Ohio AG joins call to protect state drug-pricing transparency laws

Ohio Attorney General Dave Yost has joined 44 other state attorneys general in calling on the federal government to bring more transparency to prescription-drug transactions.

They also asked that in proposing their own transparency rule, the feds make clear that they’re not pre-empting state transparency laws.

The attempts at transparency are aimed at pharmacy benefit managers, or PBMs.

The companies represent insurers in drug transactions.

The biggest three control about 80% of drug transactions, and each is part of a huge health conglomerate that also owns major insurers. In addition, the conglomerates own pharmacy operations, with one, CVS Health, owning the nation’s largest brick-and-mortar chain.

PBMs work on behalf of insurers in drug purchases. They decide which drugs are covered, and often extract large, non-transparent rebates from drugmakers in exchange for covering their products.

PBMs also create pharmacy networks and determine how much to reimburse them for what they sell.

The companies claim that PBMs are the one link in the drug-supply chain aimed at bringing costs down.

However, inflation in drug prices has far outpaced that in the general economy since the PBMs arose. And research has shown that the current rebate system increases list prices of drugs.

Meanwhile, small-chain and independent pharmacies say that the companies that own PBMs have an obvious conflict when they decide how much to reimburse their own pharmacies as well as competitors. Many blame the conglomerates for a wave of pharmacy closures in the United States.

A raft of reforms has been proposed over the past decade by individual states and the federal government.

Perhaps the most thoroughgoing is the Break up Big Medicine Act introduced earlier this year. It would prohibit companies from being both the provider of health services and the entity that determines how much consumers ultimately have to pay for them.

A more modest measure is a federal rule proposed in January by the U.S. Department of Labor. It would require PBMs working with plans subject to Employee Retirement Income Security Act to open their books to plan sponsors twice a year and allow sponsors to audit them.

Those sponsors are self-insured plans typically used by large employers. The idea behind the rule is to allow the employers to see if they’re getting the savings the PBMs promised them.

In their letter, the state AGs applauded the effort at transparency, but they asked the Justice Department to make sure state transparency laws aren’t pre-empted by it.

The question isn’t merely theoretical.

A lower court held that states couldn’t impose requirements on multi-state, self-insured plans. But the U.S. Supreme Court in 2020 overturned that decision.

Ohio and many other states have passed their own laws attempting to make PBMs’ actions more transparent. Last week, Oklahoma Attorney General Gentner Drummond led 45 attorneys general in seeking assurances that the Department of Labor’s proposed rule won’t vacate the state laws.

“In a letter to the Department of Labor, the coalition urges the adoption of two additional protections,” Drummond said in a written statement. “First, they ask the Department to clarify that the rule does not override existing state PBM transparency laws. This is an important safeguard since PBMs have historically argued that federal law preempts state oversight. Second, they ask the Department to commit to coordinating enforcement with state attorneys general, including by referring potential violations of state law to their offices.”