Frank Thomas interviews Dr. David Keisner on the meaning of the recent Supreme Court ruling for PBMs, how increased prescription costs may be passed along to employers and insured patents, how other states may act as a result of this ruling, and the potential ramifications of this ruling on other states’ regulation of healthcare providers, regardless of the federal Employee Retirement Income Security Act (ERISA). Listen in for action steps your company should take in considering the potential effects on your healthcare plan of this complicated ruling.
[:27] Frank Thomas introduces Dr. David Keisner. David specializes in pharmacy benefit management solutions, including contract negotiations with PBMs on behalf of employers.
[1:25] Act 900 was an Arkansas law dating back to 2015. It regulates what happens when a pharmacist fills a prescription medication through a patient’s health insurance plan. When the pharmacist runs a medication through a health insurance plan, the pharmacist is reimbursed for the cost by a Pharmacy Benefit Manager (PBM).
[2:04] Sometimes a PBM may reimburse a pharmacist less than the acquisition cost of the medication. Act 900 provided three things: a floor reimbursement based on the acquisition cost of the prescription, an administrative appeal procedure, and that a pharmacist may refuse to dispense a medication below the acquisition cost.
[2:53] Act 900 allowed independent, rural pharmacists to keep their doors open and provide broad access to healthcare in the state. People opposed to Act 900 pointed to increased costs to employers and employees.
[3:48] PBMs are hired by health insurers or directly by an employer to manage a prescription drug benefit for their employees. The “Big Three” of PBMs are CVS Caremark, Express Scripts, and OptumRx.
[4:10] PBMs perform electronic processing of prescription drug claims and establish a network of pharmacies for patients to use to fulfill their medication prescriptions. They contract with pharmacy chains and independent pharmacies to ensure that patients have the product and that the pharmacies will accept their drug plan.
[5:00] The question that the U.S. Supreme Court considered in reviewing this case was whether Act 900 applied to a self-insured health plan. The case was specifically whether Act 900 is preempted (displaced) by the federal Employee Retirement Income Security Act (ERISA).
[5:36] ERISA is a Federal law that sets minimum standards and establishes protections for private health plans and retirement plans. One notable exception is that fully insured health benefit plans are not preempted by ERISA. Laws like Arkansas Act 900 have traditionally applied to those plans.
[6:43] Justice Thomas wrote that language in ERISA that a state law does not apply if it relates to an employee benefit plan was so broad that it was essentially meaningless.
[7:06] Previously, the court had established that laws such as Act 900 do not apply to a self-insured plan if the law governs essential matters of a plan administration or interferes with national uniform plan administration.
[7:25] This recent court decision was an eight to zero decision (before Justice Coney Barrett was sworn in). The court ruled unanimously that Act 900 is not preempted by ERISA. The law does apply to self-insured plans.
[7:44] The court stated that this is a rate regulation and laws merely affecting cost are not preempted by ERISA. Laws like Act 900 do apply to self-funded plans even if they have the potential to raise costs for health plans and their beneficiaries.
[8:08] Can individual states regulate their health plans any way they want to? This is a subject of much discussion, and more clarification is needed. David does not believe that states can regulate matters that deal with plan design, such as mandating certain benefits or certain cost-sharing percentages.
[8:35] One big question David has is what other laws that typically did not apply to self-funded benefit plans will now apply as a result of this decision? If a state applies rate regulation that is so acute that it will effectively dictate plan choice, preemption may still apply. There is more to “play out.”
[9:23] How will states use this decision to regulate PBMs? What else do they feel they can do as a result of this Supreme Court decision?
[9:48] There is still a lot of discussion on whether this court decision is limited to PBMs. This may open a door to regulation on third-party administrators (TPAs) or other healthcare service providers. This potentially opens the door to inconsistent state regulation of various healthcare service providers.
[10:15] The main question David is getting is whether this decision will raise costs for patients and employers. David cites JB Hunt’s Friend of the Court Brief in favor of the PBMs, arguing that if Act 900 was in place it would significantly increase their plan costs.
[10:49] The opinion, written by Justice Sotomayer said “PBMs may well pass those increased costs on to plans, meaning that ERISA plans may pay more for prescription-drug benefits in Arkansas than in, say, Arizona. But ‘cost uniformity was almost certainly not an object of pre-emption.’”
[11:27] This could subject multi-state employers to different rates, from state to state.
[11:45] This court decision was focused on the contractual relationship between PBMs and pharmacists. How will it affect the contracts between PBMs and employers? David gives an example about contract language relating to renegotiating the contract if there are significant changes to federal regulation. PBMs may see this change as significant.
[12:45] Other contract language allows PBMs to limit services or apply additional fees to employers in states where they believe there are stricter laws.
[13:00] Stephens is currently reviewing all of their client contracts to see what the potential impact is and what the next steps are for those employers.
[13:33] Employers may be in a long-term deal with a PBM. All of a sudden, as a result of this decision, your PBM may attempt to renegotiate the financial terms of your agreement. It’s so important to have a benefit advisor on your side who is ready to engage in those renegotiations, should they take place.
[14:34] David shares his background. He started in nuclear pharmacy, working with radioactive materials. He has always been interested in unique aspects of health care. There is nothing more unique than the regulatory and insurance industries!
[14:58] One of the main things David does at Stephens is to negotiate and help employers with their contractual relationships with PBMs. Healthcare is very complex, so it’s very important for healthcare providers to be involved in the insurance and regulatory sides for the good of the industry.
[15:47] David’s advice to employers regarding this court decision is to thoroughly review your PBM contracts, talk to your benefits consultant and make sure they have a strategy, and that you have a long-term strategy for your company. The healthcare landscape is changing. Be in a position where you can be flexible and creative.
[16:18] Frank thanks David for his insights and direction in relation to this very complex issue involving the Supreme Court’s decision on Arkansas Act 900.
[16:29] For more information on this topic, please contact Stephens Insurance at 1-800-643-9691.