Advocating for Better Public Policy on Pharmacy Benefits

Icon of pill bottle with dollar sign
May 17, 2016
Former Executive Vice President and Chief Operating Officer, CVS Health
Over the next 10 years, PBMs will help save $635.8B for U.S. payors.

Plan sponsors who provide prescription drug coverage to their plan members count on pharmacy benefit managers (PBMs) to help ensure appropriate utilization, lower costs and improved health outcomes. Over the next decade, PBMs will save payors and their members approximately $654 billion while improving adherence and reducing waste.

PBMs help payors develop benefit plan designs that align with their strategic priorities. That is why we support policies that allow us to offer tailored plan design options with appropriate and convenient pharmacy care and access at cost-effective rates.

Over the next 10 years, PBMs will help save $635.8B for U.S. payors.

However, PBM tools – including the use of clinically appropriate and cost-effective formularies and preferred pharmacy networks – are under constant threat in Congress and state legislatures across the country. In 2016 alone, a CVS Health analysis identified more than 550 bills affecting prescription benefits that were introduced in legislatures across the United States. Currently, 46 states – as well as Washington, D.C., and Puerto Rico – either have bills under consideration in active legislative session, or pending consideration.

Many of these proposed measures, if adopted, would raise costs for plan sponsors and their members without significantly improving access, quality of care or health outcomes. CVS Health actively works with state and federal policymakers to prevent changes that hinder our ability to help control health care costs. Much of the opposition, and heightened scrutiny of PBMs, is prompted by independent pharmacists associations and pharmaceutical manufacturers.

Many Pending Measures Would Raise Costs Without Significantly Improving Access, Quality or Outcomes

29 bills would require PBMs to be licensed by a state’s department of insurance
As we shared at the 2016 CVS Health Forum, many of the bills up for consideration create undue administrative costs for clients or compromise the effectiveness of their prescription benefit plan design. For instance, new licensure laws under consideration would require PBMs to be licensed by a state’s department of insurance before they could operate in that state as a PBM even though the PBM is not an insurer.

23 bills would cap member copays
Bills that would cap the member’s copay have been gaining momentum. We oppose measures that cap member copays because they hide a drug’s true cost from plan members and will likely create unintended consequences, including higher premiums from payors to offset the higher share of costs they would pay.

38 bills would restrict use of Maximum Allowable Cost (MAC) pricing
To successfully manage prescription drug costs and control trend, PBMs, on behalf of clients, need to be able to:

  • Negotiate discounts from drug manufacturers
  • Maintain the confidentiality of proprietary MAC lists

MAC pricing is designed to keep generic pricing competitive by giving pharmacies an incentive to buy the lower cost generic drug, regardless of the manufacturer’s list price. Because different manufacturers can charge different amounts for bioequivalent, interchangeable generic drugs, MAC pricing keeps the economic incentives in the right place. If a pharmacy buys the higher-priced alternative, its margin will be smaller. MAC pricing helps ensure that pharmacies are incentivized to purchase the lower-cost generic drug, which benefits both payors and members.

Legislation to weaken the MAC-based payment system or require PBMs to disclose proprietary pricing information is designed to increase pharmacy profits at the expense of payors and consumers. In South Carolina, for example, lawmakers are considering Senate Bill 849, which would require PBMs to provide pharmacies with the sources utilized to determine MAC and access to their MAC lists.

38 bills would mandate use of abuse-deterrent formulations (ADF) for opioid analgesics
Such legislation would require patients, even those with no history of abuse, to take ADF painkillers that have not been conclusively proven to be less addictive. Because ADFs are available only as brand-name products, they would be significantly more expensive than their generic equivalents and often cost hundreds of dollars for a 30-day supply.

We understand the United States faces a prescription drug abuse epidemic. We are doing everything we can to help stop it. There are other, more effective ways to address the problem than expensive, branded ADF painkillers. We support greater utilization of prescription drug monitoring programs (PDMP) and electronic prescribing. PDMPs equip providers and pharmacists with real-time information about the drugs – in what combinations and in what doses – a patient is taking. Prescribers can use this insight to decide what therapeutic action to take, including an intervention to stop nonmedical or inappropriate clinical use. Electronic prescribing similarly reduces drug diversion and fraud.

We’ve also worked to expand the availability of naloxone at pharmacies nationwide, through standing order. Naloxone blocks the effects of opioids and can prevent death from overdose.

8 bills address continuity of care
Continuity of care legislation states that once patients start treatment with a brand-name medication, they would be allowed to use that drug for the duration of their therapy. Such laws essentially bypass step therapy provisions requiring plan members begin treatment with less costly, clinically equivalent generics.

Advancing Policies That Improve Health Outcomes

CVS Health supports efforts to remove barriers and facilitate the approval of biosimilars to increase access to life-saving drugs by making them more affordable. We also oppose state-level activities that conflict with FDA decisions on biosimilar and interchangeable biologics.

Comparative effectiveness research
While CVS Health does not support price controls, we believe a drug’s price should reflect its efficacy. As comparative effectiveness information becomes widely available, the marketplace can decide which medications merit a premium price.

The effect of high-cost drugs on the health care system and drug trend is not limited to price increases related to older brand-name drugs but also the introduction of new, expensive therapies.

Through an ongoing dialogue with policymakers at the state and federal level, we generally support policies that promote pharmaceutical industry competition. We also are vocal about reducing the FDA backlog that prevents needed drugs from entering the market.

Representing Our Clients

CVS Health’s internal Government Affairs (GA) team is constantly on the look-out for any proposed legislation that could raise costs for clients. Supported by locally based lobbyists and trade partners such as America’s Health Insurance Plans and the Pharmaceutical Care Management Association (PCMA), the team regularly engages with state and federal legislators and policymakers through individual lobbying, committee testimony, group briefings, and coalition development.

The team educates lawmakers about utilization management programs PBMs manage on behalf of private and public employers, health plans and other payors, including unions and public employee retirement plans and their members. The intent is to defeat burdensome bills outright or at least mitigate problematic provisions that would undermine client goals to help improve quality and access while reducing cost.

A changing dimension of the legislative challenge is the shift in focus from national to state-by-state legislative lobbying efforts by pharmaceutical companies. While partisan gridlock has made progress difficult for pharmacy benefit-related bills before the U.S. Congress, the GA team still engages in an active advocacy program in Congress and the administration, including testifying before congressional committees and meeting with members of Congress and their staffs. However, due to the slow pace of federal legislation, pharmaceutical companies have instead increasingly shifted their attention from federal to state lawmakers in the hopes of securing favorable formulary placement for their drugs or circumventing utilization management programs.

Uniting for Better Legislative Outcomes

Collaboration Works

CVS Health worked closely with a client to defeat an anti-mandatory mail, MAC and biosimilars bill in 2015.

As the PBM for a union plan, we worked with the union leadership to block a pharmacy bill for the past two years.

Two CVS Caremark clients were instrumental in supporting the state's board of pharmacy biosimilars' language, deflating the drug manufacture bill in 2015.

The CVS Health GA team continuously monitors legislation and policy activity at the federal, state and municipal level to ensure payor perspective is heard and their interests, as well as those of plan members, are appropriately represented. In addition to monitoring legislation that is being introduced, and engaging with lawmakers, we also perform a complete fiscal analysis when a bill is introduced to calculate its effect on our clients. We share this information with our Sales and Account Services teams to inform clients who may be affected and therefore may be interested in collaborating with us to oppose harmful legislation.

We know from experience just how essential it is that elected representatives hear directly from clients, their constituents. As legislators consider laws with the potential to increase the cost of providing prescription drug coverage, we urge clients to stand with us. Working together, we can support sensible legislation that expands access, improves quality of care and lowers costs.

Do you know how you can help support policies that drive down prescription drug costs? Ask Us
May 17, 2016
Former Executive Vice President and Chief Operating Officer, CVS Health

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All of the savings and/or trend changes discussed in this Insights Feature will vary based on a variety of factors including demographics, plan designs and programs adopted by the client. Client-specific modeling available upon request.