By: HUB’s EB Compliance Team
We’ve seen a number of proposals on the federal level aimed at reducing the costs of prescription drugs over the past year. While federal lawmakers consider these proposals, states have begun stepping into this arena as of late. As an example of this, the Governor of Oklahoma recently signed HB 2632 (a/k/a the “Patient's Right to Pharmacy Choice Act” herein the “Act”) into law.
The purpose of the Act is to establish minimum and uniform access to providers and standards and prohibitions on restrictions of patient's rights to choose pharmacy providers. The Act sets out to accomplish this by placing a number of requirements on pharmacy benefits managers and insurers that contract with, or operate, pharmacy benefit managers (“PBMs”) related to their networks and operations within Oklahoma.
Among other requirements, the Act requires PBMs to maintain pharmacy networks that comply with the prescribed accessibility standards. PBMs are required to maintain network pharmacy locations within a certain distance of a significant percentage of covered individuals depending on whether the individual lives in an urban, suburban, or rural area. Mail order pharmacies do not count for purposes of meeting these requirements. The idea is to make sure there are enough brick-and-mortar pharmacies to service individuals who live in each area.
For example, at least 90% of covered individuals residing in an urban service area live within 2 miles of a retail pharmacy participating in the PBM's network. As the classifications move from more densely populated areas to less dense, both the percent of covered individuals and distance requirements are adjusted accordingly. To illustrate this, for rural areas, only 70% of covered individuals must live within 15 miles of a retail pharmacy participating in the PBM's network.
Finally, although mail order pharmacies can be included in pharmacy benefit manager networks, PBMs cannot require, or provide incentives for, individuals to use mail order. This provision is key as the use of mail order pharmacies has grown in recent years as PBMs have encouraged their use as a way to manage prescription drug costs. This will no longer be available in Oklahoma.
In addition to the network requirements above, the Act also prohibits certain PBM practices including:
- Charging pharmacists or pharmacies fees to process claims.
- Reimbursing pharmacists or pharmacies amounts less than the amounts reimbursed to pharmacies owned by or under common ownership with a PBM for providing the same covered services. In other words, PBMs have to pay every pharmacy the same, whether the pharmacy is part of their corporate family or not.
- Denying a pharmacy the opportunity to participate in a pharmacy network at preferred participation status if the pharmacy is willing to accept the terms and conditions that the PBM has established for other pharmacies as a condition of preferred network participation status.
- Retroactively denying or reducing reimbursement for covered claims after authorizing the payment of the claim, unless the claim was submitted fraudulently, or to correct errors identified in an audit.
These provisions are designed to encourage PBMs to both expand their existing networks by not limiting network participation while also preventing them from punishing those pharmacies who do not participate in a PBM’s network.
The Act also requires monitoring of PBMs by health insurers. Essentially an insurer who contracts with a PBM is just as responsible for the PBM’s compliance with the Act as the PBM is responsible for its own compliance. In some cases, the health insurer may own the PBM, in which case the insurer is simply monitoring themselves, or another division of the company. Where the insurer does not own the PBM, they’re required to monitor an outside organization, which may be difficult.
In most cases, ERISA preempts any attempts by states to regulate self-insured health plans. However, Oklahoma may be trying avoid ERISA preemption by instead regulating PBM practices through the Act. By regulating PBMs instead of health plans, the Act will impact self-insured health plans, but does not attempt to regulate such plans directly. This approach may ultimately help the Act avoid challenges by self-insured health plans on ERISA preemption grounds.
Impact to Plans
At this point it’s difficult to ascertain the impact the Act will have on group health plans. Much of the impact will depend on the insurers and PBMs plans work with, as well as the current practices of those PBMs. If PBMs currently engage in practices now prohibited by the Act, it’s easy to see that ending those practices will likely result in increased costs, which the PBM is likely to pass along to insurers and health plans. If on the other hand, the practices referenced in the Act are not common, the impact may well be minimal.
Finally, should the Act lead to lower prescription drug costs, other states are likely to follow Oklohoma’s lead with similar legislation.
The Act goes into effect on November 1, 2019.
NOTICE OF DISCLAIMER
The information herein is intended to be educational only and is based on information that is generally available. HUB International makes no representation or warranty as to its accuracy and is not obligated to update the information should it change in the future. The information is not intended to be legal or tax advice. Consult your attorney and/or professional advisor as to your organization’s specific circumstances and legal, tax or other requirements.