's in the interest of benefit managers to work with pharmacies on drug payments. She said benefit managers want pharmacies in their networks.

“What the Arkansas law does … is (that when dealing with generics) pharmacies basically get to call the shots on what the drug pricing is and (that) takes away any incentive on the part of the pharmacies to get the best possible price on a generic drug,” Ms. Kanwit said.

The association has sued over laws related to drug prices in a number of other states, including Main, Iowa and Washington, D.C., but she said the Arkansas law is “one-of-a-kind.”

“There's not another law in the entire United States that's as far reaching,” Ms. Kanwit said.

According to the lawsuit, Act 900 “guarantees Arkansas pharmacies a profit” on many scripts filled because it requires benefit managers, when challenged by pharmacies, to pay the costs listed on pharmacies' invoices, regardless of whether the pharmacies got the drugs for less or got rebates or discounts.

Ms. Kanwit said it's rare for benefits managers and pharmacies not to be able to resolve disagreements over payments.

But Mark Riley, CEO of the Arkansas Pharmacists Association, said Act 900 is not about helping pharmacies profit. It's about fairness, he said. He added that his association's members say they're now filling 11% of their prescriptions below invoice costs.

“It's a problem that had to be addressed,” Mr. Riley said. The [pharmacy benefits manager] industry doesn't want to fix it because they're making money.”

He said benefits managers will charge employers one price for generics and then pay pharmacies a lower amount, pocketing the difference.

National Community Pharmacists Association CEO Douglas Hoey said in a statement that opposition to the law seems to be “motivated purely by the desire to cling to windfall profits.”

“Drug costs can surge virtually overnight, yet (pharmacy benefit manager) corporations may wait a month or longer to update reimbursement rates, leaving community pharmacies with losses of $100 or more on prescriptions and jeopardizing patient access to medication,” Mr. Hoey said. “Moreover, the lack of transparency allows (pharmacy benefit manager) corporations to overcharge employers, the government and other plan sponsors by paying community pharmacies below cost and charging plan sponsors the going market rate.”

Act 900 also requires, among other things, that benefit managers update their maximum allowable cost lists, which benefit managers use to decide how much to reimburse pharmacies, within a week of a significant increase in pharmacies' costs to buy the drugs from most wholesalers.

The Pharmaceutical Care Management Association takes issue with that provision of the law as well, saying benefit managers aren't privy to information on the acquisition costs of pharmaceuticals

Judd Deere, a spokesman for Arkansas Attorney General Leslie Rutledge, who is named as the defendant in the suit, said the attorney general and her staff are reviewing the lawsuit and won't comment on it until the matter is resolved.

Lisa Schencker writes for Modern Healthcare, a sister publication of Business Insurance.

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