How a Change to Medicaid Could Save Kentucky Millions

FRANKFORT, Ky. – A study from the Kentucky Cabinet for Health and Family Services and the Department for Medicaid Services found Kentucky taxpayers are losing money by using Pharmacy Benefit Managers (PBMs) in the Medicaid Managed Care program.

The study found if the state carves out PBMs it could save taxpayers $44.7 million a year.

A PBM is a third-party administrator of prescription drug programs for commercial health plans and in Kentucky’s case, Medicaid. While there are several operators in the commonwealth the largest is CVS Caremark.

Don Kupper, President of the Kentucky Pharmacists Association, says in recent years PBMs are increasingly causing hardships for independent pharmacies because of fees sometimes tacked on months later.

“Our pharmacists don’t know what kind of money they are making because of all these fees and clawbacks that are happening to them,” Kupper said.

This has caused 170 independent pharmacies to close their doors in the past five years and caused KPhA to push the legislature to separate PBMs from Medicaid.

“This will give relief to the pharmacies that fill Medicaid prescriptions and they won’t see these fees hitting them,” Kupper said. “Carving out would take the transaction back to the state and they would basically run that through a different approach.”

Lawmakers in Frankfort heard these concerns from pharmacists and other constituents and passed Senate Bill 5 in 2018 which required the state to look at the fees and costs associated with PBMs, the study looked at the program charges from 2017 and 2018 to find the state could save $44.7 million by removing PBMs from the Medicaid process.

“Over $120 million was going out of the state away from the Medicaid program and additionally away from the independents, so $120 million was going out based on these fees and clawbacks,” Kupper said. “That’s a tremendous amount of money for a state of our size and the number of Medicaid patients we have to care for.”

KPhA is not only looking to remove PBMs from the Medicaid process but create an overall reform of PBMs in Kentucky. The reform would remove the ability of PBMs to indirectly remove or call back money from pharmacies for certain prescriptions.

“As you know the legislative process is very dramatic and dynamic so you can’t mix the reform effort with the carve-out,” said Kupper. “We have total support from both the House and the Senate, and we have also spoken to Governor-Elect Andy Beshear and we have his support, he obviously wants to know a little more about, but we really feel like we’ve got the ball rolling.”

The two bills will be separate but Kupper hopes to have the reform for commercial business and carve out for Medicaid discussed during the 2020 General Assembly Session.

That’s not the only legislative goal KPhA has for the upcoming session they would also like to see pharmacists compensated for their time helping patients.

“Pharmacists play a huge role as advocates for the patient, for information sources, many of the patients come to them prior to going to the physician just to see if they really need to go to a physician,” said Kupper. “A lot of our pharmacists have also been trained to take care of the diabetic patients, the asthmatic patients and we would like to see those folks that see patients on regular basis paid and compensated for their time as well.”

The billing if this passed would be through insurance companies just as it is done now for doctor visits.

The study found that spread pricing equated to 12.9% in PBM profit per prescription.