Sides aired in prescription-law challenge

Benefits managers ask judge to halt enforcement of reimbursement rule

In an all-day hearing Wednesday that extended into the night, pharmacy benefits managers and Arkansas pharmacists testified about the difficulties each group faces in trying to procure and dispense prescription drugs at prices that are fair to the pharmacist, the consumer and the consumer’s health plan.

The benefits managers, who are tasked with trying to contain costs for insurance companies and health plans, want Chief U.S. District Judge Brian Miller to halt the enforcement of Act 900 of 2015, which took effect July 22 after they say pharmacists sneaked it through the Legislature with little discussion.

The law, which the benefits managers said is unique among similar laws passed in 24 other states, requires them to reimburse pharmacists for generic drugs at or above the cost the pharmacy paid for the drugs from a supplier — either a wholesale distributor or the drug manufacturer.

The pharmacists have said the lag time between stocking and dispensing the drugs often leaves them shortchanged, because the benefits managers use a reimbursement method based on outdated numbers. But the benefits managers said proprietary agreements between the pharmacists and the suppliers prevent them from knowing how much the pharmacy actually paid, so they have no choice but to provide reimbursements based on a regularly updated chart for the plan they’re managing, which sets the “maximum allowable cost” of the drug on the day the reimbursement is sought.

John Trainor, chief financial officer at an Express Rx pharmacy, and former chief financial officer for the Arkansas-based USA Drugs chain, which was sold to Walgreens in 2012, testified that it takes time for a pharmacy to acquire an established consumer base and then, based on those needs, keep the proper volume of drugs in stock.

“Different layers of drugs move at different speeds,” he said, noting that high-volume drugs such as some antibiotics and pain medication can be reordered daily without fear of them rotting on the shelf, but pharmacists take a financial risk in ordering more expensive drugs to keep on hand. He said sometimes the pharmacy will only obtain those drugs on demand — which is almost certain to drive patients to another pharmacy that regularly keeps the drug in stock.

He recalled that earlier this year, his pharmacy bought a tube of ointment for $200 that had previously cost $4. After dispensing it, he said, the pharmacy learned that benefits managers refused to reimburse his pharmacy for more than $8 — the “maximum allowable cost” per tube, according to the current chart for that particular health plan.

While that situation left no question about the need to appeal to the benefits managers — a time-consuming process involving a lot of paperwork — Trainor noted that many “negative reimbursements” equal only a few cents or a few dollars, which makes the decision about whether to appeal difficult. Without a successful appeal, he said, the pharmacy could continue to lose those pennies or dollars on each such prescription it fills, which can quickly add up to a substantial loss for high-volume drugs.

Benefits managers, testifying on behalf of the Pharmaceutical Care Management Association, which filed an Aug. 13 lawsuit seeking to have Act 900 thrown out, testified that there is no other practical way to manage the amount of reimbursements than to rely on the maximum allowable cost chart. While that method sometimes results in a nega- tive reimbursement, it also sometimes results in a pharmacy being reimbursed more than it paid for the drug, and overall the differences “even out” and still enable the pharmacists to make a profit, they say.

The managers also note that pharmacists sometimes receive rebates or discounts from drug manufacturers that they don’t disclose when seeking reimbursement. They say the pharmacies’ proprietary contracts with their suppliers, which vary from pharmacy to pharmacy or network to network, make it impossible to guarantee a reimbursement rate that is fair for everyone.

The Arkansas law, they contend, is the worst in the country from their perspective, in that it permits pharmacists to refuse to fill expensive prescriptions if they fear they won’t be fully reimbursed, and because it will require them to painstakingly modify their multistate contracts with employers or insurance companies to carve out specific requirements that apply only in Arkansas.

Trainor said most pharmacists won’t refuse to fill a prescription for fear of losing the customer altogether.

The benefits managers have asked for a preliminary injunction to halt the law’s enforcement while its overall legality is considered. It wasn’t clear Tuesday when Miller would decide on the request.