PEIA Changes Concern Pharmacists Over Drug Reimbursement

The high cost of prescription drugs, and concerns of small pharmacies over reimbursement claims were presented to the Joint Standing Committee on Finance on Tuesday.

New changes to the Public Employees Insurance Agency (PEIA) go into effect July 1 and reflect a return to an 80/20 employer/employee premium split with reimbursement to providers at a minimum of 110 percent of Medicare’s rate.

Joylynn Fix, director of the Life and Health Division at the West Virginia Offices of the Insurance Commissioner, talked about the role pharmacy benefit managers (PBMs) play in determining drug costs and patients’ access to medications moving forward and highlighted access to specialty drugs.

Pharmacy benefit managers, are companies that manage prescription drug benefits on behalf of health insurers, like PEIA.

They negotiate with drug manufacturers and pharmacies to control drug spending, and have a significant impact in determining total drug costs for insurers, shaping patients’ access to medications, and how much pharmacies are paid.

In recent years they have fallen under scrutiny about their role in rising prescription drug costs and spending.

“There are some drugs out there that we have evidence of, some injectables, that a specialty drug pharmacy with one of the big three was charging $16,000 a month, whereas a local pharmacy who could handle that drug (it didn’t need to be in a specialty pharmacy) charged $8000 for the same drug, so half price,” Fix said. “So we think that that is a very big deal, the specialty drugs and where we think we’re gonna see a lot of hope for our consumers.”

Del. Amy Summers, R-Taylor, thanked the Insurance Commission for taking the new PEIA legislation seriously.

“Sometimes we pass legislation and it’s considered just a suggestion by some agencies, we just want you to know how much we appreciate you for that,” Summers said. “The specialty drug part of this that we’re talking about is because we’re a citizen legislature and we had a pharmacist that brought this to our attention.”

Fix also talked about mental health parity in the state.

The federal Mental Health Parity Act of 1996 provided that large, employer-sponsored (group) health plans and their insurers cannot impose annual or lifetime dollar limits on mental health benefits that are less favorable than any such limits imposed on physical health benefits.

In a review of the state’s major medical carriers, Fix said it was discovered that many are out of compliance with several aspects of mental health parity. 

“We did find immediately all of our major medical carriers had issues. No one was in full compliance,” Fix said. “This was truly surprising to us as mental health parity reporting is required on the federal level and the federal government found that there was not a carrier in the country in compliance with mental health parity. That’s very alarming and something that we also dug right into.”

Fix said their review found the biggest compliance issues were with pharmacy utilization and claims denials. 

“Those were significantly higher for mental health parity and substance abuse claims than they were for medical, or surgical,” Fix said.

Fix said that while claims for mental health parity show a good track record for being completed on time, many of the other compliance issues stem from a lack of awareness on the part of carriers.

“We decided to work with all of our carriers who showed great willingness to comply with the law,” Fix said. “They just needed education and to get on board.”

John Lambert, owns Lambert drugstore in Romney. He told the committee about the difficulty he is having with pharmacy benefit managers, and losses stemming from compliance issues. 

“When we go from a 30-day claim to a 90-day claim, the rates decrease and we don’t get reimbursed as well,” Lambert explained. “So consequently, claims that we may be profitable on, or slightly under profitable become huge losses.”

“I look at my first quarter for 2023 and I can see where just in my small independent pharmacy in Romney, West Virginia, I’ve purchased nearly $100,000 worth of drugs that I have lost nearly $7,000 on. And these are all mostly brand drugs that are diabetic meds; mostly those are the ones that have the biggest impact.”

Lambert said he is not sure if he can remain in business, telling the committee that if pharmacies like his can’t be profitable, they either go out of business or choose to exclude PEIA members from their services.

“It’s just getting to the point where it’s just not sustainable anymore and we’re going to have to make those decisions as we move forward, as to how long we can continue to serve those PEIA members.”

Jason Haught, interim director of PEIA said participation in a pharmacy service administrative organization helps with purchasing power.

“You know, PEIA is not deaf,” Haught said. “We understand the pharmacy concerns and we do try to make sure we work with both as much as possible with the limitations of the financial restraints that are in place.”

Haught said PEIA requires parity with the pharmacy benefit managers, and the pharmacies as far as mail order reimbursement.

“The 90-day maintenance network is kept at parity between the mail order and the pharmacies. We do not allow promotion of mail order with preferred pricing or benefits and recently implemented the specialty medication network on October 1, 2022 allowing all pharmacies to participate to supply those drugs.”

Haught compared how PEIA contracts with pharmacy benefit managers for purchasing power to that of pharmacists who contract with Pharmacy Services Administrative Organizations (PSAOs). Haught said pharmacists are able to negotiate with drug manufacturers for the lowest cost to obtain a better margin.

“If we go to a manufacturer with 163,000 members, we’re not going to get a very good deal. But if we go to the manufacturer with millions of lives, and billions of dollars in purchasing power, they’re going to pay attention, they’re going to give you a better deal,” Haught explained. “When you join a PBM you join a collective of millions and millions of people across the country in which you can then negotiate at the table with the manufacturers.”

Del. Matthew Rohrbach, R-Cabell, asked Haught about pharmacies that no longer accept PEIA prescriptions.

“We’ve heard testimony that Kroger’s and several other pharmacies have stopped taking our prescriptions,” he said. “If we see more and more pharmacies refusing to take PEIA prescriptions, where does that put us in regards to network adequacy?”

Haught responded that PEIA closely monitors the network adequacy. 

“We are aware of the loss, Kroger left the Express Scripts (ESI) network,” Haught said. “It didn’t leave PEIA. ESI still has a very good network coverage. 

PEIA’s Pharmacy Benefits Manager (PBM) changed to Express Scripts on July 1, 2022

With their removal from the network, however, we continue to monitor that to ensure that there is proper network adequacy for our members. In the event, there would be a loss of network access, PEIA would have to work with the pharmacy benefit managers to make the necessary adjustments to make that network full. That is one of their jobs, to provide an adequate network to the payer.”

“What is our relationship with ESI? Are they simply the same thing as a third-party administrator?” Rohrbach asked.

Haught answered in the affirmative. 

“They set the fee schedule, they negotiate with the manufacturer and the PBM the pharmacy, so the contract is with the pharmacy and the PBM.”

Rohrbach asked Haught to further explain why the cost of specialty drugs is so high.

“You mentioned that 38 percent of your spend is now specialty drugs, ” Rohrback said. “If we heard testimony from the insurance commissioner, that we’re not allowed to define, especially drugs based simply on cost, what would be the criteria that would be so serious that 38 percent of our cost would be specialty drugs?” 

Haught responded that specialty drugs are also known as biologics (medications developed from blood, proteins, viruses, or living organisms used to prevent and treat many health conditions). He said manufacturers report that the cost to develop the drugs is much more expensive than generic or brand or traditional drugs used for years. 

“So the costs to develop these biologics and the manner in which they’re prepared, administered and delivered to the patients, and the providers is one aspect as to how they’re classified,” Haught said. “They come with special handling in some cases, and they also come with extremely high prices. Our average specialty plan cost, for specialty drugs, is $6000 per prescription.”

For more information about prescription drugs costs and changes to PEIA go to Peia.wv.gov.