Effort to rein in drug prices will cost us as well

A vast number of Hoosiers will be exempted from new legislation regulating pharmacy benefit managers (PBMs) -- companies that administer prescription drug benefits for health plans, employers and other entities.

Senate Enrolled Act 140 requires that insurers and PBMs guarantee network adequacy and restricts alleged anticompetitive practices -- but Medicaid, managed care agencies and the state employee health plan are exempt due to cost-increase concerns.

PBMs joined the nation's health care system as drug wholesalers in the 1950s, said state Sen. Andy Zay. But in recent years they've played a more prominent role in the health care sector.

"They have really absorbed a lot of money -- trillions of dollars -- nationwide for performing that same wholesaler function," the Huntington senator told The Journal Gazette Wednesday.

The major PBMs are affiliated with pharmacies or insurers, which Zay says reduces competition and consequently drives up costs. Practices such as "drug steering" -- when patients are directed to use pharmacies or mail-order services affiliated with the PBM or insurer -- and "spread pricing" -- under which a PBM charges patients higher prices for a drug than they pay pharmacies -- contribute to anticompetition, he said.

Because most Hoosiers rely on their employers for health care coverage, legislative efforts to control spiraling costs are imperative. SEA 140, however, might take this concern in the wrong direction. By mandating pharmacy dispensing fees, it will ultimately burden employers and individuals with higher prescription drug expenses.

Furthermore, requiring insurers, PBMs or other administrators of pharmacy benefits to reimburse pharmacies at a rate that includes "a fair and reasonable dispensing fee" will raise prescription drug costs on consumers. The Indiana Manufacturers Association estimates SEA 140 will lead to at least $100 million in new health care spending.

"It's crucial to understand that these increased costs won't simply be absorbed by insurers or employers," said Ashton Eller, vice president of governmental affairs for the manufacturers association. "Instead, they will inevitably be passed down to consumers, further straining already-tight family budgets."

As businesses wrestle with higher health care costs, they could be forced to reduce benefits, raise employee deductibles or increase employee copays for prescription drugs. That will translate into fewer funds in Hoosiers' bank accounts, making it harder to afford essential goods and services.

"Indiana employers who provide health insurance benefits to their employees will also bear a substantial burden," Eller said in a piece published by the Indiana Capital Chronicle. "The increased cost of providing new benefits may very well negate any progress made this year in lowering health care costs."

The Indiana Manufacturers Association, Indiana's Council for Citizens Against Government Waste and the Indiana Chamber of Commerce are troubled by the fact that SEA 140 exempts Medicaid and the state employee health plan. The exemption will force commercial payers, employers and individuals who purchase private health insurance to disproportionately shoulder the burden of the increased costs while the state avoids the financial impact.

In other words, legislators recognized the cost of this new fee, protected the state budget they were writing, but still raised the cost of prescription drugs on the private sector.

Pharmacy benefit manager reform is necessary, and SEA 140 does contain some positive provisions. It requires an insurer or PBM to file an annual report with the state Department of Insurance commissioner; allows any insurer, PBM or pharmacy impacted by an alleged violation to file a complaint with the commissioner; and grants the commissioner the authority to order reimbursement to any person who has incurred a monetary loss as a result of a violation.

But the unfair mandate on individuals to pay pharmacy dispensing fees overshadows these improvements, creating additional financial burdens on consumers.