State bill could lower prescription drug prices, keep local pharmacies in business

Pilgrim Pharmacy has been open for more than 40 years in the Bronx, owner Ray Macioci said.
Pilgrim Pharmacy has been open for more than 40 years in the Bronx, owner Ray Macioci said. Photo Credit: AFP/Getty Images/Don Emmert

With days left in the legislative session, state lawmakers are considering a bill that has the potential to save local pharmacies “from extinction,” according to the owner of an independent pharmacy in the Bronx. 

The proposed legislation, S5923 and A2795, would give the state control of negotiating prescription drug prices for Medicaid patients and determining which drugs are covered by Medicaid plans. If the bill passes, it would remove some power from the pharmacy benefits managers (PBMs), which have contributed to rising drug prices and put a major strain on independent pharmacies

“This is a tremendous step toward solving the PBM problem,” said Ray Macioci, the owner of Pilgrim Pharmacy in Pelham Bay and representative of FixRx, a group lobbying for the bill. But since the proposed legislation would only affect the Medicaid program, “it wouldn’t cut the PBMs out entirely,” he said.

“This legislation could save quite a few pharmacies from extinction because it’s going to put the decisions back in the hands of the patients and their health care providers and puts the state in control of both the rebates and the formularies,” or the drugs covered by insurers, said Macioci, who has had to cut staff and hours at his pharmacy in recent years.

Acting as middlemen between insurers, drug manufacturers and pharmacists, the PBMs control what prescriptions are covered by insurance, how much they cost and how much pharmacies get reimbursed for dispensing the drugs. While a number of PBMs were initially created in the 1960s to manage prescription drug claims and reduce drug prices, now three companies control most of the market, and their policies have led to higher drug prices and lower reimbursements for pharmacies, according to a report released this month by the State Senate’s Committee on Investigations and Government Operations.

“PBMs often employ controversial utilization and management tools to generate revenue for themselves in a way that is detrimental to health plan sponsors, patients, and pharmacies,” the report says.

For example, PBMs often require patients to use their own retail or mail order distributors to fill their prescriptions, limiting a patient’s choice and taking business from local pharmacies, the report says. 

By removing PBMs from the state’s Medicaid program, “the state can realize savings from bulk purchasing and fairly pay the independent pharmacies for dispensing medications,” said Sen. Gustavo Rivera (D-Bronx), who sponsored S5923. “This bill will ensure a fair treatment for our local pharmacies and Medicaid patients alike as it will provide more uniform policies and more control over taxpayer dollars.”

Rivera wouldn’t say if he thought the bill will pass by the end of the session on June 19, but said there is “an ongoing discussion” about it.

PBMs also profit from a process known as spread pricing, in which the PBM charges a health insurance sponsor one price for a prescription drug and reimburses the pharmacy a lower price, keeping the difference. Earlier this year, in the 2019-2020 state budget, legislators banned this practice in the state’s Medicaid program, but just as with the bill, the ban doesn’t protect prescriptions filled through private insurance.

“In a perfect world, pharmacists would love to see PBMs disappear,” Macioci said, but quickly added, “That’s not going to happen.” 

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