Health Care

Gov. Scott signs law that targets prescription drug intermediaries

pharmacist holding vial on syringe
Steven Simpson, the supervising pharmacist at Kinney Drugs in Barre, prepares a syringe with a dose of the Pfizer/BioNTech Covid-19 vaccine. Vermont’s independent pharmacies and hospitals gained some ground as Gov. Phil Scott signed a bill that takes aim at pharmacy benefits managers. File photo by Mike Dougherty/VTDigger

Vermont’s independent pharmacies and hospitals — particularly UVM Health Network — gained the upper hand this week as Gov. Phil Scott signed a bill that takes aim at pharmacy benefits managers.

These go-between national companies negotiate prescription prices with drugmakers on behalf of private insurers. Private insurers say that pharmacy benefits managers use bulk discounts to keep prescription drug costs in check. But some regulators — including the Federal Trade Commission — say benefits managers set drug prices with an eye toward their own profits.

“What we’ve done is we’ve ripped off the Band-Aid to actually look at what we’re doing,” Jeff Hochberg, president of Vermont Retail Druggists, said last week. “Now we’re looking under there to see what’s going on. And at the same time, we’re establishing a platform through which all other reform can happen.”

With the newly signed H.353, Vermont joins a growing group of regulators who say pharmacy benefit managers are one reason for soaring drug prices. 

H.353 started out as a bill to make drugs more affordable by regulating negotiations between pharmacy benefits managers and independent pharmacies in Vermont. Revisions in the bill also introduced provisions that all but guaranteed that specialty drug prescriptions given to patients in health care settings, including expensive cancer medications, would be filled at the University of Vermont Health Network’s pharmacies, rather than through cheaper mail-order pharmacies that insurers prefer.

Though the language was softened somewhat in subsequent revisions, the final version of the bill still gives UVM Health Network an advantage when it comes to filling those expensive prescriptions. The health network, for its part, argued that shipping specialty drugs put patients at risk because of medication errors and improper storage in transit. 

Specialty prescriptions — a broad category that includes anything from Botox to biological drugs — are a relatively new addition to a doctor's arsenal. Patients typically get these drugs at a clinic or other health care settings through a monthly infusion or injection. Because these drugs can cost thousands of dollars for one dose, insurers dispense them sparingly and only after patients and their doctors have exhausted all other options. 

Annie Mackin, a UVM Health Network spokesperson, said this week that providers “can now be sure that medication was shipped safely before being prepared and administered to patients at the location where they are receiving their treatment, without the potential for damage to the medication that could harm the patient or delay their care.”

The bill could be a financial boon to UVM Health Network. For example, a single dose of Herceptin, a biological drug to treat esophageal and breast cancers, costs more than $10,000 when dispensed at a hospital pharmacy, according to national insurer trade group AHIP. The same drug costs roughly $6,500 at a physician’s office and $4,600 at a standalone pharmacy. 

With H.353, hospitals can decide where the drugs come from, meaning that patients who get specialty drug infusions at a clinic or medical center would almost certainly get their drugs from the more expensive hospital pharmacy. 

In most cases, specialty drugs are so expensive that patients hit their out-of-pocket maximum after one or two infusions. That means that patients often aren’t aware of the added expense of filling a drug at a hospital pharmacy. Insurers, however, build this additional spending into next year’s premiums.

Private insurers and pharmacy benefits managers cited those costs in their opposition to the bill. They’ve argued that the bill could cost some Vermonters hundreds of dollars a year. 

Sara Teachout, of BlueCross BlueShield of Vermont, reiterated on Thursday that H.353 “removes levels to control drug costs,” and ultimately would raise premiums. 

Earlier this month, BlueCross BlueShield — the largest private insurer in the state — already asked regulators at the Green Mountain Care Board for a hefty increase to insurance premiums, citing hospital and drug spending.

But Jeff Hochberg, president of Vermont Retail Druggists, said previously those concerns are unfounded. 

“The only thing that’s changing is just saying that (pharmacy benefits managers) can’t only cover their own pharmacy,” he said before the bill was signed into law. “They have to make it open and more accessible to consumers.”

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Liora Engel-Smith

About Liora

Liora Engel-Smith covers health care for VTDigger. She previously covered rural health at NC Health News in North Carolina and the Keene Sentinel in New Hampshire. She also had been at the Muscatine Journal in rural Iowa. Engel-Smith has master's degrees in public health from Drexel University and journalism from Temple University. Before moving to journalism, she was a scientist who briefly worked in the pharmaceutical industry.

Email: [email protected]

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