No Secret Price Gouging In Connecticut

May 26, 2017

 

State lawmakers recognize the problems posed by pharmacy benefit managers (PBMs) and that they are contributing to drug prices, and they have been busy. On Wednesday the Connecticut State Senate unanimously passed S.B. 445, a bill intended to protect consumers from secret price gouging by PBMs, and told Connecticut’s Insurance Commissioner not to weaken the bill. This measure will now be considered by the Connecticut House.

 

In a statement, Senators Martin Looney and Len Fasano accurately noted that PBMs serve as middlemen between insurance companies and pharmacies. They stated that PBM contracts often require pharmacists “to collect the full payment for a drug even if the drug costs significantly less. For example, a pharmacist may be reimbursed $5 for prescription medicine, and yet be required by the PBM to collect the full $20 copay from the consumer with the difference, or $15, pocketed by the PBM.” This bill would ban two anti-consumer practices: gag clauses that prohibit pharmacies from disclosing relevant drug price information to consumers, and contract provisions that lead to consumers unknowingly paying higher out-of-pocket prices for prescription drugs than the drugs actually cost.

 

This vote comes just a day after the Senators sent a letter to Insurance Commissioner Katherine Wade warning her to drop her attempts to weaken the bill. They wrote, “We would have expected you to support legislation that improves public transparency regarding drug prices and protects consumers from secret price gouging…Therefore, we were surprised to learn that you interjected yourself into the legislative process in a manner that would benefit Cigna and other insurers who have affiliated PBMs.” Wade previously worked for Cigna for 21 years as a lobbyist, and her husband is a lawyer for Cigna.

 

The Insurance Department responded that Commissioner Wade was abiding by all ethics laws and that she supported the bill’s underlying concepts. Previously she had proposed new language for this bill that would give pharmacy benefit managers the responsibility for auditing and enforcing the bill’s provisions in their contracts, and the Insurance Department would be able to audit the contracts. Senate leaders were not happy with the proposed language and characterized it as “the fox guarding the hen house.”

 

While antitrust regulators should protect consumers from abuses and market failure, this has unfortunately not always been the case. Last year Wade was embroiled in a similar controversy over the attempted merger of health insurance companies Anthem and Cigna, and she ultimately agreed to recuse herself from all future contact with the merger. And the Federal Trade Commission has refrained from regulating PBMs or opposing the consolidation of the PBM market. Instead they have argued that regulation and transparency of the PBM industry will lead to collusion between companies.

 

The Senate’s unanimous passage of this bill is a powerful statement. It sends a message that PBMs will be held accountable and that their worst abuses will be curbed. We hope the Connecticut Assembly and Governor Daniel Malloy will heed that message as well.

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