In the wake of recent scandals involving drug manufacturers such as Valeant, renewed attention has been drawn to the skyrocketing cost of prescription drugs and the attendant problem of rising health insurance costs across the U.S.
Insurance regulators have been grappling with this problem for decades and currently there is little uniformity among the various state benefit plans and providers. Regulatory oversight for this system falls under the jurisdiction of the National Association of Insurance Commissioners (NAIC), an organization that establishes standards and practices for its member regulators in each of the 50 states.
In 2003, the NAIC set forth the Health Carrier Prescription Drug Benefit Management Model Act in an attempt to address the issue of escalating prescription drug costs. The intent of the measure was to address management procedures that are used to provide prescription drug benefits under state health benefit plans, including formularies, dose restrictions and therapy requirements. That said, no state has adopted the plan since its proposal.
“The purpose of the NAIC is for the states to initiate some uniformity so the federal government doesn’t have to step in,” William Schiffbauer, a prominent Washington insurance attorney, recently told American Pharmacy News.
In an uncharacteristic move, the Pharmaceutical Research and Manufacturers of America (PhRMA), along with representatives from the pharmacological lobby industry, have recently petitioned the NAIC for revisions to the model. Among these proposed changes would be the inclusion of new and revised formulary definitions, structural changes for Pharmacy and Therapeutics (P&T) committees, the addition of new federal non-discrimination requirements, and a host of other detailed procedures that would that would eventually have to be enforced by state insurance regulators.
“This is an ironic position for an organization that otherwise routinely opposes the government's regulatory reach and any intrusion into the workings of the private prescription drug marketplace,” Schiffbauer said.
He went on to say that such proposals “are a waste of precious time to revise a model that to date has not appeared to be useful at all.”
PhRMA's proposed changes would double the size of the current model, add nearly 10 pages of regulatory text and require regulators to develop more staff and expertise.
“This PhRMA proposal requires insurance regulators to perform the nearly impossible task of examining each health insurance plan's benefit design and none of the proposed changes offered by the pharmacy lobby would provide any relief of high-prescription drug prices that consumers are experiencing today,” Schiffbauer said.
In addition to the fact that no state has adopted the model in over a dozen years, Schiffbauer has stressed the point that most of its provisions have been supplanted in federal law with the implementation of the Affordable Care Act and the establishment of specific regulations set forth by the Centers for Medicare & Medicaid Services. Because federal laws supersede any state law, this has created an unworkable dual standard.
According to Schiffbauer, a more effective alternative to the PhRMA proposal would be to address the issue of copay coupons offered by large drug manufacturers. In a recent review, he wrote that the problem with these coupons is how they essentially circumvent cost-sharing arrangements in health benefit contracts and discourage the use of generic or less expensive drugs.
“Drug manufacturers are employing copay coupon schemes that operate unregulated as ‘secondary insurance,’ and as such they are engaging in ‘tortious interference’ with contract cost-sharing terms, resulting in significant upward cost spikes for health benefit plans,” Schiffbauer said. “Couponing is described as a ‘high stakes’ game of chicken where insurance companies have raised copays on some drugs to discourage the use of less expensive but effective drugs. Consumers take the coupon directly to the pharmacy for the more expensive drug and pay no cost-sharing. The health plan and the pharmacy benefit manager don’t notice this until after the more costly drug claim comes in. The consumer is off the hook because they don’t have to pay the copay, but the drug company makes a sale on a much bigger item, so it’s a great deal for these drug companies and these expensive drugs.”
In any event, consumers who depend on prescription drugs under health benefit plans should not expect to see changes anytime soon.
“The normal process for revising models is two or three years anyway, and so any major changes to this model will be a couple of years down the road,” Schiffbauer said. “The model revision is not going to help consumers at all -- it’s just going to add more regulation to the health insurance plan, and therefore more costs passed through in the premium. I think that is the bottom line.”
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