PBMs Remain a Target as State Lawmakers Plan 2020 Agenda

July 8, 2019

PBMs Remain a Target as State Lawmakers Plan 2020 Agenda

Reprinted with AIS Health permission from the July 8, 2019, issue of Health Plan Weekly

Going into 2020, state lawmakers likely will continue to target prescription drug prices with proposals largely aimed at PBMs, but they may also tackle bills on a wide range of topics, including reinsurance, the opioid epidemic and maternal mortality.

More than 260 bills to rein in the cost of prescription drugs — many of which specifically banned common PBM business practices — cropped up in the U.S. this past spring, and Gerard (Jerry) Vitti, founder and CEO of Healthcare Financial, Inc., says he anticipates more of the same going forward. States most likely will follow the federal government’s lead and focus on drug pricing transparency, he says.

“The debate will be around drug pricing — around half of the [2019] bills are PBM-related,” Vitti tells AIS Health. For example, lawmakers in New York approved wide-ranging legislation designed to require pricing transparency from PBMs and to eliminate key PBM practices, including spread pricing, mid-year formulary shuffling and drug substitutions.

New York is ahead of most states on this issue, but four or five others are close behind and will likely look at Medicaid price transparency in their next legislative sessions, adds Alex Shekhdar, founder of Sycamore Creek Healthcare Advisors.

Shekhdar tells AIS Health that additional states, including Ohio, California, Kentucky and Maryland, are considering plans to carve out pharmacy benefits in their Medicaid programs. In fact, Ohio’s new Medicaid managed care RFP includes a drug carve-out, he says. California Gov. Gavin Newsom (D) had wanted to include a statewide drug purchasing program in the state’s just-approved budget, but instead will need to go back to lawmakers next year for authorization to create such a program.

While pharmacy and drug pricing measures are likely to heat up again in states through the fall and into 2020 — especially since 2020 is a state-level election year in most states — other issues of interest to insurers also are likely to get some attention.

For example, lawmakers in additional states are likely to approve proposals asking CMS to grant them Affordable Care Act (ACA) Section 1332 waivers to implement reinsurance programs designed to lower premiums in their individual marketplaces, Shekhdar says.

To date, seven states have received Section 1332 waivers from CMS to allow federal pass-through funding to partially finance and implement reinsurance programs. They are Alaska, Maine, Maryland, Minnesota, New Jersey, Oregon and Wisconsin, according to the Kaiser Family Foundation. Another two waivers — from Colorado and North Dakota — are pending.

Around two-thirds of states have considered legislation in the past two years that would authorize a Section 1332 waiver application, with most proposals likely to involve reinsurance, according to the National Conference of State Legislatures (NCSL).

State lawmakers also are likely to continue tackling the opioid crisis, using federal funding to finance various prevention and treatment programs, Shekhdar says. The 21st Century Cures Act, approved by Congress in late 2016, authorized $1 billion in state-level grants to be overseen by the Substance Abuse and Mental Health Services Administration (SAMHSA).

Those Cures Act grants end this year, but Congress in 2018 augmented the money with an additional $1 billion for state grants over two years, and state lawmakers again will consider what programs to support. “States have access to large pots of money and a great deal of discretion on what to do with it,” Shekhdar says. Possibilities include inpatient treatment programs, outpatient mental health treatment centers and programs that attempt to rein in polypharmacy, he says.

The opioid crisis has had unexpected effects on state budgets, Shekhdar says. For example, in West Virginia, the opioid crisis has resulted in 100,000 additional foster children in the system as their parents succumbed to opioid addiction. In addition, the crisis has disproportionally affected Medicaid budgets, especially in the hardest-hit states, he says.

On June 28, CMS approved Minnesota and Nebraska’s requests to implement Medicaid demonstration projects that increase access to treatment for opioid use disorder and other substance use disorders. Both states will get Medicaid matching funds for treating such disorders in facilities that meet the definition of an institution for mental diseases.



Going forward, “we continue to see more red states attempt to expand Medicaid under flexible arrangements,” Vitti notes. These arrangements might include work requirements, even though courts struck down Medicaid work requirements in Arkansas and Kentucky.

According to the Kaiser Family Foundation, nine states have approved waivers from CMS to implement work requirements: Arizona (not implemented), Arkansas (set aside by court), Indiana (implemented), Kentucky (set aside by court), Michigan (not implemented), New Hampshire (implemented), Ohio (not implemented), Utah (not implemented) and Wisconsin (not implemented). Another several states have waiver requests pending, including: Alabama, Mississippi, Oklahoma, South Carolina, South Dakota, Tennessee and Virginia.

Vitti contends that work requirements hurt Medicaid beneficiaries who are particularly vulnerable because they have mental health issues or substance abuse issues. A study of Arkansas’ work requirement published last month in the New England Journal of Medicine backs this up, finding that the uninsured rate rose sharply between 2016 and 2018 for adults who were subject to the state’s work requirement.

Vitti notes that some conservative-leaning states also may consider Medicaid beneficiary cost-sharing, adding, “there really is an appetite in state legislatures for these types of conservative policies.”

Over the next year, state legislatures might also undertake efforts to improve maternal health and maternal mortality, according to Shekhdar. Some 15 states enacted legislation in 2019 on that issue, mainly to provide funding for data collection, although the District of Columbia also authorized a $200,000 grant to provide preventive health services and perinatal education to expectant mothers living in low- income areas who receive Medicaid.



Additional states may consider joining California, Massachusetts, New Jersey and the District of Columbia in mandating that everyone carry health insurance, Shekhdar says. California approved legislation last month to impose an individual mandate beginning next year (HPW 6/17/19, p. 1). However, states also may reach the conclusion that an individual mandate isn’t necessary to force younger, healthier people to join the market, he says.

Contact Vitti and Shekhdar via Joe Reblando at joe@joereblando.com.


by Jane Anderson