Q&A of the Day – The Impact of Florida’s Prescription Drug Reforms
Each day I feature a listener question sent by one of these methods.
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Today’s Entry: Hi Brian, we could use your help in understanding what’s changing with the new prescription drug policy. More transparency and fewer middlemen sounds positive but I don’t really understand what’s changing here. Also, will it really lead to lower prices? Thanks.
Bottom Line: So yes, while in Jupiter on Wednesday Governor DeSantis signed two pharmaceutical related bills. The Prescription Drugs bill and Public Records/Pharmacy Benefit Managers bill. Set to take effect in July, the two new laws aim to crack down on third party negotiated prices/practices which lead to less transparency and markups for prescribed drugs within the state. The new laws also mandate that 100% of all manufacture discounting of drugs is to be passed onto consumers. But you’ve raised a question many have been wondering. What does it mean to me? It’s a good question in part because there aren’t hard and fast answers that apply to everyone. The changes are aimed at the processes by which you obtain prescription drugs in Florida, which in turn are expected to have a positive impact on Floridians. Let’s start with what’s in each law.
The legal summary of the Prescription Drugs bill reads like this:
- Requiring certain drug manufacturers to notify the Department of Business and Professional Regulation of reportable drug price increases on a specified form on the effective date of such increase; requiring the Division of Consumer Services of the Department of Financial Services to designate an employee as the primary contact for consumer complaints involving pharmacy benefit managers; providing a grandfathering provision for certain pharmacy benefit managers operating as administrators; requiring pharmacy benefits plans and programs, beginning on a specified date, to annually submit a certain attestation to the Office of Insurance Regulation
Most specifically here’s what now changes as a result of this law.
- Any annual price increase of 15% or more within a 12-month period must be reported to the state or any increase of 30% or more within three years.
- Floridians will have a direct point of contact at the state if they want to file a complaint against a benefit manager
- 100% of wholesale price reductions of prescribed drugs are to be passed directly on to consumers
The state will share this reported information publicly to aid in transparency. So, for example, if a prescription drug you’re taking suddenly jumps in price, you’ll be able to see what the wholesale price increase was and compare it to what you’re paying. If the two don’t match you’ll know the difference in price was an additional markup by a third party (benefit manager/retailer) which may lead to savings by shopping around. Speaking of third parties, there are significant changes for benefit managers. With the Public Records/Pharmacy Benefit Managers Bill. Here’s it’s summary:
- Providing an exemption from public records requirements for examination and investigation reports and work papers relating to pharmacy benefit managers; expanding a public records exemption for the books and records of administrators held by the Office of Insurance Regulation for purposes of examination, audit, and inspection to incorporate the inclusion of pharmacy benefit managers as administrators under the Florida Insurance Code; providing for future legislative review and repeal of the exemption; providing statements of public necessity, etc.
That sounds complicated. Here’s what changes with benefit managers
- Bans clawbacks, or benefit managers assigning higher prices for prescribed drugs than the wholesale acquisition cost
- Ends mail order mandates by benefit managers (opening up more options for Floridians)
- Bans benefit manager price spreading, or the practice of charging Medicare and Medicaid a higher price for prescribed drugs than what the wholesale acquisition costs is
- Bans benefit manager steering, or mandates, that drugs be purchased through pharmacies owned or controlled by benefit managers
- Bans affiliate only networks
- Mandates consumer consent for data sharing
So, to the question as to whether these changes will save you money? Last year a Forbes analysis determined the average increase in cost per policy holder as a result of benefit managers to be $70. Florida’s new laws significantly reign in the ability for benefit managers to profit from their 3rd party, or what are often referred to as “middlemen”, services. The net effect should result in the savings of at least some of that $70 per person, per year. There’s also the savings associated with any drug price decreases at the wholesale level being passed onto you. That’s a very specific situation based on what prescribed drugs one takes. I suspect the biggest impact in the longer term will come in the form of transparency. Greater transparency will make it harder for unnecessary prescription drug price hikes, in addition to mandated consumer choice. There often are significant price differences for prescribed drugs from one pharmacy to another. Come July 1st, the status quo benefit management business ends in Florida and with it, more control is shifted to consumers.