Michigan Association of Health Plans

HB 4346, 4353, 4354 and 4348 Raise Healthcare Costs for Michigan Businesses

HB 4346, 4353, 4354 and 4348 will not cut health care costs for Michiganders – and they will reduce access to time and cost-saving programs that do help reduce prescription drug costs overall. And they will impact small businesses and individuals who buy insurance on the commercial market – big companies and large government groups, Medicaid and Medicare, all are exempt, and won’t have to follow these laws.

This bill raises insurance premiums for all companies, non-profit organizations, governments and individuals who purchase insurance in order to limit the out-of-pocket cost of insulin to users. The price of insulin is too high – but House Bill 4346 won’t cut that price. It just makes everyone in Michigan pay more for it, even if they don’t need insulin.

If we want to cut the cost of insulin, legislation is needed to attack the predatory pricing practices of pharmaceutical companies, which continue to increase the list price of insulin with no connection to cost or increased quality. HB 4346, by limiting copays insulin users pay, will drive up the cost of health insurance for all.

The price of insulin is high because of a lack of competition, with just three manufacturers controlling the majority of the market. That’s why prices are high. Not because of insurance copays. HB 4346 will only pass the costs on to small businesses in the form of higher premiums.

Other state legislative models that provide a more comprehensive approach to address Insulin drug affordability should be evaluated, including:

  • Establishing a state-run insulin assistance program with a nominal copay, similar to that done in Minnesota.
  • Enact legislation that fines pharmaceutical manufacturer’s for price gouging or for price increases that exceed a state threshold . Three states in addition to the District of Columbia have price gouging legislation. With Massachusetts having the most comprehensive legislation enacted for price gouging protections law that applies to both generic and branded drugs .
  • Establish a prescription drug affordability review board to assess drug affordability and provide rate setting for prescription drugs to bring savings to all patients, not just those utilizing insulin therapy. Six states have enacted legislation creating a drug affordability review board.

As with the insulin bill, reducing out-of-pocket (OOP) costs for some individuals with through this legislative mandate will only increase costs for all others in the commercial insurance market. Manufacturers have the unfettered ability to continue to raise drug prices and, in turn, shift these increased costs to payers (employers, government, health plans) which ultimately result in higher health care costs for everyone through premium increases.

This legislation would not benefit the vast majority of Michigan’s citizens. In Michigan, 58% of all cancer diagnosis are to those over 65 years of age and covered by Medicare, not impacted by state mandated legislation.

Removing other programs not impacted (ERISA plans, Medicaid and the uninsured), just 0.06% of Michigan’s population would benefit. In reality, many Michigan citizens will be misled to believe everyone will be helped. Cost increases for these drugs will continue if this bill is passed, increasing insurance premiums for all.

Pharmaceutical manufacturers offer billions of dollars in “copay coupons” as one way to increase sales and profits of more expensive brand drugs over less costly generics or alternative therapies. At first glance, these coupons appear to benefit patients, but in reality, the ugly truth is that they result in higher spending by payers and insurers and result in higher premiums for businesses and individuals struggling to make each health care dollar efficient.

Manufacturer prescription drug coupons act as a form of unauthorized, unregulated insurance, operating as a “secondary insurance” and circumventing the terms and conditions of health benefits plans that include cost-sharing for covered prescription drugs. Prescription drug copay coupons act as “secondary insurance” because the manufacturer agrees to cover a portion of the insured’s prescription drug expenses.

This bill lets large pharmaceutical companies issue “rebates” that encourage use of high priced “brand name” drugs over lower price, equally effective generic drugs. And it does nothing to require that those “rebates” continue, leaving users facing higher costs when rebates end. It’s another marketing play – one that federally financed programs can’t use because of “Anti-Kickback” legislation.

PBMs play an essential role in the delivery of pharmacy health benefits services or administration on behalf of an employer, government agency, health plan or other third-party payers. Pharmaceutical manufacturers are quick to point the finger to PBMs for the rising high cost of drugs. The PBMs, however, do not set the list price for drugs.

This bill increases government regulations on pharmacy benefit managers, which are nothing more than third parties with expertise and clout in negotiating with powerful pharmaceutical companies. They will limit the ability of these operations, used by many insurers, to provide an incentive for convenient and cost-saving mail-order prescription delivery or other special arrangements, and allow the pharmaceutical companies to raise rates on prescription drugs without notice while requiring the benefit manager to give a 60-day notice to patients, giving an advantage to big drug companies. This legislation:

  • Limits the ability of a PBM to provide an incentive for mail-order or exclusive specialty arrangements. This may result in increased costs to employers or purchasers because they can no longer provide this coverage option. State of Michigan Retirees use such an arrangement.
  • Removes the flexibility for employers and payers to determine the level of pricing concessions on drugs that meet their ability to provide a compressive yet affordable benefit design.
  • Requires a PBM to notify a patient of any cost-sharing increases of drugs 60 days in advance. However, drug price increases occur daily. Unless the drug manufacturer provides a 60-day notice of any price increases to health plans and the PBM, it would be impossible to notify patients in advance of any price changes.
  • Provides significantly more reporting requirements for PBMs to DIFS than those for health plans and pharmaceutical manufacturers.
  • Provides drug cost reimbursement levels that currently conflict with state Medicaid payment requirements.

HB 4346, 4353, 4354 and 4348 will raise costs for small businesses and limit access to programs that have helped control pharmaceutical costs for consumers. These bills would increase costs for many to reduce out-of-pocket costs for a few, instead of proposing real action to hold down the rising costs of prescription drugs.