Proposed amendment to drug plan bill could spike costs for Oklahoma consumers, says national healthcare expert

Oklahoma consumers enrolled in health plans with insurance deductibles that have yet to be reached and those who are uninsured may bear the high costs of rising drug prices, thanks to a proposed piece of legislation that would give pharmacies permission to disregard negotiated discounts with insurers and transfer the price hikes on to consumers.

“Each state has the right to regulate drug plans pretty much as part of their regulatory duties, except Medicare Part B that is federally regulated,” Devon Herrick, senior fellow at the National Center for Policy Analysis, told American Pharmacy News.

The U.S. Food and Drug Administration (FDA) has seen a spike in new drug applications from manufacturers applying to produce generic drugs over the past several years, which has created a backlog. As a result, some generic drug manufacturers have taken advantage of the now-lengthy approval process and have drastically increased their prices temporarily.

“Basically, if I know there is not going to be a competitor for two or three years, and there are not that many (competitors) making the same drug, you can always jack up the price because there is a backlog of applications and the FDA can’t approve them quickly,” Herrick said.

Health plans use Maximum Allowable Cost (MAC) price lists to place a cap on how much they pay for a given drug, and pharmacies agree to the terms outlined in the contracts, which are negotiated annually between pharmacies and insurance companies. Without these limits, pharmacies would not be bound to prices, and could set whatever price they saw fit, forcing consumers to grapple with even higher drug prices.

In Oklahoma, a law (SB 1150) mandates weekly updates to MAC lists and permits pharmacies to contest MAC prices they deem inaccurate or unfair. The law was passed after pharmacies decided the MAC lists were not being updated fast enough and lobbied their complaints to legislators, insisting they make insurance companies update the MAC list quicker.

But now a new proposal that would amend SB 1150 and give drugstores more leeway to raise prices arbitrarily is being considered by the Oklahoma Senate.

“It was kind of backhanded in my opinion,” Herrick said. “It was essentially taking the phrase ‘maximum allowable cost’ and scratching it out and replacing it with ‘reimbursement amount.’ And then, of course, in the bill it redefined reimbursement amount as all of the money that a drug store might pay or be reimbursed for a drug.”

As amended, SB 1150 opens the door for pharmacies to contest not just MAC list generic drugs, Herrick said, but possibly name-brand drugs and copays.

“Essentially it just allows the drug store or pharmacy to dispute," Herrick said. "It allows them to sign an agreement and then later say, ‘I don’t like that agreement.’ And basically dispute some of the prices they get for a variety of things."

Herrick said regulating MAC lists is basically a means for pharmacies to get more money, which ultimately hurts consumers.

He added that pharmacies tend to have the upper hand when it comes to getting legislation passed because they complain about “the big, evil insurance or PBMs (pharmacy benefit managers),” which always garners a warm reception.

“But the trouble is, of course, like any special interest, they are self-interested and they ask for regulations essentially designed to benefit them and the loser in the long run is usually the consumer,” Herrick said. “Drug plans don’t make a very sympathetic topic and consumers are so dispersed that quite often regulations are easily passed.”

Herrick, who has done extensive research on how consumers can save on drugs, said other states have regulations that don’t benefit consumers. Like a drug plan regulation passed a few years ago in the state of New York making it illegal to offer a drug plan enrollee a better deal if they opt for mail order pharmacy, which, of course, hurts the consumer who could have gotten a better deal, Herrick said. 

“I guess my final thought is this isn’t just a trivial issue with pharmacies contesting and PBMs," Herrick said. "This is not just a contest between drug plans and pharmacies. All lot of consumers are on high deductible plans, which means on my drug plan I don’t begin to get any kind of benefits until I’ve spent about $5,000. So for the first $5,000 I spend on drugs it is out of my pocket directly. So I think it is a consumer issue.”

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National Center for Policy Analysis 14180 Dallas Pkwy Dallas, TX - 75254

U.S. Food and Drug Administration (FDA) 10903 New Hampshire Ave Silver Spring, MD - 20903