House lawmakers are mounting a push for greater transparency and accountability from some of the largest and most profitable companies in the United States for the business they conduct in Vermont.
Proposed amendments to an omnibus health care reform bill under consideration in the House Health Care Committee would require pharmacy benefits management companies to disclose how much of the money they charge stays in their pockets.
Rep. Sarah Copeland-Hanzas, D-Bradford, vice chair of the committee said the proposed statute would help the public understand “how our health care system works.”
“As a matter of principle we want to ensure our health care dollars go toward the actual provision of care,” Copeland-Hanzas said.
Spending on pharmaceuticals has grown dramatically in Vermont, said Copeland-Hanzas, even as the overall growth in health care spending has slowed.
“We just need to get a handle on how much of our pharmaceutical spending actually is going to provision of care versus administrative overhead,” she said.
That overhead includes marketing, administrative fees and, ultimately, corporate profits for the benefits managers, who act as third-party administrators for prescription drug programs.
The amendment, submitted by committee chairman Rep. Mike Fisher, D-Lincoln, would require pharmacy benefit managers to report the percentage or dollar amount they pocket on each claim charged to an insurer in addition to what is paid to pharmacies for filling and dispensing prescriptions.
It would also require the benefits managers to report an aggregate dollar amount they make for all claims to health insurers. Both would be required for companies to hold contracts in Vermont.
A recent analysis of Vermont’s health care spending by the Green Mountain Care Board shows that 12 percent – or $629 million – of the state’s $5.2 billion in health care costs went toward prescription drugs and nondurable medical goods that require a prescription.
Vermonters paid $135 million in out-of-pocket costs for prescription drugs and supplies in 2012.
That’s the second-largest out-of-pocket health care expense for residents, surpassed only by spending at hospitals, which totaled $170 million in 2012, the most recent year for which the Green Mountain Care Board has data.
The board’s spending analysis shows that overall health care spending rose $142 million, or 2.7 percent, from 2011 to 2012. Prescription drug spending accounted for 16 percent of that growth at $23 million.
Roughly 65 percent of the growth in prescription drug spending was borne by the private sector, the analysis shows.
St. Louis-based Express Scripts is the pharmacy benefit manager for Blue Cross Blue Shield of Vermont, the state’s largest health care insurer and the third-party administrator for the Vermont State Employees Association’s health plan.
Express Scripts, one of the largest pharmacy benefit managers in the country, reported $27.4 billion in revenue for the last quarter of 2013, according to the St. Louis Business Journal, and netted $1.3 billion in profits in 2012.
Rhode Island-based CVS Caremark, another of the largest pharmacy benefit managers in the U.S., reported $32.8 billion in revenue last quarter, according to Yahoo Finance.Express Scripts and CVS Caremark are numbers 24 and 13, respectively, on CNN Money’s Fortune 500 list.
“Are they making too much money?” Fisher said. “I don’t know, but this is about transparency.”
Lobbyists for both companies expressed concern about the proposals and said their clients oppose the amendments.
“Transparency takes time … and in this business the more time you spend doing those administrative tasks, the more money it costs the insurer,” said CVS Caremark lobbyist Will Smith with the Northfield firm Miller and Smith.
Smith’s firm received $20,000 in lobbying fees from CVS Caremark during the most recent reporting period, which ended Jan. 25, according to lobbying reports filed with the Secretary of State’s Office.
Express Scripts paid Montpelier lobbying firm KSE Partners $20,000 during that same reporting period. KSE lobbyist Chuck Storrow said his client had deferred comment to Express Scripts’ corporate communications office.
A spokesman for Express Scripts characterized the transparency amendments as onerous and anti-competitive.
Without guarantees of confidentiality, the reporting called for in Fisher’s proposal could expose proprietary information on a the company’s profits to its competitors, said David Whitrap, director of communications.
“If a (insurance) plan wants certain financial information disclosed, they can negotiate it into the terms of their contract,” Whitrap said. “This legislation would ultimately stifle competition among PBMs.”
CVS Caremark does not have any current contracts in Vermont, but they have had contracts here in the past and are likely to again in the future, Smith said. He urged lawmakers not to go forward with the transparency amendment on their behalf.
Blue Cross Blue Shield of Vermont received a bid for benefits management from a company that built in transparency measures, and it came in $3.5 million over Express Scripts’ winning bid, Smith said.
BCBS is going to release a proposal request this summer for another three-year contract, he said.
“If you are to build this language in, you would see what that would cost,” Smith warned.
He said that if the state passes the amendment it should consider adding language that would make it apply to contracts entered into after the law takes effect.
The Senate-passed version of the health care reform bill contains a provision calling for a study and report on Vermont acting as its own pharmacy benefits manager for Green Mountain Care, the state’s planned universal health care program.
“From the testimony I’ve heard, I don’t think it makes sense for us to be our own pharmacy benefit manager,” Copeland-Hanzas said.
Large pharmacy benefits managers, such as CVS Caremark and Express Scripts, use their purchasing power to negotiate affordable rates for bulk purchases from the major drug manufacturers.
Even if all 620,000 Vermonters were in the same risk pool – which is unlikely to happen because there are populations that will get their primary coverage elsewhere – the state wouldn’t have nearly the leverage to negotiate fair prices with drug makers, she said.
Copeland-Hanzas has pushed for greater regulation of pharmacy benefits managers in the past, working to pass legislation last session that restricted auditing practices by large pharmacy benefit managers that were hurting Vermont’s small pharmacies.
She’s introduced additional amendments to the health care bill that would require pharmacy benefits managers to furnish pharmacists with the maximum allowable costs for the prescriptions they cover and prevent the companies from imposing higher copayments than are included in the insured’s health plan.
In addition, the amendments would require pharmacy benefits managers to pay out claims within two weeks. That provision is to protect small pharmacists from long waits for compensation that can hurt their profit margins.
Vermont needs to look out for the small Main Street pharmacist that is working hard to keep its doors open and serving its customers, Copeland-Hanzas said.
Smith said the two-week provision was the only proposal CVS Caremark finds palatable and suggested they would not oppose that language.
Whitrap, the Express Scripts spokesman, however, said a two-week turnaround is unrealistic, when the national norm is closer to 30-60 days.
He suggested that the 14-day window would ultimately require companies to drive up prices for Vermonters.