Governor’s Task Force on Reducing Prescription Drug Costs Holds Third Meeting

February 27, 2020

Pharmacy Benefit Managers (PBMs) were again the focus of the Feb. 19 meeting of the Governor’s Task Force on Reducing Prescription Drug Costs. The Task Force met on the campus of UW-Oshkosh, where PBM representatives were given an opportunity to tout their value within the pharmaceutical supply chain. Door County Medical Center CEO Brian Stephens serves on the task force.

Kris Hathaway, vice president of state affairs with America’s Health Insurance Plans (AHIP), and Heather Cascone of the Pharmaceutical Care Management Association (PCMA – the national association representing America’s pharmacy benefit managers), briefed the task force first. Both Hathaway and Cascone stressed the importance of focusing not just on PBMs, but on every participant in the drug supply chain, including pharmaceutical manufacturers, wholesalers, insurers, pharmacies, pharmacy services administration organizations (PSAOs – developed to help independent pharmacies interact with third party payers), health plan sponsors (usually employers) and insured health plan members.

Hathaway provided examples of strategies that impede the efficient operation of the prescription drug market, such as gaming the drug patent system through orphan drug abuses (getting market exclusivity for drugs that aren’t truly orphan drugs), pay for delay (agreements whereby a brand drug company simply pays a generic company not to launch a version of a drug), product hopping (where a drug manufacturer reformulates a brand drug to keep it off generic market), and dosing strategies (changing dosing schedule to keep a drug on patent). These strategies keep low-cost generic drugs from entering the market by extending the life span of a patent.

Both Hathaway and Cascone offered their opinions on ineffective strategies to lower prescription drug costs:

Point-of-sale rebates: These rebates will not have a significant impact on overall costs, because only 2.4% of brand drugs are rebated. Rebates are offered only when there is head-to-head competition between drug manufacturers.
  • Copay coupons: Coupons are offered only for expensive brand-name drugs and may not be used in Medicare or Medicaid programs. While helping individual patients, coupons may encourage patients to use costly brand medications instead of using cheaper generics, resulting in overall increased drug spend.
  • Capping copays: Again, this strategy brings relief to the individual patient but may result in higher overall premiums.
  • Rebate transparency issues: Tacit collusion may occur when rebate transparency is required. Rebate information should be protected so it is not attributable to a specific PBM or manufacturer.

Hathaway and Cascone offered suggestions for effective prescription drug cost control strategies, including eliminating patent abuses outlined above, eliminating gag clauses and claw backs, requiring manufacturers to provide advance notice of drug cost increases and ensuring that drug representatives disclose drug prices when marketing to physicians. Also promoted were evidence-based reviews to evaluate the appropriateness, medical necessity, and efficiency of health care services rendered to patients. Other cost-saving measures could include use of formularies and provider-tiered network design, prior and concurrent authorization, and e-prescribing and e-prior authorization for physicians.

Don Nelson, vice president, government relations for MagellanRx’s Midwest Region, a PBM for the Medicaid program in 18 states, reviewed Magellan’s 2019 Medicaid Pharmacy Trend Report. The 2019 data show a trend of an overall decline in the net cost-per-pharmacy claim. Underlying this story is a high specialty pharmacy cost trend which is balanced out by the traditional pharmacy cost trend. Medicaid programs struggle to pay for these high-cost drugs even after accounting for federal and supplemental rebates.

Paul Meyer, chief operating officer of The Alliance, brought with him three members of The Alliance who described how their businesses have been able to restrain health care and prescription drug costs. The Alliance, founded in 1990, facilitates group purchasing of health care contracts with providers. Member businesses self-fund their health plans. Alliance members include 250 employers whose health plans cover 100,000 employees and their dependents in the states of Wisconsin, Illinois, Iowa and Michigan.

Meyer identified four core drivers of high-value health care for members of The Alliance:
  • Comprehensive prescription drug data transparency.
  • Payment reform, by rewarding quality of service over volume.
  • Provider network design.
  • Benefit plan design. Prescription drug benefits are an important part of benefit design.
Meyer urged the task force not to villainize PBMs. While acknowledging that there are flaws in the PBM process, they can also bring tremendous value. The Alliance works with National Cooperative Rx, which provides pharmacy benefits to self-funded member-owned groups throughout the United States and works with a PBM to manage these benefits.

Josh Bindl, CEO of National Cooperative Rx, said their employer members pay 90% of the pharmacy benefit and employees pay 10%. The major fears facing employees right now is what is on the horizon with high-priced specialty drugs, gene therapy and other innovations spiking cost increases. Bindl identified some issues that could be examined by government, including “popup” pharmacies that cold- call individuals and get them to switch pharmacies. These pop-ups prey on older patients, and the Cooperative has locked out more than 700 of these pop-ups.

Three Alliance employer members described their tactics for keeping health care costs, including prescription drug costs, in line. Advanced Laser in Chippewa Falls; Seats, Inc. of Reedsburg; and Brakebush of Westfield all operate on-site health clinics for their employees and their family members. They work with National Cooperative Rx to get the best prices for drugs dispensed at the clinics and otherwise under their health plans.

The task force concluded with a brief discussion of a policy paper compiled by Wisconsin Officer of the Commissioner of Insurance staff focusing on PBM policy. Many of the items in the paper are addressed in legislation that may be taken up by the State Senate in March, including PBM transparency requirements, prohibitions on gag clauses and claw backs, and auditing of PBM claims practices. The insurance commissioner emphasized in the paper that while PBMs have been the recent focus of the task force, other parts of the prescription drug supply chain will be studied in future meetings.

The next meeting of the Governor’s Task Force on Reducing Prescription Drug Costs will be March 18 in Wausau.

This story originally appeared in the February 27, 2020 edition of WHA Newsletter