Iowa Lawmakers Investigate Billing Practices for Prescription Drugs

Apr 18, 2018

Iowa lawmakers are looking into whether companies known as pharmacy benefit managers (PBMs) are overcharging public entities for prescription drug benefits.

The House Oversight Committee heard testimony Wednesday from Ottumwa pharmacist Mark Frahm, who said he lost money on prescription drugs he provided to the Wapello County Jail.

Frahm said CVS Caremark charged the county about $5,000 for a month’s worth of drugs, but CVS Caremark only paid Frahm about $1,000 to provide those drugs.

Because of this, Wapello County Supervisor Jerry Parker said the county is losing taxpayer dollars.

“If we’re losing, then the city’s probably losing and the state’s probably losing,” Parker said. “So this committee has a very important job to do: help us, who can’t necessarily in these positions, help ourselves.”

PBMs act as a middleman between pharmacies and organizations that sponsor health insurance plans.

Rich Ponesse with CVS Caremark said they help plan sponsors, like Wapello County, save money. He said pharmacists can appeal their payments.

“But you never, ever adjust the price,” said Rep. John Forbes, D-Urbandale, who is also a pharmacist.

“I do adjust the price,” Ponesse said.

“Bulls***!” Forbes replied.

Ponesse added plan sponsors that contract with PBMs do so willingly and can choose between several options.

Kate Gainer with the Iowa Pharmacy Association said she wants the committee to determine if PBMs are being transparent when they take public money.

“This is a conversation of ‘they said, we said.’ Only a thorough investigation and audit can be conducted to unveil the truth,” Gainer said.

Several lawmakers wondered whether Iowa’s Medicaid program is getting overcharged for prescription drugs in a similar fashion. Other state legislatures have recently addressed this problem.

Forbes said he doesn’t think Iowa’s Medicaid program is affected.

“The way we set ours up, we somewhat insulate ourselves from the problem we talked about today,” Forbes said. “But we’re still going to work with Iowa Medicaid, and I’ve had some discussions with them already to make sure what the pharmacies get reimbursed and what the PBMs bill the state of Iowa matches up.”

Forbes said local governments should look into their own contracts with PBMs. 

House Oversight Committee Chairman Bobby Kaufmann said he would announce next steps soon.