Max Wise wants to know where $600 million went.
The Republican Kentucky state senator says independent pharmacies in his rural central Kentucky district are in danger of closing, in part because of low reimbursement rates from Medicaid. He says the joint state and federal Medicaid program spent $1.68 billion on pharmacy benefits last year, of which about $1 billion went to pharmacies.
But the rest of the money went to pharmacy benefit managers, who won't say how they spent it. Wednesday, a Senate committee overwhelmingly approved a bill that would take that money from the pharmacy benefit managers and give it to the state to administer its own pharmacy benefits program.
"I can't sit here representing my district back home and allow independent pharmacies to go out of business because corporations refuse to share information," Wise said. "(Pharmacy benefit managers) currently set all the rules with little to no government oversight. As a state senator, taxpayer, I don't think that's right."
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But Republican Gov. Matt Bevin's administration warns if the bill were to pass it would cost taxpayers hundreds of millions of dollars. It says that's because pharmacy benefit managers can administer prescription drugs for less than the government can. Officials with the Cabinet for Health and Family Services say it would cost at least an extra $161 million, with $36 million of that coming from state tax dollars.
"That's significant to me," said Republican Sen. Julie Raque Adams, who was one of two senators to vote "pass" on the bill in committee. "That plays a role in everything else that we do relative to budgetary decisions. Those are real dollars and they are going to impact real people."
Kentucky is one of 26 states that use managed care organizations to manage their Medicaid programs, including pharmacy benefits. But states across the country have been grappling with how to handle pharmacy benefits. Of those 26 states, seven choose to administer pharmacy benefits themselves.
West Virginia recently carved out its pharmacy benefits via an administrative decision. Similar discussions are happening in Ohio and Arkansas, according to Shannon Pratt Stiglitz, vice president of government affairs for the Kentucky Retail Federation. She said Kentucky was the first state to file legislation that would do that.
While Kentucky uses several pharmacy benefit managers, lawmakers were particularly angry at Caremark, the prescription benefit management subsidiary of CVS. Sen. Tom Buford said CVS was taking over the pharmacy benefit manager market to drive other pharmacists out of business. A representative for Caremark did not respond to an email requesting comment.
"We have no alternative but to support this bill, the way we are being left here in the dark," Buford said.
Medicaid Commissioner Stephen Miller said one compromise could be to renegotiate contracts with managed care organizations to require that pharmacy benefit managers pay pharmacies a minimum dispensing fee of between $3 and $4. The current dispensing fee is $85 cents.
But Miller warned that for every dollar the state increases the fee, it would take $6 million of state money to fund it.
"It's the cost of doing that that becomes a real hurdle," Miller said.