The latest trends in state-level pharmacy policy and the impact of pharmacy benefit manager (PBM) regulations were investigated in an AMCP Nexus 2024 session hosted by Tom Casey, MPP, Associate Director, Government Affairs, AMCP, and Adam Colborn, JD, AVP, Congressional Affairs, AMCP.

Session speakers explained that US states are currently focused on managed care pharmacy because prescription drug costs are high, community pharmacies are closing, and managed care practices are unpopular with patients and physicians. Notable overall trends in managed care pharmacy policy include drug pricing, PBM reform, utilization management, and Medicaid unwinding.

“State legislatures are thinking a lot about overall drug spending…drug spending has grown by double-digit percentages,” shared a session speaker. “It is projected that by 2031, overall prescription drug spending will grow over a hundred billion dollars and will reach almost 700 billion. So that's obviously a concern.”

Within drug pricing, prescription drug affordability boards (PDABs) were of special interest. PDABs are independent bodies designed to analyze the causes of high prescription drug costs and make recommendations to the state to lower spending. PDABs capitalize on existing transparency requirements to assess the impact of pharmaceutical supply chain components on cost and 11 states have created PDABs since 2019, while 13 states introduced legislation this year.

PDABs are split into 3 categories: Medicaid rebate negotiators, pharmaceutical supply chain evaluators, and price-setting bodies.

With Medicaid rebate negotiators, boards identify therapies with high impact on Medicaid and determine appropriate value and achieve savings through supplemental rebates. For pharmaceutical supply chain evaluators, boards review the pharmaceutical supply chain and propose strategies for state payers to control costs. Boards may also conduct affordability reviews of specific drugs. Finally, price-setting bodies differ in that boards conduct affordability reviews of specific therapies and have authority to establish upper payment limits (UPLs) if a reviewed therapy poses an affordability challenge.

Several states have passed bills to protect consumers from high cost-sharing obligations, including Oregon, Colorado, and New Mexico. Other states like New York, Colorado, New Jersey, and Washington have implemented copay caps for specific medications such as insulin and epinephrine. Additionally, PBM reform bills are setting maximum patient cost-sharing levels at the lowest possible amount.

In terms of the pharmaceutical supply chain, Florida is the first state to have an FDA-approved importation plan. Other states like Colorado and New York have also granted authority to pursue similar plans. States are also partnering to produce biosimilar insulin and other generic products to improve access and address shortages, with initiatives like CalRx in California and legislation passed in New York. Illinois has enacted legislation requiring plans to cover brand drugs in case of generic drug shortages.

PBM reform has been a significant focus in state legislatures, with 183 bills passed across all 50 states since 2017. In the 2023-2024 sessions alone, 273 bills were introduced, resulting in 37 bills being enacted across 25 states in 2024. Three key areas of focus in the PBM industry are transparency, health plan contracts, and pharmacy contracts.

PBMs are required to obtain licenses, report information to the state, and share information with health plans. Regarding disclosures, states vary in requirements for PBMs to report information, including who receives it, frequency of reporting, level of detail, entities that must report, and public disclosure. Health plan contracts should include transparency on rebates collected, payments, pharmacy types, fiduciary duties, potential conflicts of interest, and regulations on PBM income such as banning spread pricing, decoupling income from drug prices, and mandating rebate passes to clients. Health plan contracts should disclose conflicts of interest, prohibit spread pricing, ensure rebate pass-throughs, and impose a duty of care. Finally, pharmacy contracts regulate the relationship between pharmacies and PBMs. These contracts require the PBMs to accept any pharmacy that agrees to the terms of the contract, with network adequacy standards meeting or exceeding Medicare Part D standards. Reimbursement floors are established, promoting transparency and requiring PBMs to publish MAC lists.

The session speakers delved into how employers are affected by examining the Employee Retirement Income Security Act of 1974 (ERISA) preemption. ERISA preempts state regulations that "relate to" employee benefit plans, giving the federal government authority to regulate fully and self-insured employer-sponsored health plans. This allows multi-state employers to offer uniform benefits to employees without the interference of state regulations. ERISA plans have historically been exempt from state regulations affecting benefit design, providing consistency across different states.

The Supreme Court ruled in Rutledge v PCMA that ERISA does not preempt state laws affecting ERISA plans' incentives without requiring specific coverage, allowing Arkansas to regulate PBM reimbursement rates and ban gag clauses. Following this ruling, states have expanded regulation of PBMs' business practices to include self-insured plans. In PCMA v Mulready, the 10th Circuit found that 4 components of an Oklahoma law regulating PBMs violated ERISA and Part D by mandating benefit design, prompting Oklahoma's AG to petition the Supreme Court to hear the case on May 10. Utilization management tools like prior authorization, step therapy, and site-of-service policies are being used by health care plans to manage costs and ensure quality and safety. State lawmakers are paying close attention to the impact of these tools on patients and providers, with 31 states passing legislation that affects utilization management practices. This highlights the growing importance of finding a balance between cost control and patient/provider access to care.

“One other trend to consider is sort of a new addition. States are increasingly talking about regulating the use of AI, or algorithmic decision-making, by insurers,” shared session speakers.

According to the National Conference of State Legislatures, 14 states have introduced legislation that would impact how private health insurers or state health programs use AI. Colorado, California, and Illinois all enacted bills that limit health insurers' use of AI-based algorithms in the utilization review process.

State trends in utilization management include implementing bagging and site-of-service policies for clinician-administered drugs, protecting 340B covered entities and contract pharmacies, setting standards for prior authorization and step therapy protocols, and mandating gold card programs.

Eight states passed laws in 2023-2024 sessions restricting health plans from interfering in a patient's choice of where to obtain clinician-administered drugs, including prohibiting coverage exclusion based on site of service. These laws also prevent health plans from refusing to pay participating providers for administering covered drugs and from dispensing drugs for patients to transport to a provider for administration.

The 340B program has seen nearly 20% annual growth in spending from 2010-2021, with nearly 40% of pharmacies under contract with covered entities in 2022. In response to actions taken by manufacturers and health plans to limit discounts, 12 states have enacted legislation to protect drug manufacturers and health plans dealing with 340B covered entities and contract pharmacies.

Many states are introducing bills to regulate prior authorization and step therapy protocols, with a focus on transparency, criteria standards, timeliness, clinician review, electronic processing, and disease state exemptions. Plans may be required to report protocols to state agencies, establish minimum criteria standards, make timely determinations, involve licensed clinicians in reviews, use electronic platforms for processing, and exclude certain treatments from protocols. The goal is to improve access to care and streamline the prior authorization process for patients.

Six states have gold card programs for prior authorization reforms, with different criteria such as approval rate, evaluation period, minimum requests needed, and duration of the exemption. Michigan requires a 95% approval rate over 2 years with at least 10 requests, while Texas requires a 90% approval rate over 6 months with at least 5 requests, both subject to retrospective reviews every 6 months.

As of July 2024, Medicaid enrollment has decreased by 15 million individuals, with certain states beginning to remove enrollees who were eligible for continuous enrollment under the COVID-19 Public Health Emergency provisions.

Twenty-seven states have passed 45 bills expanding pharmacist scope-of-practice, allowing them to administer vaccines, tests, and treatments for COVID-19 and other common conditions like flu and strep throat. Some states have provided pharmacists with broad prescribing authority or allowed them to order treatments for HIV or substance use disorder, with laws in California, Illinois, and Oregon requiring health plans to cover pharmacist patient care services within their scope of practice.

The session speakers emphasized the significant impact of state-level pharmacy policy and PBM regulations on managed care pharmacy, highlighting the continued need to monitor rising drug costs, protect consumers, and promote transparency to ensure access to affordable medications.

Reference

Casey T, Colborn A. State Legislative and Regulatory Update. Presented at: AMCP Nexus 2024; October 14-17; Las Vegas, NV.