Pharmacy Trends, Litigation, and Legislation

By Murray L. Harber

Employer-sponsored health and pharmacy plans continue to experience rising costs in their drug expenditures. During these times of economic slowdown, financial uncertainty, and a greater focus on expense control, employers have an opportunity to look at different ways to manage drug spend. There are some good examples of employers in Mississippi and in the Southeast working to reduce the waste and unnecessary cost and also promoting good patient consumerism. However, more employers need to step up and take more meaningful action by identifying key levers and moving to value-based benefit designs which reduce barriers to high valued services, products, and programs.

Employer-sponsored health plans have worked with Pharmacy Benefit Managers (PBMs) over many years to process claims between the pharmacy and the plan. They have been around since the early 70’s and 80’s and have grown to doing more than their initial intention. These additional efforts have caused friction with the local and independent pharmacies as they usually must pay a higher price due to contracting and volume differences. Also, PBMs offer programs that steer plan members to specific pharmacies and to mail-order programs which also causes friction with local pharmacies. These programs are promoted as cost savings to the plans and their members and have worked to improve compliance and cost. With all this friction, it is important that employers begin to work with proven transparent PBM’s who share data and assist with looking at ways to improve value of the investments into these benefits plans.

POLICY & LITIGATION

There is an increasing number of lawsuits popping up across the country questioning the fiduciary responsibility of the managers of the health plans putting into question effective use of plan assets. Plan sponsors need to be able to secure good quality data and to know where their money is being spent. Across the country there is a movement to change both state and federal statues to change the way the PBMs operate.

The U.S. Supreme Court will be making a ruling on a case “Rutledge vs PCMA” which will decide if states have the right to regulate PBM’s. This case began in Arkansas and worked its way through the U.S. Court of Appeals Eight Circuit. ERISA is the current overseer of employer-sponsored plans from a federal level and limits the control of state regulation of PBMs. When this decision is released, it will give clarity to the situation and actions can be taken thereafter with a more a more focused image. Currently, different states are passing similar but different local legislation which has conflicting policies and questions about the effect on patient care.

In Mississippi, legislation passed this session related to PBM’s gives the Board of Pharmacy more control and shortens the deadline to pay claims from 15 days to 7 days called “prompt pay” in the law. The law also eliminates the “claw back” process where currently PBMs can retroactively change the fee after the claims as been adjudicated. The law also requires PBMs to share with pharmacies their Maximum Allowable Cost (MAC) list and send out timely communications on updates to the list. It is reported that these efforts will “level the playing field” for all pharmacies in the state.

TRENDS

Specialty pharmacy costs within the health plan can be an area that can elevate way beyond the needed costs. For example, having an infusion in the hospital will cost more than an outpatient facility or physician’s office which is much more than being delivered during a home health visit. These site of care options influence the overall cost of care drastically both to the patient and the health plan.

Pharmacy costs continue to change through the costs and complexities of the complicated supply chain of planning, designing, testing, developing, selling, distributing, dispensing, and delivering. Due to all of these so called “middlemen” cost of drugs increase drastically. Typical PBMs business models include ingredient cost and cost of dispensing as primary variables. Employers are wanting more integrated programs and services which provide value. Middlemen continue to add to the cost of drug claims that was the subject of “Drawing a Line in the Sand” published by the Midwest Business Group on Health in 2018 that was coauthored by Randy Vogenberg, PhD, FASHP who is the Board Chair of Employer Provider Interface Council (EPIC). “Dr. Vogenberg underlined that employers are caught in the middle with specialty drugs. To aid employers an employer toolkit was developed that support health benefits professionals in making critical and informed decisions, which can be found at www.specialtyrxtoolkit.org.”

Adding in delivery and in depth consultation such as Medication Therapeutic Management can improve both adherence and satisfaction. The Veterans Administration (VA) was one of the first to develop then fully implement MTM in the late 1970s-to-mid-80s. Since PBM’s usually do not pay for that level of service, plan-sponsors have to implement themselves. 

A NEW FOCUS FOR EMPLOYERS

There is a large employer in Mississippi, who has kept their pharmacy claims to under 10% – the national average is around 15% – currently in pharmacy cost as a percentage to total costs. They do this by having members pay cash for all medications where they have a joint medical and pharmacy deductible and then the plan pays 100% for generics and 80% for brand medications. Their efforts have improved the knowledge of true cost of the medications to both the provider and the patient. Several employers work with local pharmacies to deliver onsite as well as having mail-order medications shipped to the workplace to each person.

Key action items from Dr. Randy Vogenberg, a thought leader who has been in the business for over 30 years, has three pathways for success for employer-sponsored plans which are as follows:

Complete Transparency – Employers need to know what they are getting and what they are paying for it. The employer has a fiduciary responsibility – if you do not know what you are paying for then they have skirted their fiduciary responsibility.

More Efficient Supply Chain – with technology today, you do not need all the middlemen and there is opportunity for continuous process improvement in managing the cost and quality of the supply chain.

Member’s Best Interest – Add in more value-based solutions, evolve consumer education, and reduced barriers to access and compliance.  Plan sponsors need to do more in communicating, incenting, and engaging plan members.

In 2020, the National Alliance for Healthcare Purchasing Coalitions released a report from its Employer Roundtables on Drug Cost. Some of the recommendations include eliminating rebates, site-of-care solutions, full transparency, and other waste-reducing and value-generating programs and services. There are new ways of contracting with manufactures and distributors to reduce the number of transactions between the producer and the end user. As pharmacy and medical drug related claim costs continue to rise as a greater percentage of total cost, plan sponsors can do more to stem the tide by taking an active role in understanding and designing value-based benefits.