Our previous blog post looked at the 2021 Kentucky Legislative Session items that will impact some, if not all, healthcare consumers in the Bluegrass State. Now we are expanding that scrutiny to the federal level. In of all places, oddly enough, there are provisions in the new bipartisan infrastructure bill that, as of this writing, can impact your healthcare spending.
Pharmacy Benefit Managers Dodge One Bullet
As reported in MarketWatch,(1) “One proposed source of funding for the infrastructure bill is delaying a Medicare rebate rule, with that move expected to provide about $49 billion.” Analysts at Capital Alpha Partners said that’s a “win” for pharmacy benefits managers, plus “negative provisions banning spread pricing have dropped out as offsets.” CVS Health, Cigna, and UnitedHealth are among the big U.S. PBMs.”(1-3)
A bit of background: The Pharmacy Benefit Managers (or Administrators) (PBMs/PBAs) issue is one that we have previously spotlighted and also comes under the scrutiny of KY and numerous other states’ lawmakers. They are frequently cited as a factor contributing to high drug prices.
Figure 1: Flow of Funds for Single-source Brand-name Drugs Purchased at a Retail Pharmacy and Managed by a Pharmacy Benefit Manager for an Employer’s Health Plan
Source: Congressional Budget Office Note: AWP = average manufacturer price; WAC = wholesale acquisition cost; AWP = average wholesale price a. The WAC is a list price that approximates what conventional pharmacies pay wholesalers for single-source brand-name drugs. b. Based on Novartis Pharmaceuticals Corporation. 2004. Pharmacy Benefit Report: Facts & Figures, p. 16.
How Big Is Big?
The three largest PBMs account for 80% of the market.(4) As shown in Figure 2 below, the PBMs listed are also national pharmacies and insurance companies. Therefore, they can steer patients away from generics (by coupons and price incentives), or in some cases, even restrict certain drugs from their coverage. The latter tactic has seen many drugs added to PBMs’ exclusion lists.(5)
Figure 2: PBM Market Share, by Total Equivalent Prescription Claims Managed, 2020
AKS Safe Harbor Protection Dodges Another Bullet
Another area targeted by legislation was the Anti-Kickback Statute (AKS) Safe Harbor. This section of the infrastructure bill “postpones the implementation of HHS OIG’s final rule titled, “Fraud and Abuse; Removal of Safe Harbor Protection for Rebates Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection for Certain Point-of-Sale Reductions in Price on Prescription Pharmaceuticals and Certain Pharmacy Benefit Manager Service Fees.”(6)
In other words, certain referral services, such as vendor agreements, discounts and specific price reductions, and group purchasing organizations that receive payments from a vendor for goods or services are illegal under the Anti-Kickback Statute. The “Safe Harbor” reference means an exception to the Anti-Kickback Statute that allowed these with doctors, drug manufacturers, and other industry-related entities. Previous legislation was passed, making this safe harbor set to disappear on January 1, 2022. However, if the new infrastructure legislation is passed into law as currently written, the expiration wouldn’t occur until January 1, 2026, when the political landscape has likely shifted again.