The pharmacy benefits industry is challenging a new state law, trying to protect a key management tool that insurers, employer groups and public payers have been relying on for cost stability.
The Pharmaceutical Care Management Association wants to overturn a new Iowa law regulating maximum allowable cost lists for generic drugs, arguing that any state involvement in the practice is preempted by the federal Employee Retirement Income Security Act's national framework.
Enacted with the support of the National Community Pharmacists Association, Iowa's law took effect in July, and joined similar laws on the books in 15 other states aimed at giving pharmacies greater bargaining power at the hands of maximum cost lists.
Iowa's law gives the state insurance commissioner the ability to require pharmacy benefit managers to disclose their pricing methodologies to pharmacies. For drugs subject to the maximum reimbursement list, the law requires PBMs to inform pharmacies of their pricing data sources and let them comment, contest or appeal the maximum rates -- and lets pharmacies claim payment retroactively for any inaccurate pricing in the past.
Iowa's law, the Pharmaceutical Care Management Association argues, could leave employer, union and publicly-funded drug plans paying more for many generic drugs and limit plans' flexibility to use less-expensive generics as new ones come on the market.
"This mandate forces Iowa employers, unions and public programs to pay drugstores above-market rates," said PCMA President and CEO Mark Merritt in a media release. "It's a giveaway to the drugstore lobby that will raise Iowa's prescription drug costs by $55 million a year with no upside."
Maximum allowable costs lists are fairly widespread in commercial insurance, Medicare Part D and Medicaid. About 80 percent of employer-sponsored drug plans used maximum cost lists, along with 45 state Medicaid programs, including Iowa, up from 26 states in 1999, according to the Pharmaceutical Care Management Association.
Pharmacists have been waging a fight against against the maximum cost list management tool, however, contending that they can leave pharmacies getting paid below the cost they pay for the drugs they're dispensing.
"While the prices that pharmacies must pay their wholesalers for these medications continue to increase, insurance middlemen known as pharmacy benefit managers may wait months before they adjust reimbursement rates to reflect market costs, and rarely do so retroactively," said National Community Pharmacists Association CEO B. Douglas Hoey in a media release. "This is forcing community pharmacies to 'buy high' and 'sell low' and routinely incur losses of $60, $100 or much more per prescription."
Whatever the fate of Iowa's and the other 15 state laws regulating maximum cost lists, PBMs may have to prepare to deal with somewhat similar, though less restrictive policies in one of the biggest markets: Medicare Part D. In 2016, federal regulators will require Part D plans and their PBMs to give contracted pharmacies the reimbursement rates for drugs under maximum allowable cost pricing standards.