California is the biggest state so far to seek to pull back the curtain on pharmacy-benefits managers, as the industry aggressively tries to thwart a wider push for transparency.
Lawmakers in the General Assembly advanced a bill that would require more disclosures of discounts negotiated between the companies and drugmakers, but the measure is on hold after Gov. Jerry Brown's administration last week asked for changes. Benefits managers have stymied several attempts at the state and federal levels to pry open their workings.
"There's been huge push-back," said the legislation's sponsor, Jim Wood, a Democratic assemblyman from Northern California and dentist. "It really makes me more suspicious that there's simply things they don't want us to know."
Politicians, pharmacies and patients say they understand little about how the $280 billion industry uses its clout to influence costs. The three largest pharmacy-benefit managers — Express Scripts Holding Co., UnitedHealth Group Inc.'s OptumRx, and CVS Health Corp. — process roughly 70% of U.S. prescriptions.
The fight is just one battle in a nationwide struggle between lawmakers who want more light on drug plans' practices and the companies, who say that increased regulation will disrupt their ability to seek lower drug costs. In addition to state efforts, the U.S. Congress is also considering legislation.
"Those bills aren't going anywhere," said Mark Merritt, chief executive officer of the Pharmaceutical Care Management Association, the industry's lobbying arm. "Every industry has numerous bills introduced by this or that member of Congress, whether you're selling shoelaces or health care, that they don't like. That's just a normal cost of doing business."
Poor Visibility
A Nevada measure signed in June by Republican Gov. Brian Sandoval requires pharmacy-benefit managers to reveal rebates they receive from insulin makers, how much of those rebates are passed on to insurers, and what they keep for themselves.
Diabetes affects 12% of Nevada's population; another 38% are estimated to be at risk of the disease. At the same time, the price of insulin, a century-old treatment, has surged. Eli Lilly & Co.'s Humalog cost $21 a vial when it hit the market in 1996. Today, it has a list price of $275. Annual insulin sales worldwide exceed $20 billion.
Pharmacy-benefit managers say such rules deprive them of bargaining power they need to contain costs. The PCMA has blocked state efforts to regulate reimbursements, curb their ownership of mail-order pharmacies, and make them disclose financial conflicts.
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In a six-page letter to Sandoval, the industry said the law would raise drug costs and likely be struck down by the courts for violating federal laws. Sandoval, a former state attorney general and federal judge, said when he signed the bill that it was unlikely to lose in court.
On Sept. 1, the Biotechnology Innovation Organization and the Pharmaceutical Research and Manufacturers of America, two drug-industry lobbying groups, sued Nevada, hoping to keep the state from implementing the law, which they say violates patent rights and jeopardizes trade secrets.
Resistant to Regulation
