Amicus briefs dispute ERISA connection
North Dakota legislation prohibits PBMs from charging copays to patients that exceed the cost of a drug. It also prohibits gag clause provisions that restrict what pharmacists may discuss with patients. PBMs may charge fees based on performance metrics, but they must use nationally recognized metrics. Fees must be disclosed at the point of sale.
In its legal challenges, PCMA has asserted that state laws violate the preemption clause in the Employee Retirement Income Security Act (ERISA). “Federal preemption allows employers flexibility to administer innovative benefit plans in an environment of increasing health care costs. The court’s decision in Rutledge v. PCMA will either uphold or threaten these federal protections,” PCMA asserted in a statement issued in March 2020.
ATAP’s amicus brief, and another one filed by 34 attorneys general that supports the North Dakota statute to regulate PBMs, counter that this isn’t the case.
“First, PBM regulation (in its common and standard form) does not reference ERISA itself. These laws leave all plans on equal footing; they do not single out ERISA plans for preferred or disfavored coverage, and they do not change the playing field for ERISA plans alone ... Second, PBM regulation does not have any prohibited connection with ERISA plans,” noted authors in the ATAP brief.
PCMA has also included Medicare preemption in its arguments against PBM regulation. This is meritless, wrote the state attorneys general. “Medicare preempts state laws only if a Medicare ‘standard’ particularly addresses the subject of state regulation. Because the challenged North Dakota laws do not dictate plan benefits or conflict with a Medicare standard, they are not preempted.”
The auctioning of medications
PBMs in theory could use their market power to drive down costs by extracting discounts from drug makers and pharmacies. In reality, they retain any price concessions and discounts for themselves, ATAP’s brief continued.
A system that PBMs have put into place, called step therapy, is essentially an auction for the preferred spot that will be authorized and covered, Dr. Worthing explained.
PBMs create formularies through this auction. The highest rebate to the PBM earns the top spot in the auction and becomes the preferred drug. “That highest bid gets paid for by passing the cost along to patients and insurance plans, and PBMs pocket the profits. This provides an incentive for pharmaceutical manufacturers to raise prices,” he said.
Dr. Worthing has seen these practices trickle down and affect his patients. “Frequently, the medication I prescribe based on what’s best for the patient based on their disease activity, values, and medical history is often not covered because a different drug or portfolio of drugs has earned the top spot in step therapy. This is an extremely frustrating and cumbersome process that not only delays access to treatments but also provides an incentive for higher drug prices,” he said.
There are other ways in which PBMs get in the way of care, said Ms. Hemmen, whose facility serves complex-care oncology patients.
“PBMs force scripts out of higher-quality pharmacies that preserve unfragmented care. They incentivize plan sponsors to put programs into place that take away patient choice, fragment care, and drive scripts to their own owned pharmacies,” she said.