Virginia takes aim at Pharmacy benefit managers in Medicaid overhaul

A bipartisan proposal to centralize Virginia’s Medicaid pharmacy benefits under a single state-contracted pharmacy benefits manager (PBM) is gaining momentum. On Thursday, a Senate bill spearheaded by Sen. Aaron Rouse, D-Virginia Beach, and co-sponsored by Sen. Travis Hackworth, R-Tazewell, cleared the Senate Education and Health Committee.

Pharmacy benefits managers act as intermediaries between health plans, drug manufacturers and pharmacies, but their lack of transparency has raised concerns. PBMs retain rebates and discounts from contracts, leaving consumers and pharmacies unsure how much savings are being passed on.

This opacity has taken a toll on local pharmacies, which often receive reimbursement rates lower than the cost of medications.

“I know what it’s like to spend $10 to make $5 dollars back from Medicaid,” said Hackworth, a former pharmacy owner.

Rouse’s bill, mirrored by a similar proposal by Del. Katrina Callsen, D-Charlottesville, in the House of Delegates, seeks to eliminate health-plan-run PBMs in Medicaid. Lawmakers argue the change would improve transparency, support independent pharmacies and create a more accountable and cost-effective system.

If enacted, the legislation would require the Department of Medical Assistance Services to evaluate drug pricing, rebates and administrative costs to ensure cost efficiency and provide greater oversight.

The new state-contracted PBMs would also be responsible for safeguarding pharmacy access in underserved areas.

Kim Wright, a pharmacist from Cumberland, voiced her support of the bill during a recent subcommittee meeting, emphasizing the vital role independent pharmacies play in rural communities.

“Local independent pharmacies are deeply rooted in their communities,” Wright said, highlighting how closures of such pharmacies would force patients in rural areas to travel even farther for healthcare services.

Urban areas face similar challenges, according to Norfolk-based Anna Peoples. She explained how transportation cost can make accessing prescriptions difficult, even when major chains like Walmart are present. “Many of my customers don’t have two dimes they can rub together,” Peoples said. The bus fare to get there could make affording their prescriptions impossible, she said.

In defending his bill, Rouse emphasized the critical impact of “pharmacy deserts” on vulnerable communities. “Pharmacy deserts are not just an inconvenience, they’re a direct threat to the health and well-being of our citizens,” Rouse said.

The proposal has garnered support from the National Association of Chain Drug Stores, with a representative noting that several pharmacy chains have shuttered in Virginia over the past year. Pharmacist Tim Robertson, who works for a Henrico-based Publix, reinforced this point by sharing his experience following the closures of a local CVS and Walgreens where new customers have flocked to his location.

He recently spent an hour and a half on the phone navigating medication access for a patient.

“That’s just unacceptable,” he said.

However, Gov. Glenn Youngkin’s administration expressed reservations. DMAS Chief Deputy Jeff Lunardi warned that some provisions in the bill could place the state at “a competitive disadvantage when going out for a single PBM” and flagged concerns about the timeframe required to establish such a contract.

In response to these concerns, Rouse amended his bill by Thursday morning, removing language that would have prohibited current PBMs from applying to be selected. Currently, five managed care organizations in Virginia serve Medicaid enrollees, each contracting with their own PBM.

Heidi Dix, representing the Virginia Association of Health Plans, raised concerns over potential costs associated with transitioning to a single PBM. Citing a study by the association, Dix noted the reform could result in approximately $17 million in administrative costs to implement the change.

Supporters of the bill, including Rouse, argue that those costs are outweighed by the potential savings. The bill could save Virginia about $39 million annually, Rouse said, pointing to successes in other states. Kentucky reported saving $56.6 million in state funds within a year of passaging a similar law in 2021, while West Virginia saw $54.4 million in savings after establishing a sole PBM in 2017.

Having cleared the Senate’s health committee, the bill now moves to the Senate Finance Committee for review. With bipartisan support and Democrats controlling the legislature, the measure is expected to reach Youngkin’s desk by the end of the session.