Rich Harvie, co-owner of Montpelier Pharmacy, said he has taken out loans totaling hundreds of thousands of dollars to cover late payments from pharmacy benefit management companies.
“It’s grossly unfair,” Harvie said. His pharmacy must pay suppliers every 10 days, but the companies that pay pharmacy claims for health plans sometimes take a month or longer.
New state rules went into effect last week that will ease the burden on pharmacies.
The health care reform law passed this session places new restrictions on pharmacy benefit managers, such as ExpressScripts, which process prescription payments for insurance companies or corporations.
Vermont now requires pharmaceutical benefit managers to pay pharmacy claims within 14 days or notify the pharmacy the claim is being disputed. The pharmaceutical benefit managers can no longer require pharmacies to pay them a portion of customers’ co-payments under the new law.
Other rules protect consumers from paying benefit managers a higher co-payment for prescription drugs than allowed by their health plan or a co-payment that’s higher than the maximum allowable cost set by the state for certain drugs.
Vermont is doing more than most states to regulate pharmacy benefit managers, said David Balto, a Washington, D.C.-based antitrust attorney.
Pharmacy benefit management companies were envisioned as honest brokers who would transmit and process claims, Balto said, but the companies have become one of the most profitable and unregulated sectors of the U.S. health care market.
St. Louis-based Express Scripts is the pharmacy benefit manager for Blue Cross Blue Shield of Vermont, the state’s largest health insurer, and the third-party administrator for the Vermont State Employees Association’s health plan.
Express Scripts 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.
Lobbyists for both companies opposed Vermont’s new rules in the Legislature last session.
The new law requires pharmacy benefit managers to pass on the value of rebates they’ve negotiated with drugmakers for specific drugs to health plans, unless the contract they negotiate dictates otherwise, making a so-called “pass through” contracts the default.
The Department of Financial Regulation and the Vermont Attorney General’s Office will work together to enforce the new rules.
Transparency measures in the law require pharmacy benefit managers to file annual reports with the health insurers they work for, DFR and the Green Mountain Care Board.
The reports must show the total dollar amount they charged a health insurer for pharmacy claims in excess of what they reimbursed pharmacies – or essentially the money they pocket.
The Green Mountain Care Board has not discussed how the reports might be used, said Mike Donofrio, the board’s attorney. However, absent a demonstration that disclosure is exempt from Vermont law the board would make the information public, he said.
Making that information public could help self-insured employers and large health plan providers, such as schools and municipalities, see which benefit managers offer the best value.
Harvie said the new rules will help his small business, but he thinks the state should consider going further and administer its own pharmacy benefits.
That idea has been tossed around the Statehouse as a potential part of the state’s planned universal health care program, but lawmakers have questioned if Vermont has the economy of scale as a small state to make that viable.
