Secretary of State Audit Confirms PBMs Need More Oversight

Secretary of State Audit Confirms PBMs Need More Oversight

OHA Changes and PBM Legislative Reform Needed in Oregon

 West Linn, OR (Aug. 21, 2023) – Secretary Griffin-Valade and her team released their much-anticipated state audit report on Pharmacy Benefit Managers (PBMs) regarding prescription drugs within the Oregon Health Plan (Medicaid).

According to the report, PBM transactions in the Oregon Medicaid prescription drug program are too complex and hidden for accountability. There needs to be more transparency and auditability built in to the program to assure compliance and understand value.

The audit states, “The difficulty with our analysis further provides evidence the system is extremely complicated, and OHA does not have enough resources to reasonably determine whether Medicaid PBMs are acting in the best interest of the program and patients under the current model.”

PBMs are known for being opaque to prevent anyone from fully understanding the pricing structure that lead to enormous profits for these Fortune 10 companies. The investigation into the complex system identified several areas for improvement because the regulation of PBMs in Oregon is limited and fragmented.

“OSPA and our members are grateful for the work of the Secretary of State auditor’s office.” said Kevin Smith, the Oregon State Pharmacy Association (OSPA) President. “With the results of this report, OSPA urges OHA and our state legislators to follow the nine recommendations outlined in the report.”

In Oregon’s current system, the Department of Consumer and Business Services (DCBS) monitors PBMs operating in the commercial insurance space but not in Medicaid. Medicaid PBMs are subcontractors of Coordinated Care Organizations (CCO), and the Oregon Health Authority (OHA) does not have direct supervision over them.

In most Oregon counties, the average was one-third of the population received Medicaid benefits in 2022. However, some counties had over 50% of their residents use Medicaid. Statutory changes are needed in order to provide the state with direct oversight of all PBMs.

“This audit, along with our independent report, provides unwavering support for why PBM reform is needed in Oregon,” said Brian Mayo, Executive Director at OSPA. “OSPA will work in partnership with our state legislators to pass PBM bills during the 2024 legislative session. PBMs manipulated the system in 2023 and we won’t let it happen again.”

Mayo is referring to HB 3013, which had a vote of 14-11 in the State Senate this year and did not receive a constitutional majority to pass. This bi-partisan bill, which passed nearly unanimously in the State House, would have helped restore timely access to pharmacy care for patients throughout the state and also would provide relief to pharmacies struggling with below-cost payments and unreasonable fees from pharmacy benefit managers. Most importantly, it had the enforcement piece at DCBS, which would have created 5 jobs dedicated to PBM investigations to assist in regulation, including the Oregon Medicaid program.

OSPA and 3 Axis Advisors released a report in October 2022 that illustrated the worrying tactics pharmacy benefit managers employ to increase their profits at the expense of local pharmacies, taxpayers and patients. The study, Understanding Pharmacy Reimbursement Trends in Oregon, found that PBMs were charging the state Medicaid program more than eight times the manufacturer’s asking prices for a generic multiple sclerosis (MS) drug, costing the Oregon taxpayers approximately $1.9M for this one drug alone, in 2021.

The SOS audit report includes laws from other states as examples focusing on increasing protections for patients and community pharmacies related to PBMs. Some of these protections include uniform preferred drug lists, fair pharmacy reimbursements, increased transparency, and changes to state Medicaid PBM models.

Another concern addressed in the report is the significant number of pharmacies going out of business in Oregon with low or unfair reimbursements being the primary reason. Pharmacy closures disproportionately affect Black and Latino communities. Closures have also negatively impacted Oregon’s rural communities, which have higher barriers to accessing medications. Sixteen counties in Oregon are below the national average for community pharmacies per 10,000 people. The audit analyzed 316,755 Medicaid claims and found that 69% were far below the $12 average cited for pharmacies to operate, which the average being only $7.16.


About the Oregon State Pharmacy Association

Oregon State Pharmacy Association (OSPA) was founded in 1889 as a professional trade association representing its member community of pharmacists, pharmacy technicians, pharmacy students and others who have an interest in advancing the practice of pharmacy through advocacy and education, and thereby improving the health of our fellow Oregonians.


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