House Health Committee weighs single PBM for Medicaid amid split between DHS, pharmacies and MCOs

A Pennsylvania House Health Committee hearing on House Bill 2270 on June 12 examined whether the state should contract with a single pharmacy benefits administrator (PBM) for Medicaid.

Deputy Secretary Sally Kozak of the Department of Human Services told the committee that DHS has already implemented several controls—"we utilize a single preferred drug list to optimize drug rebates, lower net drug cost, and to provide consistency to providers"—and warned that "moving to a single PBA would only add cost, time, and risk without seeing the savings that some other states have seen." Kozak also told lawmakers that Mercer Government Services, DHS's actuary, estimated a state-directed payment to raise pharmacy rates could cost on the order of $200,000,000 a year and that the contract and IT procurement timeline make implementing a carve-out by the bill's proposed date infeasible.

Pharmacy owners and outside experts gave a contrasting account. Antonio Chacha of 46 Brooklyn Research described how PBMs can create hidden margins and later claw back money from pharmacies, saying PBMs "were essentially clawing back dollars that they had overpaid pharmacies." Chacha pointed to Ohio's experience where an audit and reform exposed large sums in what he described as hidden spread pricing and urged mandatory acquisition-cost reporting and a standardized dispensing fee.

Community pharmacists who testified said reimbursement rates are unsustainable. Scott Newton, owner of Gonz Drugstore, said that in his stores "approximately 10% of the prescriptions that we dispense for reimbursement were reimbursed for less than what we paid to purchase the medication itself," and argued that a NADAC-based benchmark plus a reliable dispensing fee would help keep community pharmacies open.

Representatives from Pennsylvania's Medicaid managed care organizations, through PAMCO Executive Director Emily Katz, warned of operational risks from a single state-run PBM, saying it would transfer benefit design, pricing, adjudication and audit authority from MCOs to a single vendor and could produce member service disruptions. Katz also noted MCOs' estimate that adopting NADAC-plus-dispensing could increase costs—she cited an aggregated figure supplied by the MCOs of roughly $74,000,000 (not publicly posted) for the change at the MCO level.

Lawmakers spent much of the hearing probing technical issues: whether DHS can obtain pharmacies' actual acquisition costs (Kozak said it currently cannot without new authority), whether NADAC is an adequate benchmark (witnesses urged mandatory surveys or state-level AAC reporting to supplement NADAC), and the federal constraints on state-directed payments that require CMS approval.

The hearing produced no formal vote. Chairs Frankel and Rapp said staff would follow up with additional data and that the committee would continue to investigate options to preserve pharmacy access while addressing potential fraud, waste and abuse. The committee adjourned after members and witnesses agreed more work and additional analysis are needed before deciding whether to move forward with a single PBM model.