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States are fed up with drug pricing intermediaries. Photo: Brendan Smialowski/AFP via Getty Images

State Medicaid programs believe they are being ripped off on drug prices, and pharmacy benefit managers — the middlemen that negotiate drug prices on behalf of insurers and employers — are in their crosshairs.

The bottom line: "You will be hard-pressed to find a state that now isn't looking into this," an Illinois pharmacist told the Columbus Dispatch, the newspaper that has reported extensively on PBMs in Ohio.

Driving the news: State officials say PBMs are manipulating the system for their own gain.

  • West Virginia, as we reported earlier this year, already fired its PBMs.
  • Ohio has audited CVS and OptumRx and found those two companies have kept $224 million through "spread pricing" — a practice where PBMs retain the difference between what they bill insurers and employers and what they pay to pharmacies.
  • Pennsylvania's top auditor released a scathing report last week that said the state should consider cutting ties with PBMs and negotiating drug benefits on its own.
  • Arkansas, Connecticut and Kentucky likewise are investigating PBM practices and are trying to crack down on spread pricing. Connecticut's comptroller said PBMs "operate in the shadows."

The other side: The PBM lobby says PBMs keep drug prices in check and are transparent, and the states and firms that hire them are "experienced negotiators."

Between the lines: The big PBMs see the writing on the wall and are trying to insulate themselves from changes.

  • Express Scripts is selling itself to Cigna, mimicking the structure of CVS and OptumRx by burying its pharmacy benefits accounting inside a larger organization.
  • CVS is launching a new model next year that guarantees every dime of a drug rebate goes back to employers and insurers. But other smaller PBMs have been doing this for years already. Derica Rice, president of CVS Caremark, told me the company created this option after fielding "frustrations" from employers.

Go deeper

House passes $768 billion defense spending bill

Photo: Andrew Harrer/Bloomberg via Getty Images

The House approved a $768 billion National Defense Authorization Act (NDAA) for the 2022 fiscal year in a bipartisan 316-113 vote on Thursday.

Why it matters: The annual bill, which authorizes Pentagon spending levels and guides policy for the department, would require women to register for the military draft, among other provisions.

6 hours ago - Politics & Policy

Republicans’ secret lobbying

Illustration: Shoshana Gordon/Axios

The five Senate Republicans who helped negotiate and draft the $1.2 trillion bipartisan infrastructure bill have been privately courting their Republican colleagues to pass the measure in the House.

Why it matters: House GOP leaders are actively urging their members to oppose the bill. The senators are working to undercut that effort as Monday shapes up as a do-or-die moment for the bipartisan bill.

CBC members nix border visit

A Haitian migrant carries a toddler on his shoulders today as he crosses the Rio Grande River. Photo: Pedro Pardo/AFP via Getty Images

Several members of the Congressional Black Caucus weighed visiting the U.S.-Mexico border this week to investigate the conditions faced by Haitian migrants and protest allegations of inhumane treatment by U.S. agents.

Why it matters: It's a thorny proposition both in terms of timing and messaging. Going assures a new wave of negative headlines for President Biden amid sinking popularity. And with congressional deadlines in the coming days over infrastructure, a possible government shutdown and debt-limit crisis, Democrats can't afford to lose any votes in the House.