Health and Benefits

A Supreme Court Case That May Impact Prescription Drug

On Tuesday morning, October 6, 2020, the United States Supreme Court heard oral arguments in the case Rutledge v. Pharmaceutical Care Management Association.

What is This Case About?

The case involves a challenge to an Arkansas law known as Act 900.  The law was enacted by the State of Arkansas in 2015 to regulate the amounts that a Pharmacy Benefit Manager (PBM) must pay to a pharmacy when an individual covered under a health plan purchases prescription drugs.  The law was challenged by a trade association of PBMs as a violation of the Employee Retirement Income Security Act of 1974 (ERISA).  While the ERISA issues may be of great academic interest to ERISA lawyers, the case may have a more practical effect on individual consumers.

What is a Pharmacy Benefit Manager?

A PBM is a third-party intermediary between employers that sponsor group health plans that include a prescription drug benefit and retail pharmacies that sell prescription drugs to plan participants.  They are usually engaged by an insurance company to administer a plan’s drug benefits, and their goal is to reduce the cost of prescription drugs to the insurance company.  When a plan participant goes to a pharmacy, it is the PBM that determines how much the pharmacy will be paid for the medication.  That amount is known as the Maximum Allowable Cost (MAC).

In addition, it is often the PBM that reimburses the pharmacy for the difference between the MAC and the co-pay paid by the plan participant.  The PBM is then reimbursed by the insurance company for the amounts that it paid the pharmacy.  A PBM may also be paid an administrative fee or a portion of the difference between the MAC and the amount that the insurance company is willing to pay for the medication.

What Was Act 900 Intended to Accomplish?

A pharmacy does not purchase prescription drugs from a PBM.  It purchases medication from a wholesaler.  The problem that the legislation was intended to address is that, sometimes, the MAC is less than the amount that the pharmacy has to pay its wholesaler for a particular prescription drug.

As a result, Arkansas, like many other states, enacted legislation regulating the MAC that a PBM must pay to a pharmacy; requiring that a PBM set its MAC in an amount that is at least equal to the pharmacy’s purchase price.  The proponents of the legislation argue that many small, independent pharmacies have been forced out of business because their acquisition costs for prescription drugs often exceeded the MAC paid by the PBM.

How Did the Lawsuit Get Started?

The lawsuit was filed by the Pharmaceutical Care Management Association (PCMA), a trade association of PBMs.  The PCMA alleged that the Arkansas statute violates ERISA.  ERISA is a federal law that regulates employee benefit plans and seeks to protect employees.  ERISA contains a preemption provision that precludes states from enacting laws that also seek to regulate employee benefit plans.  Of course, the PCMA was not motivated solely by loyalty to federal law.  It claimed that the law eliminates an incentive used by PBMs to reduce the cost of prescription drugs.

It also likely reduces the profits earned by PBMs and increases the regulatory burden.  The state, of course, argued the opposite.  It claimed the law would protect consumers by preserving smaller, independent pharmacies and providing greater access to less profitable drugs.  The PCMA won in the district court as well as in the U.S. Circuit Court of Appeals for the Eighth Circuit.

How Will the Supreme Court Rule?

It is, of course, impossible to predict what will happen in the Supreme Court.  As of October 6, 2020, when the case was argued, the Court had only eight members.  This means that, if the Justices split, 4–4, the decision of the Appeals Court will be upheld, and Act 900 will be overturned.

In addition, similar laws of many other states would suffer the same consequence.  While each side may have presented its case as important for consumers, the issue is much more esoteric.  The issue is ERISA preemption, which has a long and confusing history.  Justices may react differently to that issue than they would if the case were simply presented as pro- or anti-consumer.

For further information or for assistance with your health and prescription drug benefit plans, contact RMC Group.

Health and Benefits

Attracting and Retaining Talent Through an Employee Benefits Package

Top candidates look for more than a competitive salary when deciding whether to accept a job offer.  Benefits packages are a significant part of the decision-making process for 63% of job candidates, according to a study by Glassdoor.

By offering a generous benefits package, human resource executives and managers can use benefits to attract and retain employees.

To create a comprehensive package that sets the company apart from the competition, it may be necessary to change your benefits, customize options, or create a targeted outreach strategy for communicating offers.

Inventory Your Benefit Offerings

To enhance a recruitment strategy by focusing on benefits, you first must determine if your package is sufficient to attract and retain the employees you seek. By taking an inventory of our current offerings, you may discover that adding desired benefits is more affordable than you might have anticipated.

Glassdoor has reported that health, dental, and vision insurance are among the most important benefits to potential employees.  A robust and attractive benefits package may also include:

  • Life insurance, including permanent insurance and term insurance
  • Accidental death & dismemberment (AD&D) insurance
  • Short-term disability insurance
  • Long-term disability insurance
  • Hospital indemnity insurance
  • Critical illness insurance
  • Cancer insurance

By having multiple benefits options, you can customize a benefits package for a particular employee. This way, an employee receives the benefits he or she wants, not simply what a broker wants to provide.

Consider Additional Benefits

A strong insurance program is only one component of a comprehensive offering. FlexJobs notes that eight out of 10 parents said flexibility and work-life balance were the most important factors when looking at new opportunities.

To that end, craft your human resource strategy with team-focused wellness programs and behavioral health programs, including:

  • Flexible hours
  • Paid maternity and paternity leave
  • Unlimited time off
  • Free or discounted daycare services
  • Free or discounted yoga classes
  • Free or discounted in-office snacks and drinks
  • Free or discounted gym memberships or an on-site/near-site gym
  • Work-from-home options
  • Student loan assistance

To round out a comprehensive package, retirement benefits such as a 401(k) or profit-sharing plan should also be considered.

Share Benefits Before the Job Offer

A mistake that employers often make is failing to fully outline benefits packages, even when they are attractive and well thought out. Information should be provided well before a job offer is made so candidates can make an informed decision.

Update Glassdoor

Your company’s Glassdoor profile should contain all benefit information so that a potential employee can see what you are offering. In the past, only employees could provide this information, which resulted in misinformation or out-of-date details. Now, Glassdoor allows employers to directly update their employee benefits package information online. Take advantage of this feature to communicate your current offerings to candidates.

Build a Benefits Portal

If your company has a career portal on its website, be sure to include a link to a benefits section. This way, candidates will be able to see all benefits on demand, enabling them to come prepared with questions during the interview process.

Provide a Printout

When scheduling interviews, start the conversation about benefits. Have a printout prepared that outlines an average total compensation statement with a section on the benefits you provide. It’s often difficult for candidates to understand how expensive benefits can be for a company without seeing the actual cost on paper.

Include a Dialogue Within the Interview

Make sure to discuss benefits as part of the interview process. This topic is often overlooked when discussing job responsibilities and company culture. By including benefits as part of the interview, managers can answer questions and share company values with candidates.

Enhance the Employee Handbook

To retain and engage existing employees, enhance the employee handbook with in-depth information about the benefits package. This handbook should be shared at annual performance reviews as well as any general meetings discussing company-wide news.

Make sure the employee handbook contains the same detailed cost analysis you provide candidates. Employees often forget the actual cost and value of their benefits packages. The expense of insurance and other benefits should be a part of any conversation about compensation.

Survey Employees to Evolve

To provide the benefits that are the most meaningful to current and future employees, it may be helpful to survey existing team members to better understand what offerings motivate them. Managers may be surprised to learn that flexible schedules — such as four 10-hour shifts weekly rather than the traditional five-day workweek — may be as important to employees as raises.

When integrating less expensive or free benefits, you can shift resources to more insurance coverage and other programs employees care about.

Finally, in order to improve your recruitment and retention strategy, remember to keep the perspective of employees and candidates as a priority. If it is difficult to upload a resume through your website or communicate with the human resources team, having a comprehensive compensation package including robust benefits offerings may make less of a difference.

Once you know what matters most to the people you want to hire, be sure to communicate your strategy with any recruiters you use.  These efforts to improve benefits will reflect well on your company, improving employee morale and facilitating interest from more qualified candidates in the future.