Viewpoint: Eliminate the red tape that stifles drug benefits
The mounting debate over prescription drug prices has led several states, including Oklahoma, to over-regulate pharmacy benefit managers (PBMs) in a supposed effort to lower drug costs. However, government meddling in this area does the exact opposite.
PBMs administer drug plans for 266 million Americans who obtain their health insurance from employers, unions, state governments, insurers and other entities. PBMs use a variety of tools like rebates, pharmacy networks, drug utilization review, formularies, specialty pharmacies, mail-order and audits to drive down drug costs, improve quality, increase patient medication adherence and prevent fraud.
Since PBMs provide benefits for such a large group, they bring to bear increased negotiating power and get substantial price discounts from pharmaceutical companies based on volume. The savings are passed on to health plan sponsors.
But in 2019 the Oklahoma Legislature passed, and the governor signed into law, House Bill 3632, which gave government bureaucrats the ability to manipulate private contracts between PBMs and their sponsors, impeding their ability to create high quality, cost-effective networks. HB 3632, according to the Oklahoma Management Enterprise Services and the Oklahoma Insurance Department, will drive up drug costs by as much as $5 million annually through the loss of discounts provided by exclusive pharmacy provider networks.
PBMs continued to receive criticism from Oklahoma legislators in 2021, leading to another attempt to interfere with private contracts via SB 821, the Patient’s Right to Pharmacy Choice Act. The legislation sought to change the definition of a PBM and included price controls and limitations on mail-order pharmacies that provide convenient access to needed medicines and help with patient adherence. SB 821 also injected the state government in how businesses design their own health plans. Fortunately, Gov. Kevin Stitt vetoed the bill, which was more about protecting special interests and less about lowering drug costs for employers, employees and patients.
Overregulation of PBMs is still a threat in Oklahoma due to the December 2020 Supreme Court decision in Rutledge v. PCMA. The court found that the Employee Retirement Income Security Act (ERISA), a federal law that regulates private-sector employer-based health plans, did not preempt an Arkansas law establishing a statutory minimum payment to network pharmacies.
The Supreme Court’s decision that the Arkansas law is not preempted by ERISA does not mean it is good policy and should be replicated in other states. The court admitted that the law may cause Arkansas ERISA plans to pay more for their prescription drugs than plans in other states.
The court’s decision does not mean states should attempt to interfere with any aspect of a PBM’s relationship with an ERISA health plan.
The D.C.-based Groom Law Group, which specializes in benefits, retirement and health care law, wrote that, “Following Rutledge, there is the potential for more widespread adoption of similar legislation by states targeting other payment practices, not only by PBMs, but also by other group health plan service providers, like third-party administrators (TPAs) that manage employer health and behavioral health benefits. Legislation of the sort could have a chilling effect on strategies currently used by employers, TPAs and PBMs to manage benefit costs for self-funded plans.”
Policies that result in less government interference, not more, are needed to bring more competition to pharmacy benefit plans and lower drug prices. At the federal level, the use of price controls in Medicaid, Medicare Part B, the coverage gap in Medicare Part D, the 340B program and the Veterans Affairs Department have distorted the marketplace and driven up costs in the private market. Similar policies should not be emulated in the states.
Instead of pushing for more government mandates on top of the restrictions they have already adopted, Oklahoma legislators should instead allow employers, and other entities that finance pharmaceutical benefits, to have the flexibility they need to work with pharmacy benefit managers to provide quality service at competitive prices.
Christina Herrin is director of health and science policy with Citizens Against Government Waste.
This article originally appeared on Oklahoman: Viewpoint: Eliminate the red tape that stifles drug benefits
