Report: Anti-PBM Laws Could Raise Health Care Costs for Oklahoma Businesses, Consumers, Government Programs
National Center for Policy Analysis Warns Policymakers of Costly, Unintended Consequences
by John C. Goodman
March 13, 2013
Source: Associated Press
Washington, DC)— Oklahoma policymakers should avoid enacting laws that undermine payers' ability to use mail-service pharmacies, preferred pharmacy networks, and other innovative pharmacy benefit management (PBM) tools, the National Center for Policy Analysis (NCPA) asserts in a new white paper, "Unnecessary Regulations that Increase Prescription Drug Costs."
NCPA is a nonprofit, nonpartisan public policy research organization that develops private, free-market alternatives to government regulation that rely on the strength of the competitive, entrepreneurial private sector.
HB 2100 would grant the State Board of Pharmacy authority to regulate PBMs, the companies which employers and state agencies hire to negotiate discounts with drugstores. Allowing pharmacy boards to regulate PBMs creates a conflict of interest since the Board members are pharmacists – a group which contracts with PBMs and could financially benefit from the policies they set, the Pharmaceutical Care Management Association (PCMA) said.
"This report shows Oklahoma policymakers that appeasing the drugstore lobby means higher prescription drug costs for small businesses, consumers, and government programs," said PCMA President and CEO Mark Merritt.
The NCPA report points out a number of regulations and laws that could increase prescription drug costs, including:
Click here to read the NCPA white paper.
Barriers to Competition: State Boards of Pharmacy and Conflicts of Interest
Background: The report highlights how some states are seeking to transfer regulatory authority of drug plans from the state's insurance commissioner to the state's Board of Pharmacy.
NCPA: "Because state pharmacy boards are controlled by pharmacists, giving them authority over drug plans creates conflicts of interest that could undermine drug plans' ability to negotiate lower prices with pharmacy networks."
Barriers to Lower Cost Mail-Service Pharmacies
Background: Employers and payers use a variety of incentives to encourage patients to use efficient mail-service pharmacies for medications treating chronic illnesses. In Oklahoma, mail-service pharmacies will save employers, seniors, unions, and consumers $540 million over the next decade.
NCPA: "Unfortunately, some states are enacting laws that interfere with the ability of drug plans to reward enrollees that use the plan's mail order option by barring drug plans from offering lower prices for mail-order dispensing. This unnecessarily raises costs for consumers, insurers and employers. Obviously, these laws mostly aim to benefit local community pharmacies rather than consumers."
Barriers to Competitive Pharmacy Networks.
Background: A new study finds that the extraordinary number of pharmacies in the United States offers an opportunity to save $115 billion over the next decade through the greater use of preferred and limited pharmacy networks. However, some states have in place so-called "any willing pharmacy" laws and regulations that force plans to contract with pharmacies that don't meet their quality standards or geographic access needs.
NCPA: "These any-willing-pharmacy laws are costly to taxpayers, employers and patients alike. The Federal Trade Commission notes that these laws reduce the drug plans' bargaining power, leading to higher drug prices and higher premiums for consumers."
Barriers to Efforts to Combat Fraud
Background: Health care fraud is a problem that increases overall health costs and is especially burdensome in Medicare and Medicaid. Billions of claims are submitted to millions of providers, making fraudulent claims easy to disguise. PBMs and companies processing electronic payments are effective at discovering irregularities that lead to fraud.
NCPA: "Regulations requiring Medicare drug plan administrators to pay claims within 14 days make it difficult to detect fraud before a claim has been paid. At the very least, drug plans need the authority to delay paying questionable claims to providers suspected of fraud. Plans also need greater authority to exclude or suspend suspected fraudulent providers from networks and conduct routine audits of participating pharmacies.
"Congress and state legislatures should avoid well-meaning, but ill-conceived, regulations intended to protect consumers, which often have the opposite result. A better way to ensure desirable outcomes is to promote a competitive environment free of market distortions that favor one party over another."
Barriers to Lower Cost Dispensing Fees
Background: Dispensing fees paid to drugstores and pharmacists that are mandated and set by states are much higher than in commercial drugs plans. The average Medicaid dispensing fees range from $1.75 in New Hampshire to $10.64 in Alabama, averaging about $4.81 per prescription across the country (the dispensing fee in Oklahoma is $4.02). By contrast, privately managed Medicare Part D plans negotiate fees with pharmacies of about $2 per prescription.
NCPA: "Dispensing fees in state-managed, conventional Medicaid plans are set by the state. State officials and state legislatures often yield to political pressure and set dispensing fees that are much higher than what private drugs plans could negotiate if allowed to do so. When the fees are set too high, taxpayers pay pharmacies more than they would in a competitive market."