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November 17, 2015
Honorable James B. Eldridge, Senate Chair
Joint Committee on Financial Services
State House Room 511B
Boston, MA 02133
Honorable Aaron Michlewitz, House Chair
Joint Committee on Financial Services
State House, Room 254
Boston, MA 02133
Re: Testimony in support of H.870, An Act to Ensure Access to Generic Medications
Dear Chairman Eldridge, Chairman Michlewitz, and honored members of the committee:
The Massachusetts Pharmacists Association (MPhA), representing the interests of pharmacists
from all practice settings, and the Massachusetts Independent Pharmacists Association,
representing the interests of Independent Pharmacies in the Commonwealth strongly support
H.870, An Act to Ensure Access to Generic Medications.
A Prescription Benefit Managers (PBM) is generally employed by an health insurance plan and
large self-insured employers to manage the prescription benefit piece of the plan. Among their
responsibilities is reimbursement to pharmacies who dispense medications to a plan's or
employer's covered members. The PBM maintains lists of covered medications for each plan
and employer and the maximum allowable cost (MAC) that will be reimbursed to the pharmacy
for each drug. The PBM is responsible for updating the MAC list of covered drugs to reflect
market prices and thereby ensure a fair reimbursement to network pharmacies.
There have been dramatic price swings in generic drug prices over the past several years. One
reason for this is consolidation in the pharmaceutical industry. As a result there are fewer
suppliers, which often leads to shortages. As demand rises, so do prices. There have also been
shortages of raw ingredients having the same effect on supplies and prices. These factors have
led to dramatic price spikes - some as much as 1,000% - and these spikes are felt throughout our
healthcare system.
Our community pharmacies are impacted by these spikes because there is an unnecessary lag
between the time the price rises and when the insurer's PBM adjusts the amount that will be
reimbursed to the pharmacy for dispensing that drug.
Under current practices, pharmacies do not know the amount of that they will be reimbursed for
a drug until they submit the claim to the PBM. So when their prices to acquire that drug rise
they hope that the PBM will have adjusted the amount they are reimbursed accordingly to
prevent the pharmacy from taking a loss.
This is not happening in a timely manner. In fact it has been taking between 2 and 6 months for
an update to occur. As a result, pharmacies often dispense generic medications at a significant
loss. In our electronic age, this is both unnecessary and inexcusable . The PBMs continue to pay
long outdated prices at a huge savings. In recognition of this problem, the Centers for Medicare
& Medicaid Services will require Part D plans to update their price list every seven days starting
in 2016.
By contract, pharmacies are permitted to appeal to the PBM to demonstrate that their costs far
exceed the payment, but this process has not been working. In a national survey of community
pharmacies, 57% of those surveyed said the appeal was rejected by the PBM and 26% said they
received no response at all. As a result 18 states have already passed legislation that requires a
more transparent process.
H.870 would require plans or its PBM to make generic drug price lists available to pharmacies,
update the list every 3 business days to catch the dramatic fluctuations in generic drug prices,
and respond to an appeal from a pharmacy within 7 business days. These are very reasonable
and fair business practices. In the absence of these fair standards, pharmacies will be tempted to
avoid carrying generic medications prone to price swings and dispense higher but more
predictably priced brand name drugs.
Sincerely,
David Johnson
Executive Vice President, MPhA
Todd Brown,
Executive Director, MIPA