Kansas pharmacist explains how patients are helped by state's new transparency law
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What are pharmacy benefit managers (PBMs) and how do they operate in the drug supply chain?
Will Anderson, pharmacist and owner of Orchard's Drug in Lawrence, was at the Kansas Capitol last legislative session with a notebook stuffed full of pages showing how many prescriptions his pharmacy filled at or below cost the previous year. The result of Will's lobbying, along with hundreds of other pharmacists, was that Kansas passed a bill last year to make the work of pharmacy benefit managers, often described as the middlemen between the pharmacy and the pharmaceutical companies, more transparent. This is Morgan Cholson, Kansas Reflector reporter, and Will has joined me today to update us on the effects of the new legislation on his business and talk about industry reform. Thanks for being here, Will.
Absolutely. Happy to be here.
Well, let's start with kind of the basics. Can you just talk about what pharmacy benefit managers are, which everyone shortens to PBMs, and how they work in your industry?
Sure.
Yeah, so the language there is intentionally confusing. It's intentionally obscure. If people can't remember what it's called, then it's harder to attack and to call it out. So that's the reason no one can remember what a PBM is, but I'll break it down real simple. A pharmacy benefit manager is one piece of the giant insurance companies, the conglomerates, the vertical monopolies that control our health care system. So if you just think about some of the major companies like UnitedHealth, CVS Aetna, Caremark, Cigna, those companies are all vertically monopolized or vertically integrated companies. health insurance companies. So they all have their own PBM. So of course, the PBMs have their own names, but these are all the same company that we're talking about.
And so they're just one piece of the pie. And what a PBM does is pretty simple. They process prescription claims. So they are a technological company. the works in the background, behind the scenes that no one really sees, hired by your insurance company to process prescription claims. Insurance companies process medical claims. That's what they're good at. And back in the day, we're talking between the 60s and the 80s, They started wanting to offer coverage for prescriptions, but they didn't have the expertise to be able to process those claims efficiently. And that's where the PBM sprang up to provide that useful service. And it is a useful service. It's something that we definitely need.
Why is the lack of transparency and accountability a problem for PBMs?
We need a company that can process claims and they do a great job at that function. If you compare prescription processing to medical uh medical benefit processing it's like a night and day difference right you go to the doctor's office it might be six months before you know what your copay is or before you know what the final payment is going to be and then you get a bill in the mail the on the prescription side you come into the pharmacy i can bill in real time and i can tell you how much the medication is going to cost i can know how much the pharmacy is going to be reimbursed etc um so they're deciding what medications are covered, how much things are going to cost, how much they're going to reimburse, etc.
And they're doing that on the behalf of the insurance company. Now, they used to be separate. Now they have consolidated. There's only three major PBMs that control about 80% of all prescriptions in the United States. And they're all integrated into those giant healthcare monopolies.
Well, that was kind of leads into my next question. What has been the challenge with the way that they have been operating?
Absolutely. So the challenge with... the PBMs is that they operate almost entirely with no transparency, no accountability. The only entity that they're really accountable to is the insurance company that's hiring them. And in this case, it's the same company, right? So they're accountable to themselves. The problem truly is that they're, Their power has consolidated and therefore they have taken advantage of certain business practices by operating in the dark. They have taken advantage of their position to extract money from every player in the healthcare industry.
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Chapters
8 chapters
1
What are pharmacy benefit managers (PBMs) and how do they operate in the drug supply chain?
0:00–2:32
2
Why is the lack of transparency and accountability a problem for PBMs?
2:32–5:32
3
How does spread pricing work and why was it banned by Kansas SB20?
5:32–9:34
4
What key provisions does Kansas’ PBM reform bill (SB20) include?
9:34–13:33
5
How has the new law affected pharmacy reimbursement and revenue for independent pharmacies?
13:33–17:04
6
What does the $10.50 dispensing fee floor mean for pharmacies and patients?
17:04–20:13
7
What early results and savings have other states seen after implementing PBM reforms?
20:13–23:20
8
What next steps are needed to ensure continued transparency and protect Kansas patients?
23:20–24:22
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