Unlike health insurance plans – in which the health of enrollees influences costs – prescription drug prices are affected by the volume of drugs purchased — not individuals’ health status. Today, every state purchases prescription drugs for its employees through its state employee health benefit plan. That health plan – or any other public plan a state administers – can leverage the size of its purchasing pool to negotiate better prescription prices for enrollees, who can include the uninsured, individuals purchasing their own health insurance, and small and large businesses.
By expanding the number of people buying prescriptions in a plan, its purchasing and bargaining power grows to benefit both current state employee health plan enrollees and those who buy into the prescription purchasing pool.
At this year’s annual National Academy for State Health Policy (NASHP) Conference, a proposal to create a state purchasing pool to lower drug prices was previewed. Feedback from those exploratory deliberations and review by NASHP’s Pharmacy Cost Work Group have shaped NASHP’s new proposal to address drug prices through creation of a state drug purchasing pool.
In this new proposal, NASHP legal consultants Erin Fuse Brown, MPH, JD, and Mark Hunter, MPH, JD, examine the “purchasing pool” options available to states and explore legal landmines and how to avoid them. Notably, a prescription drug purchasing pool would need to be constructed to avoid Employee Retirement Income Security Act (ERISA) pre-emption and to assure compliance with Affordable Care Act provisions regarding essential health benefits and qualified health plans. This paper provides a roadmap to accomplish those goals and raises questions for states to explore regarding how best to make a public purchasing pool work given the role of pharmacy benefit managers (PBMs) in managing the pharmacy benefit in state employee health plans.
We encourage and invite additional state review and comments as we develop model legislation to implement a state drug purchasing pool, which will be available soon.
This proposal is the latest initiative of NASHP’s Prescription Drug Pricing Center, funded with support from Arnold Ventures. Over the next several months, NASHP will release a new series of policy options that states can pursue to lower drug spending and we will continue to report on state efforts to implement new laws promoting drug price transparency, PBM oversight, and importation, and we will track Maine and Maryland’s new laws to create drug affordability review boards. As the 2020 legislative season approaches, we will once again report on state activity and already have seen a number of drug pricing bills moving to introduction. Stay tuned!