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Story highlights

"Gag rules" may be keeping your pharmacist from telling you about cheaper drug prices

Over 20 states have banned such rules; President Trump plans to tackle them on a federal level

(CNN) —  

Independent pharmacist Ira Katz has been serving the eclectic community of Little Five Points in Atlanta for 37 years. But it wasn’t until Georgia passed a law last year banning “gag rules” that Katz could legally tell his patients they might save big bucks on their prescriptions if they paid cash or used a lower-priced generic.

The gag rule was a clause in his contract with one of the pharmaceutical benefit managers, also known as PBMs, that manage most of our nation’s prescription drug programs.

“We’re not supposed to be in violation of the contract, or they can cut you off,” Katz said. “I did it. I don’t give a damn what the PBMs say. I did it. It’s a travesty.”

Invisible to consumers, these benefit managers are the nation’s middle men in the drug delivery process, hired by health plans, employers, unions and government programs such as Medicare Part D to administer prescription drug benefits. The managers process and pay your claims, help create the list of medications your plan will cover, set the amount of copays for those drugs and are supposed to save the system money by encouraging the use of lower-cost medications.

Pharmaceutical benefit managers negotiate prices with drug companies on behalf of insurance companies and other payers, and then communicate those prices to retail pharmacies. They also negotiate rebates from manufacturers and discounts from drugstores.

According to the Pharmaceutical Care Management Association, which represents the industry, “PBMs are projected to save employers, unions, government programs, and consumers $654 billion – up to 30% – on drug benefit costs over the next decade.”

President Trump targeted the benefit managers in his Friday speech announcing his 44-page blueprint to lower American drug prices and reduce out-of-pocket costs, called “American Patients First.”

“Our plan bans the pharmacists gag rule, which punished pharmacists for telling patients how to save money,” Trump said.

After the speech, the Pharmaceutical Care Management Association issued a statement that said, “We support the patient always paying the lowest cost at the pharmacy counter, whether it’s the cash price or the copay. We would oppose contracting that prohibits drugstores from sharing with patients the cash price they charge for each drug.”

In the past two years, at least 21 states have enacted laws prohibiting “gag rules” on pharmacists, according to the Prescription Drug Resource Center of the National Conference of State Legislators. The most recent legislation was passed in Arizona, Colorado, Florida, Indiana, Kansas, Kentucky, Mississippi, Utah, Virginia and West Virginia between March and May.

Some municipalities are also taking action. Chicago Mayor Rahm Emanuel announced a plan Friday to “hold the prescription industry accountable” and reduce drug prices. As part of that plan, the city opened an investigation into the business practices of local pharmacy benefit managers.

“A letter was sent to all PBMs that states the practice of gag clauses may be a deceptive practice that violates the city’s deceptive marketing act,” said Chicago’s chief of policy, Chris Wheat. “There was over 150 million prescriptions filled in Illinois retail pharmacies last year, totaling nearly $19 billion, so it’s a huge issue.”

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Independent pharmacist Jim Kolar, who has run a pharmacy and compounding business in the Lakeview area of Chicago for 25 years, believes that the system is in desperate need of a fix. He’s watched one independent pharmacy after another go under, leaving a “pharmacy desert.”

“We’re finding the PBMs are driving up prices,” Kolar said. “None of it’s transparent; no one is seeing where the money goes. The only reason I’ve been able to stay afloat is because of my compounding business, which isn’t covered by insurance. It’s all cash.”