Top 3 Things You’ll Learn
- Federal rulings and announcements on drug pricing
- Factors affecting overall pharmacy costs
- Impact of the major 2019 changes
As anticipated, the pharmacy landscape underwent a number of significant shifts during 2019. The impact of these events sets the stage for how the market will adjust and what changes we can expect in 2020. We’ve ranked the most noteworthy pharmacy benefit news of 2019 with a countdown of the top five moments, their impacts on the industry, and what that means for you moving forward.
#5: PBM and Medical Carrier Mergers
A year ago, we faced uncertainty in the market as we anticipated the impact of the CVS-Aetna and Cigna-Express Scripts mergers. While news of mergers is not uncommon in the industry, the potential effects were a subject of concern. People questioned how the consolidation would impact customer service, pharmacy arrangements, and whether it would influence more healthcare entity mergers.
Fast forward to today, you can see how the consolidation added further complexity to an already complex market. These changes include:
- Disruption – focus on organizational changes that make the most sense to drive shareholder value, with limited resources spent on managing disruption
- Less competition – increased change fees and less room to negotiate contracts for carving out pharmacy
- New business models – emergence of new healthcare delivery models
Looking ahead, we expect ongoing challenges for employers, the continuation of carved-out arrangements as the most practical option for plan flexibility, and more obstacles for those trying to leave the PBM/carrier.
#4: Federal Ruling on Copay Accumulators
In April 2019, the U.S Department of Health and Human Services (HHS) issued their guidance for how manufacturer copay assistance can be applied to member out-of-pocket requirements in private health insurance plans. The proposal represented an attempt at making prescription drugs more affordable by encouraging use of lower-cost generic drugs.
However, there was confusion in the market about language that conflicted with prior IRS guidance for high deductible health plans. Thus, the ruling was put on hold in August 2019 when HHS announced that penalties for non-compliant plans will not be assessed in 2020. We expect to gain more clarity in the year ahead as HHS evaluates how these programs are applied.
The Rx industry underwent significant shifts in 2019. These are the 5 most noteworthy moments impacting employee benefits.
#3: Mounting Pressure to Allow Imported Drugs
Increased awareness of high drug costs in the United States compared to other countries has triggered public dispute. Consumers are struggling to rationalize the excessive costs, questioning government action, and demanding access to cheaper drugs available elsewhere (specifically Canada).
In response, the Trump Administration and the Food and Drug Administration (FDA) have developed plans that encourage pharmacy benefit affordability, but their views differ and have caused confusion in the market.
- The FDA – Is raising safety concerns amid reports of contamination, fraud, and shortages and is conducting research on the feasibility of importing drugs from Canada.
- President Trump – Believes that importation should be allowed. On Nov. 22, he announced that a plan would be forthcoming about allowing Florida to access internationally sourced drugs.
Key challenges in this debate center on the unknown impact that importations could have on the Canadian drug supply, including how would it disrupt Canada’s distribution system, can we balance supply and demand, and would it ultimately bring sustainable value to consumers. Looking ahead, we expect that addressing these concerns will be a major discussion in the 2020 presidential campaign.
#2: Drug Rebates (Not) Going Away
Another federal proposal that gained momentum in 2019 was a plan to eliminate rebate Safe Harbor protections in an effort to make prescriptions drugs more affordable for government-sponsored benefit plans. The administration believed that removing rebate protections would force manufacturers to lower their prices in order to compete in the market. However, the reality became clear that the government would have to pay more for their programs because drug manufacturers would have to drop their prices dollar-for-dollar in order for the plan to be financially feasible – something that was not required under the ruling.
Moving forward, drug rebates will continue to generate significant savings for employers when aligned with their formulary. Typically, rebate dollars go back to the plan to decide what to do:
- Apply at the point of sale to lower costs for members at the pharmacy
- Apply to the benefit to lower cost-sharing for all plan members
#1: Federal Drug Pricing Controls
Topping the list is the overall challenge of finding a practical solution to make prescription drugs more affordable. This was evident in the pricing-focused proposals and rulings that came and went in 2019. We saw how changes in the mix of drugs being used affected overall pharmacy costs, driven by the increased use of specialty medications and their associated cost.
Numerous proposals and ideas that Washington considered imposing on drug pricing practices are still up for debate as we end the year. The key questions on the table include:
- Will the government allow the Centers for Medicare & Medicaid Services (CMS) to negotiate drug prices for government funded programs?
- Will the government be allowed to produce drugs to alleviate shortages?
- Will drug manufacturers be forced to limit price increases to match the inflation rate?
- Will drug manufacturers be forced to share their research to enable more generic drug production?
Any programs implemented would directly impact government programs, and we expect that those could be leveraged to the general population and commercial market.
Are You Set for 2020?
The challenge of prescription drug affordability remains a major concern. You need a partner who will advocate for you and your members to help keep the pharmacy benefit affordable.