The United States Senate has passed the Patient Right to Know Drug Prices Act, which prohibits insurers and pharmacy benefit managers from using gag clauses to conceal lower prescription drug prices from patients or their employers.
Pharmacy Gag Clauses
Nearly 60% of Americans, including roughly 90% of seniors, take prescription drugs. According to the National Conference of State Legislatures, medical professionals write at least 4.45 billion prescriptions per year in the United States. Every year, consumers in the United States buy $235 billion of prescription drugs.
Commercial contracts between a pharmacy and a pharmacy benefit manager (PBM) play a large role in the distribution and sales chain between original manufacturer and the end consumer. The terms of these contracts are usually hidden from consumers and employer purchasers.
In some cases, these contracts include restrictions that prohibit pharmacists from informing consumers about different drug purchase options. Often, prescriptions are cheaper if consumers pay out of pocket rather than through their insurance plan.
Prescription drug overpayments (or “co-pay clawbacks”) occur when commercially insured patients’ copayments exceed the total cost of the drug to their insurer or pharmacy benefit manager. Pharmacists who disobey these clauses face significant penalties.
NBC Nightly News recently highlighted the issue of “pharmacy gag clauses.”
A 2016 industry survey found that nearly 20% of pharmacists were limited by gag clauses more than 50 times per month.
A study (“Frequency and Magnitude of Co-payments Exceeding Prescription Drug Costs”) published in the March 2018 Journal of the American Medical Association reviewed 9.5 million insurance claims and found that 23% of prescriptions would have cost less if customers paid out of pocket.
The University of Southern California’s Schaeffer Center for Health Policy and Economics researchers who performed the analysis found that consumers had overpaid to the tune of $135 million.
State and Local Laws
Increasingly, legislators are writing new laws to block contracts that prohibit pharmacies from informing customers about available alternative pricing for medications, including paying out-of-pocket or buying generic products that may be less costly for a patient. Many bills also address the “co-pay clawback” situation.
Between 2016 and 2018, at least 26 states have enacted laws that prohibit gag clauses in contracts between pharmacies and pharmacy benefit managers. The states that have enacted these laws include: Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Mississippi, Nevada, New Hampshire, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and West Virginia. Fifteen other states are considering or have considered similar legislation.
Some cities are also taking action. Chicago Mayor Rahm Emanuel announced a plan to “hold the prescription industry accountable” and reduce drug prices. As part of that plan, Chicago opened an investigation into the business practices of local pharmacy benefit managers. Chicago’s Chief of Policy Chris Wheat said, “A letter was sent to all PBMs that states the practice of gag clauses may be a deceptive practice that violates the city’s deceptive marketing act…There was over 150 million prescriptions filled in Illinois retail pharmacies last year, totaling nearly $19 billion, so it’s a huge issue.”
