Change in Medicaid drug pricing could save taxpayers $43M, lawmakers say

By David Reich-Hale

New York legislators have passed new regulations that eliminate so-called “spread pricing” on prescription drugs within the Medicaid managed care system, a move they say will save taxpayers about $43 million a year.

The law, part of the $175.5 billion state budget passed Monday, targets pharmacy benefit managers (PBMs), which are third-party administrators of prescription drug programs.

PBMs, such as CVS Caremark and Express Scripts, act as the middle man between health insurers and pharmacies. When a patient fills a prescription, he or she pays a co-pay. The PBM collects the balance of the payment from the insurer, passes a portion of that on to the pharmacy that dispensed the drug, and pockets the rest. The difference between what the PBM collected and what it passed on is the spread. PBMs — which set both amounts — do not have to disclose to insurers how much they pass on to pharmacies, or disclose to pharmacies how much they collect from insurers…

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