A recent article from the Sun Journal explained that Maine could soon shed a 2003 law designed to protect consumers from high drug costs and fraud perpetrated by pharmacy benefit managers (PBMs), the corporate middlemen between insurance providers and employers and pharmaceutical companies and wholesalers. Pharmacy benefit managers provide health insurance to process and pay prescription drug claims.
The controversial law, known as the Unfair Prescription Drug Practices Act, prevents PBMs from switching patients to more expensive drugs, while also protecting consumers from co-payments when the actual drug price is cheaper. If a pharmacy benefits manager makes a substitution in which the substitute drug costs more than the prescribed drug, the pharmacy benefits manager must disclose to the covered entity the cost of both drugs and any benefit or payment directly or indirectly accruing to the pharmacy benefits manager as a result of the substitution.
The pharmacy benefits manager must transfer in full to the covered entity any benefit or payment received in any form by the pharmacy benefits manager either as a result of a prescription drug substitution or as a result of the pharmacy benefits manager’s substituting a lower-priced generic and therapeutically equivalent drug for a higher-priced prescribed drug. Under the 2003 law, PBMs are also required to pay independent pharmacies promptly and negotiate prices in good faith.
The law was adopted at the urging of former Maine Attorney General Steven Rowe. He believed providers in the largely unregulated industry should register with the state and disclose their dealings with pharmaceutical companies, including kickbacks to PBMs for promoting certain drugs, before doing business here.
The law was precipitated by a lawsuit against Medco Health Solutions, a PBM sued by Maine and 19 other states for violating consumer protection and mail fraud laws for “drug-switching,” the practice of changing patients’ drug prescriptions to similar drugs of therapeutic value but that pay the benefit managers higher rebates.
Medco, a New Jersey-based company, denied any wrongdoing but paid $29.3 million in a 2004 settlement. It also agreed to disclose the rebates it received from pharmaceutical companies. The pharmacy benefit managers industry has paid $371 million in damages over the past several years to several states for false claims, kickbacks and overcharging patients for generic drugs.
The PBM industry, which manages the pharmacy benefits of more than 95 percent of Americans with health insurance, has fought the Maine law for years and succeeded in temporarily delaying its implementation in 2004.
The 2003 Maine law was passed at a time when state legislatures around the country began focusing on PBMs as one way to peel back the curtain on prescription drug costs. By September 2009, 14 states plus the District of Columbia had enacted some type of direct state PBM regulation, according to the National Conference of State Legislatures, although Maine was the only state that imposed fiduciary-disclosure requirements on PBMs.
Repealing the Maine PBM Law
Last week however, the Maine legislature passed a bill to repeal the 2003 law. The Sun Journal noted that the “vote was prompted by industry lobbying over charges that transparency requirements had discouraged PBMs from doing business in the state, which was resulting in less competition and higher drug costs.”
In two votes that broke mostly along party lines, the Republican-controlled Legislature gave preliminary approval to repeal the law, arguing that it was unnecessary and increased patient drug costs. Rep. Meredith Strang Burgess, R-Cumberland, sponsored the bill that repeals the law. She said the Maine Attorney General’s Office could handle oversight of the industry.
Several Democrats joined the Republican majority supporting LD 1116 in the House. The Senate vote, 21-14, broke along party lines with Sen. Richard Woodbury, U-Yarmouth, voting with the Democratic minority.
During Wednesday’s debate in the House of Representatives, Strang Burgess said that while the protections and transparency in Maine law sounded like a good idea, the “additional regulation had discouraged pharmacy benefit managers from doing business here.” She said the result was less competition and higher drug prices.
Opponents said repealing the law would remove a host of protections for consumers and independent pharmacies. They also argue that the existing law prevents benefit managers from switching patients to more expensive drugs and protects them from co-payments when the actual drug price is cheaper. The law also requires benefit managers to promptly pay independent pharmacies and to negotiate drug prices in good faith. They also note that 25 other states regulate PBMs.
Sharon Treat, a Maine legislator who heads the National Legislative Association on Prescription Drug Prices, claimed that the new bill “would replace the law with a minimalist registration provision with no teeth … under the guise of restoring ‘market-based competition.’ However, Treat asserted that the repeal really does the reverse: true competition in the marketplace is only possible when there is pricing transparency.”
Several independent pharmacies testified against the repeal bill in the public hearing. Repeal proponents included the PBM industry and the Maine Merchants Association, which said the current law hamstrung employers attempting to negotiate contracts with PBMs.
Sen. Margaret Craven, D-Lewiston, attempted to introduce an amendment that would prohibit public or quasi-municipal agencies from contracting with a PBM if the company had committed fraud or had been penalized $500,000 by a state or federal agency within the previous three years of the contract.
Craven said she couldn’t imagine why other senators would want the state or another public agency to contract with a PBM that had been fined for misconduct. Craven’s amendment was tabled by Republican leaders.
The current repeal bill was backed by Medco, the company involved in the 2004 lawsuit, CVS Caremark and the Pharmaceutical Care Management Association. The PCMA represents the largest PBMs, including Medco, CVS, AdvancePCS and Express Scripts. Medco has also spent more than $8,500 through April lobbying several bills, including LD 1116. The bill was also lobbied by Express Scripts, which spent $2,000 over that same period.
Mark Merritt, CEO of PCMA asserted that, “repealing the PBM law would lower prescription drug costs for Maine’s consumers and payers.”