Because of their big share of patient prescriptions, the three largest PBMs are about to undergo scrutiny via Congressional reports and looming lawsuits that call out questionable practices
Pharmacy benefit managers (PBMs) are finding themselves under scrutiny from both Federal Trade Commission (FTC) investigations into drug pricing as well as recent Congressional hearings into anticompetitive practices.
Because of how PBMs have captured the lion’s share of patient prescriptions away from retail pharmacies in the United States during the past 15 years, pathologists and clinical laboratory managers may want to track how Congress and federal antitrust regulators respond to this development. The issue is the high cost of prescription drugs for patients and the role of PBMs in keeping drug prices high to optimize their profits.
House representatives pressed the executives for “steering patients to pharmacies the PBM owns and favoring more expensive brand-name drugs on their formularies, or list of covered drugs, which result in higher rebates paid to them by drugmakers,” Healthcare Dive noted.
In its final report, the Committee on Oversight and Accountability found that “PBMs inflate prescription drug costs and interfere with patient care for their own financial benefit.”
Though hearings on PBMs have been increasing, the last time PBM executives testified on the Hill was before the Senate Committee on Finance in 2019, according to Healthcare Dive.
“Spread pricing and rebates benefit PBMs and have helped the three largest PBMs monopolize the pharmaceutical market … these self-benefitting practices only serve to help their bottom line rather than patients,” said Chairman James Comer (above) during a meeting of the federal Committee on Oversight and Accountability. “PBMs have been allowed to hide in the shadows for far too long. I look forward to the Oversight Committee continuing to work in a bipartisan fashion to shine a light on how these PBMs have undermined community pharmacies, raised prescriptions drug prices, and jeopardized patient care.” Clinical laboratory executives may want to track efforts by Congress to rein in PBMs so as to reduce the cost of prescription drugs to patients. (Photo copyright: US Federal Government/Public Domain.)
Turning up the Heat on PBMs
The spotlight began to grow on PBM practices back in 2023. Since then, PBMs have been the focus of three congressional hearings. The late July meeting came just hours after Chairman James Comer, R-KY, presented his report following a 32-month-long investigation “into how PBMs raise prices and reduce consumer choice,” Healthcare Dive reported.
Comer’s research found that “PBMs have used their position as middlemen to cement anticompetitive policies which have increased prescription drug costs, hurt independent pharmacies, and harmed patient care,” according to a press release announcing the upcoming hearing with the executives of the three largest PBMs.
Comer’s report uncovered “300 examples of the three PBMs preferring medications that cost at least $500 more per claim than a safe alternative medication excluded from their formularies,” Healthcare Dive noted.
Coming Lawsuits, Public Opinion
While the Congressional hearings put pressure on the three PBMs, a new threat looms on the horizon—multiple lawsuits—including one from the FTC “over their tactics for negotiating prices for drugs including insulin, after a two-year investigation into whether the companies steer patients away from less-expensive medicines,” The Wall Street Journal reported.
State attorney generals and independent pharmacies are lining up with lawsuits targeting PBM’s questionable business practices as well, Healthcare Dive reported.
While PBMs maintain their innocence, public opinion differs. An independent survey from KFF found that approximately three out of 10 individuals surveyed reported not taking a prescribed medicine due to expensive costs.
“This includes about one in five who report they have not filled a prescription or took an over-the counter drug instead (21%), and 12% who say they have cut pills in half or skipped a dose because of the cost,” KFF reported.
Further, 82% of those surveyed described the cost of prescription drugs to be unreasonable. Still, 65% described the costs as being easily affordable, with the biggest challenge going to those with a household income of less than $40,000.
PBMs Push Back
In response to the backlash, the PBMs brought their own report to Congress, prepared by global consulting firm Compass Lexecon. It showed that “PBMs pass through almost all rebates to plan sponsors and have operating margins below 5% in recent years,” Healthcare Dive reported.
During their testimony, Conway said that Optum Rx saves over $2,000 per person annually. Kautzner claimed Express Scripts brought $64 billion in savings to patients last year and kept “out-of-pocket costs on a per-prescription basis at $15, despite brand manufacturers raising drug prices on 60% of those products,” Healthcare Dive reported.
Joyner said CVS Caremark experienced “little or no competition” from the pharmaceutical industry for brand name drugs. He blamed the pharmaceutical industry for drug pricing increases, Healthcare Drive reported.
“Let me be clear, we do not contribute to the rising list prices. Hampering our ability to negotiate lower drug cost … would only remove an essential tool and our ability to deliver lower cost for medications,” Joyner told the Congressional committee.
House representatives were not moved.
“On one hand we have PBMs claiming to reduce prescription drug prices and on the other hand we have the Federal Trade Commission, we have major media outlets like The New York Times, and we have at least eight different attorneys generals, Democrats and Republicans, who all say PBMs are inflating drug costs,” said Raja Krishnamoorthi (D-Ill), Healthcare Dive reported.
“This is why just about every state now is taking up PBM reform,” Comer said. “There’s a credibility issue.”
Because there has been a parallel concentration of market share for clinical laboratory testing among a handful of billion-dollar national lab corporations, clinical laboratory managers may want to follow these events. They are examples of federal regulators investigating the business practices of a major healthcare sector while, at the same time, members of Congress look for ways to lower healthcare costs. Prescription drugs is a high-profile target.
At some future point, the cost of genetic testing could also become a target when Congress seeks other healthcare sectors in their goal to control medical expenses.
Settlement is a reminder to all clinical laboratories that state and federal DOJs and AGs are willing to file actions against genetic testing companies that intentionally mislead the public
California’s Attorney General, in cooperation with the Federal Trade Commission (FTC), announced a recent settlement with CRI Genetics regarding deceptive trade practices. The at-home genetics testing company will have to pay $700,000 in civil penalties and according to the Santa Monica Daily Press, “will be barred from a wide range of deceptive practices to settle charges from the Federal Trade Commission and the California Attorney General that the company deceived users about the accuracy of its DNA reports.”
Santa Monica, Calif.-based CRI Genetics (CRI), which also does business as OmniPGx, offers DNA saliva-swab test kits that are analyzed by a third party laboratory to return customers ancestry data, health information, optimal nutritional guidelines, and potential allergies. The company’s website states a guaranteed 8-week turn around for the kits.
The original complaint against CRI alleged the company used misleading marketing practices by claiming its DNA tests are more accurate and detailed than their competitors, such as Ancestry DNA and 23andMe. CRI also claimed their ancestry data was more than 90% accurate and could determine ancestry dating back 50 generations.
In addition, the company stated its algorithm for matching DNA was patented, which it was not, according to the complaint.
The complaint also alleged the CRI website contained deceitful information and was formatted to appear independent but included inflated reviews and false testimonials.
“CRI Genetics could have found legitimatewaysto market its services. Unfortunately, in its pursuit of growth and profits, the company repeatedly misled consumers. The FTC and my office took notice, we investigated, and we are delivering results today,” said California Attorney General Rob Bonta (above) in a press release. (Photo copyright: State of California Department of Justice.)
Alleged Deceptive Business Practices
According to court documents, CRI manipulated customers into purchasing add-on services and forced consumers to click through a myriad of pop-up pages to lure them into purchasing more products. Customers were informed they would have a chance to review their orders before being charged but were immediately billed. Consumers then had to go through a lengthy and often confusing process to obtain refunds for returned items.
“Based on the facts and violations of law alleged in this Complaint, the FTC has reason to believe that Defendant has violated or is about to violate laws enforced by the Commission because, among other things, Defendant engaged in the unlawful conduct over a period of four years, willfully and knowingly, despite having knowledge of hundreds of consumer complaints and refund requests, as well as inquiries by the Better Business Bureau regarding their deceptive practices and only ceased its unlawful activities after the FTC notified Defendant of its pending investigation,” the court filings state.
“Our settlement not only holds CRI Genetics accountable for its past misconduct, it also aims to ensure that CRI Genetics doesn’t engage in similar misconduct going forward,” said California Attorney General Rob Bonta in the press release. “I want to thank our federal counterparts at the FTC for their continued partnership and commitment to ensuring that all businesses play by the same rules.”
In addition to the $700,000 fine, CRI is obligated to change its practices by:
Ceasing to make misrepresentations about its testing and analysis services.
Not using deceptive tactics to sell its products, represent endorsements, or in billing practices.
Accurately disclosing its website billing practices.
Disclosing any sharing or usage of genetic data for purposes besides the services the consumer purchases.
Refraining from offering the sale of any DNA information testing product or service.
“Today’s action continues the FTC’s crackdown on deceptive reviews, dark patterns, and baseless claims around algorithmic solutions,” said Samuel Levine, Director, Bureau of Consumer Protection at the FTC, in the press release. “We are proud to partner with California on this important matter and will continue to carefully scrutinize claims around biometric information technologies.”
This settlement serves as a reminder to all genetic testing firms and clinical laboratories that state and federal Departments of Justice and state Attorney Generals are willing to file actions against genetic testing organizations that intentionally mislead the public. It is also useful for lab managers to stay aware of the lengths some genetic testing companies will go to deceive consumers and that regulatory agencies are noticing egregious practices.
Proposed regulation to limit rate increases during health crises gets pushback from staffing agencies and travel nurses who disagree with salary restrictions
Hospitals across the nation are seeking relief from skyrocketing costs due to increased demand for temporary workers—especially travel nurses. This has led organizations like the American Hospital Association (AHA) to step in and call for legislators to cap spiking salary rates. Many clinical laboratories report similar increases in salaries following the outbreak of SARS-CoV-2 for medical technologists (MTs), clinical laboratory scientists (CLSs), histologists, and other skilled positions. This increase in salaries of lab scientists was mirrored by an even greater increase in the cost of travel MTs.
According to analysis conducted by Becker’s Hospital Review of hiring data from Vivian Health, an online job placement website for healthcare professionals, “Average weekly travel nurse pay climbed from $1,896 in January 2020 to $3,782 in December 2021, a 99.47% increase.”
A prior study by Kaufman Hall and Associates, LLC., found rates for temporary workers almost 500% higher than pre-pandemic times. While numbers are trending downward, it’s clear that rates are still high enough to cause alarm, KFF Health News reported.
“During the pandemic there were staffing companies who were making a lot of promises and not necessarily delivering,” Dave Dillon (above), VP of Public and Media Relations at Missouri Hospital Association, told KFF Health News. “It created an opportunity for both profiteering and for bad actors to be able to play in that space.” (Photo copyright: L.G. Patterson/Missouri Hospital Association.)
AHA Alleges Price Gouging
Demand for temporary healthcare workers surged during the COVID-19 pandemic, and, because supply was limited, salaries for temporary workers—such as travel nurses—soared as well. This dramatic increase in hospitals’ costs prompted the AHA in 2021 to send a letter to the Federal Trade Commission seeking relief for healthcare providers from what the organization called “anticompetitive pricing by nurse-staffing agencies.”
In January 2022, about 200 House members urged then White House COVID-19 Response Team Coordinator Jeffrey Zients “to investigate reports that nurse staffing agencies are taking advantage of the COVID-19 pandemic to increase their profits at the expense of patients and the hospitals that treat them,” an AHA new release noted.
In an AHA House Statement titled, “Pandemic Profiteers: Legislation to Stop Corporate Price Gouging,” the AHA wrote “Our concerns range from potential collusion to increased prices way beyond competitive levels and/or egregious price gouging and the impact these behaviors could have on efforts to care for patients and communities.”
Temporary nurses make up a large portion of staff nationwide with 1,760,111 employed nationally as of September, according to Zippia research. With some nurses commandeering $40,000 signing bonuses and pay rates up to $10,000 a week for ICU nurses during the height of the COVID-19 pandemic, the significant impact of these rate hikes cannot be ignored.
“We have received reports that the nurse staffing agencies are vastly inflating price by two, three, or more times pre-pandemic rates, and then taking 40% or more of the amount being charged to the hospitals for themselves as profits. This situation is urgent and reliance on temporary workers caused normal staffing costs to balloon in all areas of the country,” Representatives Peter Welch, D-VT, and Morgan Griffith, R-VA, wrote in the letter submitted by the AHA to House members.
States Take a Stand
But nothing was done at the federal level to cap rates for travel nurses, so hospital organizations in 14 states lobbied legislators to cap rates at the local level. However, this has proven to be problematic.
At this time, at least 14 states have proposed legislation that impose limits on what temp nursing services can charge and what stipulations they must follow during a crisis. Navigating this patchwork of state laws could be challenging for both hospitals and temporary nurses.
Some states are taking sterner measures, KFF Health News reported:
Missouri regulators proposed legislation that would allow felony charges to be brought against healthcare staffing agencies that raise prices during emergencies.
Texas lawmakers proposed legislation that would administer civil penalties against agency price-gouging—laws which the state does not have on the books at all—and also would allow fees up to $10,000 to be assessed per violation of the proposed law.
New York proposed amendments to legislation that would cap the amount temporary staffing agencies could charge.
Nurses, Staffing Agencies Tell Their Side
The implementation of new laws to protect hospitals from alleged temp agency price gouging presents new challenges. One issue is state-to-state competition.
“It might become difficult to hire travel nurses, and some states could face a lower-quality hiring pool during a national crises if the neighboring state doesn’t have strict measures,” Hannah Neprash, PhD, Assistant Professor, Division of Health Policy and Management at the University of Minnesota, told KFF Health News.
And financial handcuffs may not sit well with staffing agencies that feel misunderstood by hospital organizations pushing for regulation. According to KFF Health News, “Typically about 75% of the price charged by a staffing agency to a healthcare facility goes to costs such as salary, payroll taxes, workers’ compensation programs, unemployment insurance, recruiting, training, certification, and credential verification, said Toby Malara, a Vice President at the American Staffing Association trade group.”
Malara added, “hospital executives have, ‘without understanding how a staffing firm works,’ wrongly assumed price gouging has been occurring. In fact, he said many of his trade group’s members reported decreased profits during the pandemic because of the high compensation nurses were able to command,” KFF Health News reported.
Not surprisingly, many nurses have also come out against government regulation of their wages.
“Imagine the government attempting to dictate how much a lawyer, electrician, or plumber would make in Missouri. This would never be allowed, yet this is exactly what’s happening right now to nurses,” Theresa Newbanks, FNP, a nurse practitioner who is affiliated with several hospitals in multiple states.
Creative Responses Required
Increases in both rates and legislation continue to spur creativity among hospitals needing to fill shifts, support staff, and prevent worker burnout.
The American Hospital Association December 2022 Task Force noted this in their “Creative Staffing Models” paper. The AHA cited telehealth visits, technical support, and working with non-traditional partners as beneficial ideas. These were also noted as meaningful ways to recruit and retain staff.
Other hospital systems have even created their own staffing agencies. Allegheny Health Network (AHN) developed a variety of systems where nurses can work a single weeklong assignment, multiple-week assignments, or transfer to other facilities, Kaiser Health News reported. While these staffing scenarios make up a small percentage of the hospital staff, it’s a worthwhile addition to increase options for nurses.
Staff turnover for RNs increased from 8.4% to 27.1% last year, as reported by the 2022 NSI National Healthcare Retention and RN Staffing Report. Finding solutions to staffing shortages—and consequently increased temporary nursing cost—is crucial because burnout is still a problem, just as it is in clinical laboratories and pathology groups.
Clinical labs should proactively investigate how a vendor will respond to a data security incident and how quickly, says expert
Clinical laboratory managers in New York and surrounding areas should be aware that almost one million protected health information (PHI) records from as many as 28 healthcare providers appear to have been stolen from a medical records company that services these providers.
Practice Resources LLC (PRL), a company that provides billing services for dozens of hospitals and medical providers in Central New York, announced in August they were the target of a ransomware attack that occurred on April 12 of this year. The Syracuse-based organization stated that hackers may have captured personally identifiable information (PII) such as names, home addresses, treatment dates, health plan numbers, and internal account numbers of 934,138 patients.
The data breach affected the patient records of dozens of medical providers and the clinical laboratories that service them, as well as physical therapists, pediatricians, gynecologists, orthopedic surgeons, and more.
“When a lab’s vendor has some type of breach, the lab entity that provided the compromised information could have some liability related to the breach,” explained Jim Giszczak, JD (above), McDonald Hopkins, in an interview with The Dark Report over a similar data breach in 2019. “That’s why every lab should be proactive and do a review to understand each vendor’s policies, procedures, training, and response in the event of a breach. Because your lab needs to know how a vendor will respond to a data security incident, and importantly, how quickly it will respond, it’s critical for lab officials to review the contracts they have with vendors that acquire, or have access to, PHI.” (Photo copyright: McDonald Hopkins.)
Not a Scam
“Unfortunately, it’s not a scam,” stated David Barletta, President and CEO of PRL, in an interview with local Syracuse news WSYR. “This really did happen in April—there was a ransomware attack on our system. We brought in forensic accountants and forensic information teams to come and look at what happened.”
PRL sent out more than 940,000 letters to potential victims of the cyberattack in August, noting that some patients may receive more than one letter.
The complete list of “healthcare entities on whose behalf Practice Resources LLC is providing notice of data incident,” according to PRL, includes:
Although their investigation did not uncover any evidence that personal data was misused, PRL has arranged credit monitoring services free of charge for one year from the date of enrollment. The company is also offering proactive fraud assistance to help people with any questions or in case they become a victim of fraud.
“There were no patient social security numbers that were taken. No medical record information was taken,” Barletta told WSYR. “We really, just out of an abundance of caution, felt that it was necessary that we provide them with credit monitoring for a year—just in case.”
Hundreds of Thousands of Patients Affected by Breach
When PRL discovered the data breach, the company took immediate steps to secure its systems and scrutinize the nature and extent of the incident. They then hired a forensic team to investigate what patient data may have been accessed by the hackers, a process that took several months.
“It does take a long time because each client has hundreds of thousands of patients maybe,” Barletta explained. “We have several large clients that really bore the brunt of this.”
According to Barletta, PRL bills about $450 million annually for its clients, which include some major institutions in Central New York. The New York state Attorney General’s office is investigating the hacking incident and delving into whether PRL’s data security was adequate.
As a result of the breach, FamilyCare Medical Group, which serves more than 80 physicians and thousands of patients, lost all of its laboratory data, according to the group’s CEO, Mitchell Brodey, MD. They had to close their lab for several months while their computer system was rebuilt. During this time, all their lab work was sent to another laboratory for analysis, MSN reported.
The PRL ransomware attack was what is commonly known as a third-party data breach. This type of breach occurs when sensitive data is stolen from a third-party vendor, or when their systems are used to access and steal sensitive information stored on other systems.
In the United States, the Federal Trade Commission (FTC) is responsible for enforcing federal privacy and data protection regulations. If a breach affects 500 or more individuals, the company must issue a press release and notify the FTC and all affected consumers within 60 days of the discovery of the breach.
Clinical Labs Should Proactively Review Member Agreements
In 2019, our sister publication The Dark Report covered a major data breach affecting more than 20 million patients. That breach occurred when hackers gained access to the data systems of a third-party bill collector and impacted four of the nation’s largest clinical laboratories:
At that time, The Dark Report asked James Giszczak, JD, Chair of the Litigation Department and Co-Chair of the Data Privacy and Cybersecurity Practice Group at McDonald Hopkins, to provide insight on what steps clinical laboratory leaders should take to avoid and handle data breaches.
“One important lesson from this data breach is how critical it is for clinical labs and pathology groups to be proactive in making sure they review their vendor agreements,” Giszczak stated. “In that review, labs need to know the specific measures each vendor is taking to protect the information the lab is providing to their vendors.”
Giszczak suggested that clinical laboratory leaders make sure they understand each vendor’s policies, procedures, training, and response in the event of a data breach. He reiterated that labs could have some liability related to the breach.
Legislation has been introduced that, if passed, would ensure health consumers have the opportunity to see and correct information held by data brokers
When it comes to patient privacy, pathologists and clinical laboratory managers may be spending more time addressing a growing issue with the patient data their labs create and store. Third-party data brokers want to position themselves to collect healthcare data at the source so can they de-identify it and sell it to interested parties.
Data brokers are commercial entities that collect, assemble, and/or maintain personal information about individuals. They also sell or provide third-party access to the information, explained the Congressional Research Service, a Legislative Branch Agency that provides policy and legal analysis to both House and Senate members and committees of the U.S. Congress, regardless of party affiliation.
Pharmaceutical companies, medical device manufacturers, and other businesses can purchase said data from various types of data brokers, such as information, analysis, and technology companies. The purchased data then can go on to guide industry investments or launch drug marketing campaigns. (more…)
