Lawmakers Seek to Cut ‘Excess’ Pharmacy Charges

Lilo H. Stainton | February 26, 2019 | Health Care
Senate passes bill that would prevent insurers from levying copayments higher than the cash price of a medication

Credit: USC Schaeffer
Prescription overpay
New Jersey could soon join a small but growing group of states that have restricted the use of certain pricing strategies by companies that manage or insure pharmacy benefits, as lawmakers seek to reduce the price consumers pay for their prescription drugs.

The state Senate unanimously approved legislation last week that would prohibit insurance carriers and pharmacy benefit managers from charging prescription copayments that are higher than the cash price someone would pay for the same medicine.

The bill, which could be posted for a final Assembly vote soon, also bans PBMs and insurance companies from restricting what pharmacists can tell customers about lower-price options. Supporters said this part of the legislation would add to the federal protections in a bill signed by President Donald Trump last year that banned “gag orders” imposed by contracts between pharmacies and PBMs or insurance companies. The new law is still being put into effect.

Consumer savings

“This legislation will help consumers to make more informed decisions in regard to their prescription drugs,” said Senator M. Teresa Ruiz (D-Essex), a lead sponsor of the measure, which was heartily endorsed by pharmacists in the Garden State. The measure would allow them to alert customers to potential savings: For example, someone who has a $15 copay could save $3 if they purchased a drug that the pharmacist could sell them directly for $12, avoiding the insurance plan entirely.

In addition, the Pharmaceutical Care Management Association, a national group that represents PBMs, said it is also on board with New Jersey’s plan. “PCMA supports the legislation. Pharmacy benefit managers support the patient always paying the lowest cost at the pharmacy counter, whether it’s the cash price or the copay,” the association told NJ Spotlight. The organization also supported the new federal law, which is designed to address the gag-order concern.

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A study published last year by the University of Southern California’s Schaeffer center for health policy found that in 2013 nearly one-quarter of all drugstore prescription purchases involved patient copays that exceeded by at least $2 the price the pharmacy had negotiated for the same drug. Called claw-backs in the study, these overpayments averaged less than $7.70 each, but added $135 million to the cost of prescription drugs nationwide that year.

“Patients should not be forced to overpay for their medications when less costly options are available,” said Senator Joe Cryan (D-Union), another lead sponsor, along with Sens. Shirley Turner (D-Mercer) and James Beach (D-Camden.)

Every little bit counts

While paying an extra few dollars may not seem like much at first, “That can add up, especially for seniors taking multiple medications everyday and living on fixed incomes,” Beach said. (The legislation does not address the underlying price of prescription drugs, an issue that has become a growing public concern.)

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According to the USC Schaeffer study, overpayment was far more common with generic drugs (involving more than 28 percent of the 9.5 million claims reviewed) than it was with brand-name medicines (less than 6 percent of these claims). But the average overpayment for brand-name drugs was nearly twice that for generics, at almost $13.50 compared to just over $7.30.

The claims research revealed that 20 medicines were the most common subjects of claw-backs. Four drugs — simvastatin, a cholesterol medication; amlodipine, for high blood pressure; the steroid prednisone; and a sleep medicine called zolpidem tartrate — involved overcharges more than half of the time.

The USC team notes that at least half a dozen states — including Connecticut and Maine — have already adopted laws that address some aspects of either gag clauses or claw-back provisions in pharmacy contracts. Others, like New York State and Massachusetts, are considering legislation to address these concerns.

A ‘magnificent’ measure

Laurie Clark, who represents both the New Jersey Pharmacists Association, the state trade group, and the independent drugstores that make up the Garden State Pharmacy Owners, said New Jersey’s proposal may go further than laws on the books in other states in how it addresses claw-backs. “This is a magnificent piece of consumer-oriented legislation,” she said.

Removing the gag clause is also a “huge thing” for pharmacy professionals, Clark said. Pharmacists want to help consumers save money, she added, but they currently risk being kicked out of the insurance networks if they violate clauses in their contract that prohibit them from sharing this kind of information. (State law already requires pharmacists to provide lower-cost generic options, unless a brand-name medication is specifically indicated by the prescriber.)

First introduced last spring, the bill (S-2690) was approved by the Senate Commerce Committee in January and underwent some changes (relating to how purchases would count toward an individual’s coverage limits) before the full Senate adopted the measure last Thursday.

The proposal would make it unlawful for a PBM or insurance carrier to charge someone with insurance more for their copayment than the individual would be charged if they paid cash, without going through their policy, for the same drugs. It also expressly prohibits PBMs or insurance companies from restricting pharmacists from telling consumers about these potential savings.

In addition, the legislation calls for the Department of Health to develop a campaign to inform individuals about their rights related to these purchases. The measure would take effect in three months after being signed by the governor.

The companion version of the bill has bipartisan sponsorship, led by Assemblymen John McKeon (D-Essex) and Ronald Dancer (R-Monmouth), and received unanimous support in committee last year. Clark, with the pharmacy organizations, said she expects it will be posted for a final vote fairly soon.