Published by Inside Health Policy
Two consumer advocates recently urged state insurance regulations to weigh using their administrative power — including rate review authority — to control rising drug costs and improve transparency, even if state legislators are unable to push through changes. Several state regulators expressed interest in exploring their administrative options following the presentation, with one hinting that lobbying by prescription benefit managers has limited legislatures’ willingness to act.
Claire McAndrew of Families USA and Eric Ellsworth of Consumer Checkbook stressed during a talk at the National Association of Insurance Commissioners conference in Boston that state regulators are well-suited to tackle high drug costs because they’re a trusted source with deep experience and can work hand-in-hand with legislators on measures that improve transparency.
While some states grant regulators more control than others, state insurance regulators have the authority to review issuers’ requests for rate increases and to gather key data to back-up rate-setting decisions. That process offers a good opportunity to get information on how drug costs contribute to prices, McAndrew said.
Ellsworth said rate review materials consistently show about 15 percent of premiums come from drug coverage. Price increases are attributable to the whole supply chain, he said. While manufacturer rebates may lower consumers’ costs, he noted, they also keep list prices high and make it difficult to understand how much a drug really costs.
McAndrew also said the entire industry needs to be held accountable, including PBMs. Simply pushing some drugs into higher cost tiers is not the solution, McAndrew stressed, noting that cost increases are not limited to specialty drugs and new drugs.
Oregon enacted a law in March requiring drug manufacturers to report and explain price increases of 10 percent or more. The first reporting requirements are slated to kick in July 1, 2019. The bill also requires insurers to report the impact drug prices are having on premium increases.
An Oregon regulator noted at the NAIC session that the same bill established a joint task force on drug pricing that involves all members of the supply chain, including PBMs, manufacturers, and medical providers. The task force has been going through a lengthy process and will have a report out in November “that must include a cost-effective and enforceable solution that exposes the cost factors impacting prices paid by Oregonians for pharmaceutical products and may include recommendations for legislation.”
Other states have mandated transparency without using their rate review powers.
Nevada has a law that requires transparency of insulin prices. The pharmaceutical industry recently dropped its challenge against that law, which mandates an explanation from drug companies if a drug’s price increases more than medical inflation.
A recently enacted Connecticut law requires PBMs to disclose the rebates they receive from drug companies and the amount passed on to consumers. Issuers will also be required to provide consumers with a point-of-sale rebate or otherwise certify that they are using the rebates to lower premiums.
McAndrew noted that the information gathered under the law will be publicly available in the future.
But one state official said state legislative action is not always a viable pathway.
Mike Humphreys, assistant insurance commissioner in Tennessee, asked whether any states had pursued disclosure requirements administratively, and suggested the PBM industry’s strong lobbying force had blocked transparency legislation in his state.
The Tennessee legislature recently got close to passing a bill that would have required cost parity for oral cancer drugs. Then lawmakers added a provision requiring PBM disclosure. The bill died after the amendment was added, and “it wasn’t the carriers that killed it,” Humphreys said.
A regulator in New Mexico said their office has broad authority under state law and if the resources are available it would be worth reviewing use of that authority. A New York regulator also expressed interest in using their administrative authority.
States have different levels of authority through rate review, so all regulators should consider taking a look at the the power at their disposal to obtain information on what is driving increases, McAndrew agreed.
She pointed to the Ohio Department of Insurance, which in April found the authority to block issuers and third-party payers, including PBMs, from enforcing “gag” clauses that stop pharmacists from telling consumers that a lower price drug could be available outside of a health plan. Insurance Commissioner Jill Froment’s April 4 bulletin also bars issuers from charging enrollees more than would be the case if a drug were purchased without coverage.
“Consumers have a right to better understand the cost of their prescription drugs and whether or not they can get those prescriptions filled at a lower cost,” Froment said. “We require insurers and pharmacy benefit managers to act in good faith and to follow Ohio law, but these explicit prohibitions will make expectations clear and will protect Ohio consumers.”