NCPA Testifies at Department of Labor Hearing to Examine Increased Transparency in Pharmacy Benefit Management


Alexandria, Va. - Dec. 7, 2010

National Community Pharmacists Association (NCPA) Vice President of PBM (Pharmacy Benefit Manager) Transparency Zachary French testified today during the U.S. Department of Labor's public hearing on "Reasonable Contracts or Arrangements for Welfare Benefit Plans Under Section 408(b)(2)—Welfare Plan Fee Disclosure of ERISA (Employee Retirement Income Security Act)". An interim final rule requiring employee benefit providers for pension and health plans to disclose any conflicts of interests that might affect their service was debated at the hearing; with French and others explaining why it is necessary.

The entire testimony can be viewed here. Excerpts can be found below:

  • "One of the PBM's primary profit streams is derived from rebates provided by drug manufacturers for driving brand drug market share on drugs purchased on behalf of PBM clients. PBMs retain all or a very large percentage of these rebates, even though they are generated by the welfare benefit plans' pharmacy "spend." This is a clear conflict of interest on the part of the PBM serving in its role as a service provider to a welfare benefit plan. But there are other sources of direct and indirect revenues earned by the PBM as well."
  • "Between 2004 and 2008, substantial enforcement actions instituted against each of the major PBMs indicating fraudulent and deceptive conduct have resulted in over $370 million in damages. These cases also shed light on some of the questionable widespread practices in the PBM industry, including the misuse of rebates, kickbacks, submission of false claims and drug switching."
  • "The recently enacted health care reform legislation now mandates a certain degree of PBM transparency in the form of aggregated required disclosures of all of the PBMs that will serve any of the state insurance exchange health plans, as well as in Medicare Part D."
  • "Federal law now dictates that PBMs that will serve any of the to-be created state insurance exchanges and Part D plans disclose certain aggregated information to the Secretary of HHS and to the plan sponsors...However, as encouraging as these provisions are, these inroads are simply a starting point and the PBMs serving ERISA plans have a long history of using their status as ERISA plans to evade regulation."
  • "The extremely concentrated PBM marketplace, the minimal amount of state and federal regulation, and the lack of any verifiable harm to the PBMs by requiring transparency considered together with the potential benefits to plan fiduciaries—clearly indicate that the proposed regulation should apply to service providers to welfare benefit plans...Without transparency, the plan fiduciary has no way to verify that the PBM is sharing manufacturer rebates or that the PBM is negotiating the lowest possible cost for specific drugs."

The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of more than 23,000 independent community pharmacies, pharmacy franchises, and chains. Together they represent a $93 billion health-care marketplace, have more than 315,000 employees including 62,400 pharmacists, and dispense over 41% of all retail prescriptions. To learn more go to www.ncpanet.org or read NCPA's blog, The Dose, at http://ncpanet.wordpress.com.

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