New Legislation Could Have Global Impact on Drug Pricing

Sarasota, FL (WorkersCompensation.com) – Drug pricing has long been volatile, but a ramp up in recent legislation could potentially spark a movement towards more stability as well as accountability. Depending on how states and agreements are set up, while most rule changes are made with Medicare and commercial carriers in mind, they could ultimately have a direct impact on the bottom line for workers compensation. 

Part of what is driving the legislation is information released by the U.S. Department of Health and Human Services. The report shows that in 2019, 5.3 million Medicare beneficiaries reported financial problems with their prescriptions. In many cases, especially those over the age of 65 with chronic conditions, beneficiaries did not get their needed medications due to cost. In yet another 2016 report from the CDC, 4.8 percent of beneficiaries did not have their prescription filled, and 17.7 percent asked their physician for a lower-cost option.

Earlier this week, President Biden signed into law H.R. 5376, Inflation Reduction Act of 2022. Included in the bill is the requirement for Centers for Medicare & Medicaid Services (CMS) to negotiate the prices of prescription drugs that do not have a generic equivalent under the Medicare program. This requirement for CMS is effective 2026, and includes a starting requirement of 10 drug negotiations. The requirement escalates to 15 drug negotiations each year for 2027 and 2028. At year 2029, the requirement increases to 20 drug negotiations and continues as such thereafter. As noted in the bill, drug manufacturers that fail to comply with the negotiation requirements are subject to civil penalties and excise taxes.

Additionally, drug manufacturers will be required to issue rebates to CMS for brand-name drugs that do not have a generic equivalent, and that cost $100 or more per year per individual, and for drugs that prices increase faster than inflation. Drug manufacturers that fail to uphold the requirement will also be subject to penalties.

Other drug related changes include eliminating Medicare patient cost-sharing for vaccines that are recommended by the Advisory Committee on Immunization Practices, as well as capping cost share for insulin. Also eliminated is the beneficiary cost-sharing above the annual out-of-pocket spending threshold under the Medicare prescription drug benefit starting in 2024, and a cap of $2,000 starting in 2025. The bill also establishes a process for beneficiaries to have their monthly out of pocket costs capped and paid in monthly installments starting in 2025.

In addition to the recent Inflation Reduction Act, the Pharmacy Benefit Manager Transparency Act of 2022 was introduced back in May. There is some speculation that the proposed legislation would give the Federal Trade Commission more power to regulate Patients Pharmacy Benefit Managers (PBMs). Some of the restrictions include charging a payer a different amount for prescriptions than the amount the pharmacy benefit manager reimburses a pharmacy, resulting in the benefit manager retaining the difference. Deceptive rebates are forbidden. Altering fees to offset Federal reimbursement changes is also prohibited.

At a State level, in 2021 18 states implemented legislation addressing PBM licensing and registration, according to a report from JD Supra back in May. Mintz Law Firm has reported that in 2022 at least 7 states have passed new legislation that addresses not only licensing but also transparency of policies and pricing.

In April, Oklahoma passed bill SB 737 which prohibits the use of spread pricing, restricts fees billed to pharmacies, and includes reporting requirements with accountability to the Oklahoma Insurance Commissioner and PBM clients.

Tennessee passed HB 2661 in May, which has an effective date of January 2023. The rule restricts PBMs from overriding a patient’s right to choose a contracted pharmacy or provider, and addresses requirements for PDM pharmacy networks. Additionally, PDMs are prohibited from reimbursing contacted pharmacies for less than actual drug cost. Vermont passed similar legislation the same month, with added requirement that network rules cannot be more restrictive than State or Federal law.

In Colorado, bill HB 1370 was signed into law in May with an effective date of January 1, 2024. According to the new rule, PBMs cannot change a current prescription drug formulary during the current plan year, and must use 100% of estimated rebates to reduce policyholder costs.

Drug pricing changes on a quarterly basis. In most cases, there is not a standard load date requirement. Drug rate updates can be loaded at any time to be used for reimbursement calculations, and there is no way to tell when that load day will be. This makes it impossible for software to track drug pricing because the effective date is not standard Additionally, in many instances, drug pricing can fluctuate drastically from quarter to quarter, and delaying a price load or loading a rate early can greatly impact reimbursement, especially as related to cost. As such, more states are starting take a closer look at complex drug pricing issues, implementing legislation, and in some cases filing lawsuits where there are no clear-cut regulations.

In April, the Louisiana Attorney General filed a lawsuit against United Healthcare of Louisiana (UHC) and Optum Rx, Inc. (Optum) for alleging that the companies practices increased drug pricing for the state’s Medicaid program. Part of the lawsuit’s argument is the lack of transparency in how the two companies price their drug reimbursement, asserting that they also failed to answer requests for records and reimbursement terms. UHC and Optum’s response, according to the Mintz report, is that the AG did not have a contract and therefore no grounds to bring a claim of breach of contract.

The Ohio Attorney General, Dave Yost, is no stranger to complexities of drug pricing. He has filed several lawsuits alleging over charging by PBMs. In 2019, he filed suit against OptumRx asserting $16 million in drug overpayments. Again in 2020, he filed suit against Express Scripts on behalf of the Ohio Highway Patrol Retirement System. Both lawsuits are still in process.

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