Actuarial Firm Milliman Examines Cost of Drugstore Lobby’s Agenda
(Washington, DC)—Proposed restrictions to consumers’ and employers’ ability to choose the mail-service pharmacy option could increase costs by as much $123 million annually, according to a new study from the actuarial firm Milliman released today by the Pharmaceutical Care Management Association (PCMA). PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which administer prescription drug plans for more than 200 million Americans with health coverage provided through small businesses, Fortune 500 employers, health insurers, labor unions, and Medicare.
“This bill is a hidden tax that will increase drug costs for Pennsylvania consumers and employers while driving up drugstore profits,” said PCMA President Mark Merritt. “The mail-service pharmacy option provides significant savings—typically about two-thirds the amount of cost-sharing of prescription drugs at a retail pharmacy. In Pennsylvania, the current proposal would eliminate those savings and could instead result in increased costs within a range of $60 million to $123 million annually.”
PCMA has serious concerns that Pennsylvania HB 814 will increase Pennsylvania consumers’ and employers’ prescription drugs costs. In order to help quantify the costs associated with HB 814, PCMA retained the actuarial firm Milliman to examine the legislation. Among the key findings from Milliman:
The total cost impact (the cost to both purchasers and consumers) of provisions in the Bill could increase total costs within the range of $60 million to $123 million annually;
The bill could raise prescription drug benefit costs by 2.3 to 4.7 percent per year, which amounts to $60 to $123 million in 2006; and
Mail-service pharmacies offer significant for cost savings over retail pharmacies due to lower ingredient costs, lower prescription dispensing fees, and lower administrative processing fees. Consumers typically pay about two-thirds the amount of cost sharing for an equivalent amount of prescription drugs through mail-service versus retail.
The mail-order pharmacy option is typically used for 90-day prescriptions for long-term maintenance drugs treating chronic conditions such as high-blood pressure and high-cholesterol. The mail-order pharmacy option typically provides consumers and employers with an additional savings of about 10 percent beyond discounts available through chain drugstores and independent pharmacies.
The value provided by the mail-service pharmacy option has been recognized by several independent sources as a key factor in driving down the costs of prescription drugs for consumers and employers. In January, researchers from the Centers for Medicare & Medicaid Services (CMS) found that prescription drug spending in 2004 slowed to its lowest growth rate in the past 10 years. The authors cited four key reasons for the slowdown in prescription drug spending, including the shift toward greater mail-order dispensing.
Furthermore, the Federal Trade Commission (FTC) in 2005 found that PBM mail-service pharmacies offer large employers, unions, and health insurers lower prescription drug prices than the retail pharmacy industry’s chain drugstores and mail-service pharmacies. In 2003, the General Accounting Office (GAO) found that the average PBM mail-order pharmacy price for prescription drugs was 27 percent lower for brand-name drugs and 53 percent lower for generic drugs than the price paid to retail pharmacies by customers without prescription drug coverage.
PCMA strongly believes HB 814 is designed to protect the drugstore lobby from competition in the marketplace. Drugstores typically earn their greatest profit margin on cash-paying customers and typically pay between 35 to 45 percent more at the drug store counter. Large employers, unions and other payers all rely and benefit from the significant cost-savings associated with the mail-service pharmacy option.
###
PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which administer prescription drug plans for more than 200 million Americans with health coverage provided through small businesses, Fortune 500 employers, health insurers, labor unions, and Medicare Part D.
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605
Separate Injunction Blocking Enforcement of District of Columbia PBM Law Unaffected, Remains in Place
In 2006, 17 States â?? Including Seven in Past Month Alone â?? Have Now Rejected Imposing Fiduciary-Disclosure Requirements on PBMs
(Washington, DC)—In an expected procedural move, the US Supreme Court today has declined at this time to review the First Circuit’s November 2005 ruling in PCMA v. Rowe, but could revisit the ruling in light of a potential conflict arising within the next year from separate litigation currently before the US District Court for the District of Columbia, the Pharmaceutical Care Management Association (PCMA) said today. Historically, where the US Supreme Court has discretionary jurisdiction, the Court is most inclined to review cases where Circuit Courts are in conflict.
“It is increasingly apparent that Maine and DC are outliers among the nation’s policymakers and payors, who typically oppose efforts to redefine PBMs as ‘fiduciaries’ and impose one-size-fits-all disclosure,” said PCMA President Mark Merritt. “While we await a decision from the US District Court for the District of Columbia, we are encouraged that state legislatures routinely reject similar legislation upon learning it would actually increase â?? not decrease â?? drug costs by undermining PBMs’ ability to negotiate discounts from drug companies. This year alone, 17 state legislatures â?? including seven in the past month — have rejected such legislation, which increases costs by 10 percent without offering any corresponding ‘upside’ to consumers or payors.”
As background, in April 2005, PCMA petitioned the US Supreme Court to review the First Circuit’s November 2005 ruling upholding a 2003 Maine law designating pharmacy benefit managers (PBMs) as fiduciaries under ERISA and imposing onerous public disclosure requirements. PCMA has serious concerns that the Maine law would result in higher prescription drug costs â?? as much as 10 percent, according to one estimate from PricewaterhouseCoopers â?? for Maine consumers and employers. Underscoring the widespread concerns about increased costs associated with the Maine law, four national employer and insurance organizations â?? Business Roundtable, US Chamber of Commerce, American Benefits Council, and America’s Health Insurance Plans â?? last month filed an amicus brief asking the Court to review the law as well.
While the US Supreme Court has declined at this time to review the First Circuit’s November 2005 ruling, the Supreme Court could revisit the ruling within the next year in light of pending litigation before the US District Court for the District of Columbia. The District of Columbia enacted a fiduciary-disclosure law similar to the Maine law in March 2004. DC’s law was subsequently challenged by PCMA and, in December 2004, the US District Court issued an injunction blocking DC from enforcing the law. The injunction blocking the DC law from being enforced remains currently in effect while the merits of the DC law are litigated. A substantive ruling on PCMA’s motion for summary judgment could be handed down perhaps in Fall 2006. If a ruling from the US District Court for the District of Columbia conflicts with the First Circuit’s decision, this conflict would afford the US Supreme Court a fresh opportunity to review both the Maine and DC statutes.
At the state level, the Maine and DC laws continue to be anomalies with respect to PBM regulation. Thus far in 2006, 17 states have now rejected imposing fiduciary and/or disclosure requirements on PBMs. Since April 28, seven state legislatures â?? Hawaii, Iowa, Minnesota, Missouri, South Carolina, Tennessee, and Vermont â?? have adjourned without enacting additional fiduciary-disclosure laws. Maine-style fiduciary-disclosure proposals are still pending in New Jersey, New York, Pennsylvania, and Rhode Island.
###
PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which administer prescription drug plans for more than 200 million Americans with health coverage provided through small businesses, Fortune 500 employers, health insurers, labor unions, and Medicare Part D.
Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605