PBM Reform: A Trojan Horse?

The legend of the Trojan horse is a great story of how an ingenious bit of trickery led to the end of the 10 year war between the Greeks and Trojans  sometime around 1200 B.C. The Greeks built a giant wooden horse and left it at the gates of Troy as a gift. Unbeknownst to the Trojans, the horse was filled with Greek soldiers. As Greek troops pretended to sail away, the Trojans pulled the giant horse into the city and celebrated their apparent victory. Under the cover of darkness as the Trojans slept, the Greek troops came out of the horse and opened the gates to let the rest of their soldiers into the city. Within hours, the Greeks destroyed the city of Troy.

Today, some states have created a Trojan Horse in their efforts to control prescription drug costs. Recently states have passed or proposed legislation regulating Pharmacy Benefit Mangers (PBMs) based on the debatable premise that PBMs, not drug manufacturers, are a major driver of rising drug costs. PBMs are certainly not perfect and reforms are needed. But some of regulations, like West Virginia’s mandated dispensing fee of $10.49 per prescription will increase, not decrease, costs for plan sponsors as well as patients.

So, where’s the Trojan Horse in all of this? The Trojan Horse enters the picture because the regulations in some states directly impact self-funded health plan sponsors. For example, under the new Florida law, self-funded plans cannot require participants to fill prescriptions for maintenance medications through mail order. Nor can self-funded plans use copay incentives to encourage plan participants to fill prescriptions at network pharmacies or mail order. The days of a 90 days’ supply at mail order for 2 times the retail copay are gone!

Hold your horses! Aren’t  self-insured ERISA plans exempt from state PBM regulations. No – a recent Supreme Court decision found that ERISA did not preempt state PBM regulations. As a result, self-funded plans are required to comply with the state regulations, making it difficult if not impossible to provide active and retired workers a uniform, cost-effective prescription drug benefit regardless of their place of residence.

States are not the only ones taking on PBM reform. At the federal level, House and Senate committees are holding hearings and actively working on proposed PBM legislation. Some of the proposed regulations, like those of the states, can result in higher patient and plan sponsor costs. The upcoming months are sure to be an exciting ride!

Happy Reading!

Suzanne Daniels