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Pharmacy Benefit...Who?

By Claire Davenport

TOMMASO BARONIO, HOST: Pharmacy benefit managers! You may never have heard of them, but these powerful middlemen are responsible for managing drug costs between pharmacies, health insurers, and manufacturers. 


But their unique bargaining position allows them to charge a LOT for their services, which can be a problem for independent pharmacies. As Claire Davenport reports, local New York pharmacists are pushing for stronger regulations.


CLAIRE DAVENPORT, BYLINE: In the back room of Mt. Carmel Pharmacy in the Bronx’s Little Italy, technicians in white coats bustle around. They’re fielding calls, measuring out tablets, and sorting prescriptions. Roger Paganelli is a co-owner and a third-generation pharmacist. 


ROGER PAGANELLI: The Italian people would say, ‘Hey, I used to come to your grandfather and I come into your father and now I come into you.’ 


DAVENPORT: And many of those customers are here for their medications. But the drugs at the core of Paganelli’s business can sometimes cost more than he pays for them. 


Paganelli says this is because of PBMs – intermediaries that work on behalf of insurance companies. Originally the role was created to simplify the system for fulfilling prescriptions. Instead of a pharmacist having to check with an insurance company to see how much of a patient’s medication bill would be covered, a PBM would get the answer in a matter of seconds. 

PAGANELLI: Which is, you know, from a 50,000-foot view, really smart, right? Uh, the benefits should be managed because there are brand name drugs, there are generic drugs, there are multiple drugs for multiple different health disorders. 


DAVENPORT: But Paganelli says along the way, they started charging higher transaction fees for their services. And sometimes these fees are so high, pharmacists can actually LOSE money when filling prescriptions, even for lifesaving devices like asthma inhalers.

PAGANELLI: In many instances, we’ll fill a prescription for below our cost, and then the dispensing fee for that will be zero or 50 cents.  

DAVENPORT: I spoke with five local pharmacists who said they’re facing the same problem - losing money on some drug sales. For small business owners, that can be a pretty tough pill to swallow. So last year, New York State began auditing and overseeing PBMs. The purpose was to find out how they work and suggest new standards and regulations. The state released its first regulatory suggestions in October. But last week the public was invited to comment - on new, weaker regulations. 


JAMES SCHIFFER: Any references to economic changes have been eliminated. Any reference to the procedures for reinstatement have been eliminated. 


DAVENPORT: That’s James Schiffer, a pharmacist-turned-lawyer. He’s working with the state’s pharmacists union to strengthen the regulations. 


He says PBMs have become too big. Quite literally compounding the problem, PBMs have consolidated with their clients. Like CVS and Aetna. Schiffer thinks their market power might have helped them shift the regulations in their favor. 


SCHIFFER: Pressure. Lobbyist pressure.  

DAVENPORT: When asked if their fees are burdensome, “The Pharmaceutical Care Management Association,”, a national organization representing PBMs, didn’t respond to our request in time for air. Next Tuesday, over 100 independent pharmacists will head to the state capitol to lobby legislators. One big request will be stronger regulations for PBMs. 


Claire Davenport, Columbia Radio News. 



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