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

Why You Need to Provide a Mail-Order Prescription Program For Your Employees

Healthcare spending in the United States is notoriously high. As of 2016, the U.S. spends 17.6 percent of its GDP on healthcare—more than any other developed nation. 

One of the biggest contributors to these costs is prescription medication.  The average American spends an estimated $1,200 per year out-of-pocket on their prescriptions. And for individuals with severe health concerns, that number can reach much higher.

The rising price of essential medication doesn’t just affect direct consumers—it also affects their employers. According to research from the Kaiser Family Foundation, employer spending on healthcare costs topped $15,000 per family in 2018, an all-time high. Compared to a decade ago, an additional 10% of that amount is spent on prescription drugs. 

Employees are hitting their out-of-pocket maximums on drug spending at much faster rates than only a few years ago, leaving employers with higher bills. A reduction in capital expenditures on prescription drugs can clearly lead to a significant reduction in total healthcare costs for both employees and employers. But how can businesses reach this goal?

A mail-order prescription program can play a vital role in improving this part of healthcare for all parties involved. Mail-order prescription programs can increase convenience and reduce overall costs for employees, passing those savings along to you. 

It’s easy to see the benefit of reduced drug costs to you as a business owner providing healthcare plans to employees. Let’s take a look at a few more specific ways mail-order prescription services can help you and your employees save time and money.

Perks of Mail-Order Prescription Programs

Wondering how to improve employee satisfaction? Using mail-order prescriptions can help. A mail-order system is faster, more convenient, and more cost-effective. A more convenient system affects employees’ quality of life, producing happier and more efficient workers. Happier workers make a positive difference to your bottom line. 

When offered a mail-order prescription benefit, employees may worry about the safety and practicality of receiving their drugs through the mail. However, mail-order prescription programs have shown to be a safe and simple alternative to refilling drugs at a traditional pharmacy.

Safety and Ease

Having your prescriptions delivered right to your doorstep is clearly convenient. The mail-order process has been created with everyone in mind, from capable seniors to busy professionals to disabled patients or those with mobility and transportation challenges.

What about the quality of the drugs involved? Is it safe to trust pharmaceuticals that come in the mail and aren’t picked up from a qualified pharmacy?

Mail-order prescriptions have to pass a rigorous quality dispensing program before they are shipped to patients. Drugs are checked to ensure proper dosages, quantities, and packaging methods, down to the specific varieties of drugs prescribed by a patient’s physician. Traditional pharmacies may offer substitutions without notifying the patient, creating uncertainty that is liable to leave your employees stressed.

Portability Between Plans and Pharmacies

No matter what insurance plan you offer or what pharmacies your employees regularly go to, there’s a good chance they can switch to having prescriptions delivered by mail without much hassle. Because of the rising popularity of getting prescriptions delivered by mail, more and more healthcare providers and pharmacies are rearranging their practices and policies to allow for mail-order programs.

Remote Benefits

With a mail-order prescription plan, employees don’t have to drive to the pharmacy every time they need a refill. They also don’t have to wait in line, and they have less paperwork to deal with. Time savings for employees can directly translate into greater productivity and higher engagement in your business.

Some other benefits that can help relieve your employees’ mental load and help them focus on work include automated reminders that let them know when it’s time to refill a prescription, or if their prescriptions are past due.

Customer Support

Have you ever struggled to get the help you need from your local pharmacy? Sometimes you have questions that need answering right away, and pharmacy workers aren’t equipped to answer all of them.

Mail-order prescription drug programs often come with helpful customer support options. They’re available year-round, 24 hours a day, seven days a week to provide helpful assistance. Participants can call a hotline or even speak with an online chat representative.

Reduced Cost

Because mail-order prescription programs usually deliver drugs in large quantities, costs are reduced. Insurance co-pays tend to be smaller for a single multi-month order of prescriptions than they would be for multiple smaller orders of the same kind. Wholesale pricing reduces the out-of-pocket healthcare costs of your employees, which directly passes on to you. 

Who Is an Ideal Candidate for Receiving a Mail-Order Prescription Benefit?

Enrollment in mail-order prescription programs generally requires access to patients’ specific healthcare and prescription drug data. Therefore, it’s an ideal benefit for employees participating in a self-funded medical plan, as these employees will typically have more of their personal healthcare information available. 

For employees with chronic conditions requiring regular medication, a mail-order prescription program is a perfect fit. Those who regularly spend at least $200 a month on long-term (over 180-days-old) recurring prescriptions will see the most benefit.

How Mail-Order Prescriptions Work 

Most prescription medications can be delivered through the mail. The only current restrictions involve controlled substances and medications that require refrigeration. If your insurance plan allows delivery, there’s a good chance that most medications your employees use are eligible.

With a typical mail-order prescription drug program, it’s common for packages to include 90 days’ worth of prescriptions in a single order. Most providers will deliver your medicine within seven to ten business days from the time an order is placed.

Managing the cost of prescriptions is one of the biggest challenges involved in offering comprehensive healthcare to your employees. Mail-order prescription programs can play a major role in helping to simplify the issue and reducing overall capital costs. 

To learn more about Mail-Order Prescription Programs or to get one started for your business, contact an RMC health specialist today.