Strickland: Drug middlemen probe will lift 'shroud of secrecy' of 'plague' on healthcare

Ted Strickland served as governor of Ohio from 2007 to 2011.

As reported in early June, the Federal Trade Commission announced it would conduct a study on the contracting practices of pharmacy benefit managers.

Most Americans are blissfully unaware of the complicated intricacies that plague our healthcare system, which often increase the cost of critical care and reduce the availability of life-saving drugs. The commission study is an important step in the right direction.

More: FTC agrees to 'shine a light' on how drug middlemen impact your prescription prices

Pharmacy benefit managers were originally formed more than 50 years ago to process claims and negotiate with drug makers for lower prices. But as of today, they administer drug plans for hundreds of millions of people, most of whom have no idea they’re doing so, or even the fact they exist.

They’re essentially middlemen who operate in a shroud of secrecy, playing a significant role in determining prescription drug costs and even controlling which drugs an insurance plan will cover.

This lack of transparency is exacerbated by the fact that a staggering 80% of the prescription drug market is controlled by only three pharmacy benefit managers.

With such a small number of pharmacy benefit managers wielding such immense power, they have become a big factor in the increasing of cost for much-needed prescription medications in states across the country, including Ohio.

One particularly odious practice is referred to as “spread pricing.” When a PBM engages in spread pricing, they carry out the process of charging a health insurance plan to fill a prescription, but reimburse the pharmacy for less than they charge the insurance plan. The pharmacy benefit manager then pockets the difference.

More: Ohio launches probe of PBM practice that critics say gouges patients and taxpayers

Consumers are not the only ones who suffer from the consequences of pharmacy benefit manager practices like spread pricing. Independent pharmacies can be reimbursed below cost and eventually forced to close down, sometimes creating pharmacy deserts.

A recent study by the University of Iowa revealed that between 2003 and 2018, at least 1,230 independent pharmacies shut down. For many, especially those who live in rural parts of the country, their local pharmacy serves as their primary healthcare infrastructure.

As a result, higher healthcare premiums and longer wait times usually follow.

Ohio families are already struggling to make ends meet due to inflation making everyday goods more expensive, skyrocketing gas prices, and ongoing product shortages.

Investigations into pharmacy benefit manager practices have previously exposed why there is such a need for transparency. For example, an investigation in Delaware revealed the state’s pharmacy benefit manager specifically targeted independent pharmacies with audits, despite the fact that plan managers “could not trace back a single plan reimbursement from pharmacy audits conducted by (the pharmacy benefit manager)."

Ohio Attorney General Dave Yost also found evidence that the state’s pharmacy benefit managers “participated in a conspiracy to wrongfully and unlawfully obtain monies from (the Ohio Department of Medicaid) to which they were not entitled in violation of the laws of the State of Ohio.”

More: Our view: 'Middlemen' tactics increase costs, reduce health-care options

All of these issues need to be further examined and investigated, which is why I’m so encouraged by the Federal Trade Commission's recent announcement of launching an inquiry into pharmacy benefit managers.

As they stated in their press release, the commission plans to “scrutinize the impact of vertically integrated pharmacy benefit managers on the access and affordability of prescription drugs.”

The commission  is focusing on the six largest pharmacy benefit managers in the country via compulsory orders for information about their business practices.

While I’m confident the commission’s actions — combined with bipartisan legislative efforts being pursued by Senators Chuck Grassley and Maria Cantwell – will bring much-needed transparency to pharmacy benefit manager practices, we all must be part of the solution.

We must continue to educate ourselves about the role of pharmacy benefit managers in our critical healthcare decisions, and advocate for reforms that reduce prescription drug prices and provide greater accessibility.

Ted Strickland served as governor of Ohio from 2007 to 2011.

This article originally appeared on The Columbus Dispatch: Opinion: Pharmacy benefit managers' practices surrounded by secrecy