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By Steve Erdman
District 47 

Straight Talk from Steve: PBMs


March 16, 2022 | View PDF

One of the issues which has concerned me ever since I sat on the Legislature’s HHS Committee is what to do about price benefit managers, otherwise known as PBMs. Price benefit managers are the middlemen who provide our pharmacies with prescription drugs. PBMs negotiate with drug manufacturers on behalf of government health plans, private health plans, and employer-based health insurance plans. The deals they strike with pharmaceutical companies determine the availability of drugs as well as the prices paid for drugs by 266 million Americans.

The problem with PBMs relates to their regulations or lack thereof. PBMs are allowed to charge a fee for their services which usually gets added onto the price of each prescription drug. Certain PBMs have been known to abuse their privilege. For example, in 2021 the Centene Corporation agreed to pay the State of Ohio $88.3 million after the Ohio State Attorney General filed a lawsuit against them, alleging that the PBM overbilled the Ohio Department of Medicaid for its services. When PBMs do their job with integrity, though, it means lower prices and more availability of drugs for everyone.

Last week the Legislature passed LB 767 by Sen. Kolterman of Seward. LB 767 regulates the operations of PBMs doing business within the State of Nebraska. This bill is necessary to protect Nebraska’s consumers against the different ways that PBMs have been known to abuse the system. So, today I would like to highlight three ways that LB 767 will protect consumers from the potential abuses of PBM’s.

First, the bill allows the director of insurance to refuse a PBM license to any applicant who is deemed to be incompetent, untrustworthy, or financially irresponsible. If the PBM violates the insurance laws of Nebraska or any other state, then the director of insurance may deny the application. This will help to ensure that PBMs play by the rules.

Second, LB 767 prohibits PBM’s from making contracts with pharmacists where the pharmacist is prohibited from shopping around for cheaper drugs. In the past, certain PBMs have used this trick to force pharmacists to purchase their more costly drugs. Pharmacists should be free to shop around and to provide their customers with the best deals they can find on prescription drugs. When PBM’s take this option away from pharmacists, they no longer have to compete for sales, and competition is essential for capitalism to thrive.

Third, LB 767 will prevent PBMs from requiring those covered by an insurance policy to purchase more expensive drugs covered by their insurance policy when cheaper drugs are available. For example, if the co-pay for a prescription drug is ten dollars but a cheaper form of the same drug can be purchased for seven dollars, the consumer should have the option to purchase the cheaper drug at seven dollars.

Regulating these PBMs is one way that the Legislature can reduce the cost of prescription drugs for consumers in Nebraska. Many people depend upon prescription drugs for their life, their health, and their well-being. Consequently, anything the Legislature can do to reduce the costs of prescription drugs is warranted and beneficial to the people of Nebraska.


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