Various states have enacted or are considering legislation limiting the circumstances under which maximum allowable cost programs (MACs) may be used, a decision that one expert says could result in increased pharmaceutical spending that in turn increases the cost of pharmaceutical coverage.
“This is immensely important at a specialized level for pharmacies and most of the action is happening at the state level where the issue is being addressed in individual state bills (SB),” David A. Hyman, the chaired professor in law and professor of medicine at the University of Illinois (UI), told American Pharmacy News.
Public and private payers usually rely on MACs to determine the reimbursement level for dispensed generic pharmaceuticals, Hyman wrote in his white paper, The Adverse Consequences of Mandating Reimbursement of Pharmacies Based on Their Invoiced Drug Acquisition Costs.
MACs are set at a level that reflects the average acquisition cost of a well-run pharmacy, and they encourage pharmacies to buy generic drugs at the lowest cost. This sparks competition among wholesalers and drug manufacturers, and lowers overall pharmaceutical spending, Hyman explained.
The issue, he said, is that states have started restricting the circumstances under which MACs can be used.
In Arkansas, for example, recently enacted legislation contains what Hyman called a novel provision that requires pharmacy benefit managers (PBMs) to pay pharmacies at least their invoiced acquisition cost, regardless of whether a lower priced option is available in the marketplace.
Such a provision, he said, effectively functions as a "guaranteed profits" term, meaning that no matter how much a pharmacy spends to buy a drug, the pharmacy is guaranteed to be repaid at least that amount and likely more.
With rebates and discounts, invoiced prices may not accurately reflect the actual drug acquisition costs, thereby further inflating the guaranteed profits, he wrote.
“The ‘guaranteed profits’ term in Arkansas SB 688 is particularly pernicious because it imposes a cost-based approach to pharmaceutical purchasing and undermines the competitive forces that would otherwise result from the use of MACs,” Hyman, who previously served as special counsel at the U.S. Federal Trade Commission and who now focuses on the regulation of health care financing and delivery at UI, said.
“In the pharmaceutical setting, such legislation is designed to benefit pharmacies at the expense of consumers, employers and PBMs."
In a nutshell, bills similar to SB 688 are special interest legislation because higher-priced drugs can make pharmacies more money — but that’s not good for consumers, Hyman said.
In his white paper, Hyman outlines why payers developed MACs; discusses how MACs became popular under Medicaid; analyzes the Arkansas legislation while pointing out that it is “a significant step back down a path that Congress has decisively rejected”; and looks at lessons learned from past experiences with cost-based reimbursement, among other topics.
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