Georgia bill seeks lower drug prices by focusing on middlemen

(AP Photo/Elise Amendola, file)

(AP Photo/Elise Amendola, file)

In an effort to attack high drug prices, Georgia lawmakers are focusing on powerful middlemen who negotiate on behalf of insurance companies.

State Sen. Dean Burke, R-Bainbridge, has introduced a bill that aims to shed light on prices that pharmacy benefits managers negotiate with pharmaceutical companies and pharmacies, and to ensure that patients are able to get the drugs when they need them. The legislation is Senate Bill 313.

“I really truly believe the state needs more transparency in drug pricing,” Burke said, noting that drugs are the country’s single biggest health expense. “That’s what I’m looking for.”

The pharmacy benefits managers, though, say Burke’s bill is misguided and will actually hurt Georgians. The two sides have come together to testify this month in hearings at the Capitol.

“SB 313 does absolutely nothing to reduce prescription drug costs and will only increase profits for Georgia’s independent pharmacies,” Greg Lopes, a spokesman for the managers’ industry group, the Pharmaceutical Care Management Association, told The Atlanta Journal-Constitution. “It’s a piece of special-interest legislation that is not patient-centric.”

A cure or the problem?

Baffling increases in drug prices are now infamous. There was the cheap lifesaving drug Daraprim, whose price rose overnight from $13.50 per tablet to $750 per tablet after being acquired by the company of a former hedge fund manager, Martin Shkreli. There’s the more mundane story of insulin, a drug nearly a century old: Three competitors sell it, but its price still increased 500% to 1,000% over the past decade or two.

So for anyone concerned about drug costs, it seems like a good idea: a company whose specialty is negotiating for lower medication prices. They’d work with drugmakers and pharmacies to get lower prices and rebates. The pharmacy benefits managers would be paid simply for how well they do that job. Three now manage more than 75% of U.S. drug sales: CVS Caremark, OptumRx and Express Scripts.

But in Georgia and across the U.S., some patients, doctors and pharmacists say benefits managers are now part of the problem.

Witnesses have testifed before the Legislature in recent weeks that the managers, pursuing their own profits, have endangered patients’ health and actually cost them and the state money.

One independent pharmacist, Jennifer Shannon, explained what she saw as the role of the pharmacy benefits manager in the cost of insulin. A new generic insulin, priced at about half the cost of the other insulins on the market, has been approved for sale in the U.S. But Shannon said she’s received notice from all the pharmacy benefits managers that they haven’t included it on their permitted reimbursement lists, meaning it won’t be covered for policyholders.

She’s not allowed to see exactly how the managers make their profits on each drug transaction — almost no one is. But she believes pharmacy benefits managers have already negotiated for rebates with the more expensive, older drugs and wouldn’t profit as much from selling the new, cheaper insulin. Whatever the reason, it’s not helping her patients get insulin at an affordable price, she believes.

The companies strongly deny that.

“A big part of a job of a (pharmacy benefits manager) is to get to the lowest net cost of a prescription drug,” Lopes said. “And that ensures the patient will pay less.”

Conflicting research

Burke’s bill would make several changes, including forcing pharmacy benefits managers to share more information with state regulators so they can investigate complaints.

The bill faced its first Senate hearing Wednesday. It would make managers track their prices against a federally approved drug price list and report when they vary too much.

Critics of pharmacy benefits managers, such as state Rep. David Knight, R-Griffin, have cited the experience of West Virginia, which took over management of its Medicaid managed care drug service from the pharmacy benefits manager. The state saved $54.5 million, according to a report by West Virginia's Health and Human Resources Department.

The pharmacy benefits managers have their own research. They say if Georgia restricts their work, it could cost Georgians more than $650 million annually in higher drug spending.

Doctors and independent pharmacists raise issue with the control benefits managers have over what drugs to pay for or not pay for, and when.

The managers say they are guiding patients to the best drugs for the best price. Over time, they say, that can encourage patients to be more regular in taking their drugs, or take better regimens.

Shannon manages a program that helps patients who are leaving Emory Johns Creek Hospital get started on the right medications after they no longer have hospital staff to administer them.

She recounted the story of a patient who had left the hospital after treatment for a massive heart attack. He was prescribed medications and Shannon went to fill them. Not yet, the pharmacy benefits manager replied.

“His (pharmacy benefits manager) deemed that all meds not going through mail order would require a prior authorization, which is crazy,” she said. “When we pleaded with the clerk on the phone … we explained he had a massive heart attack, was currently in heart failure and these medications were vital to keeping him alive. The only answer we continued to receive, over and over again, was, ‘You’ll have to submit a prior authorization; it could be 24 to 72 hours before it could be approved; and then we’ll ship the medication.’ ”

By then, Shannon guessed, he would have had another heart attack. Instead, she agreed to give him a low cost if he paid cash — giving up on the insurance system.

Lopes took issue with such anecdotes.

“In most instances you’re describing there are overrides and appeals that would prevent anything like that happening,” he said.


Drug prices are rising much faster than overall inflation. It’s hitting Americans right in the pocketbook, especially in higher insurance premiums.

One problem is drug companies setting high prices for their products. Some say anther problem is pharmacy benefit managers, middlemen who are supposed to bring prices down by negotiating with the drug companies — but may pocket for themselves the rebates or “fees” they negotiate. Some states are trying to get the middlemen out of state-run health plans, or at least demand more transparency so they can see where the money is going.