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LHSFNA Staff Deliver Labor Perspective on PBM Legislation

Healthcare costs continue to rise, and the latest target in Congress is pharmacy benefit managers (PBMs). There are a number of different bills proposing PBM reform on Capitol Hill, with the ultimate goal of lowering prescription drug costs for consumers and bringing more transparency to the industry. You may have even seen commercials discussing some of these issues online or on TV.

LIUNA General Secretary-Treasurer Michael F. Sabitoni

So what do PBMs do, and why are they in the spotlight? PBMs act as a third-party between insurance providers and pharmaceutical companies. They manage prescription drug benefits on behalf of health insurers, including the creation of formularies, negotiation of drug rebates with manufacturers, processing of claims and managing of pharmacy networks. The three largest PBMs – Express Scripts, CVS Caremark and Optum – serve 270 million Americans and make up almost 90 percent of the PBM market. Critics argue that these PBMs in particular have too much control over pricing, forcing pharmacies to pass on higher prices to consumers and leaving pharmacies without other options.

“LIUNA’s health and welfare funds work to ensure LIUNA members and their families receive the highest-quality care at an affordable price,” said LIUNA General Secretary-Treasurer and LHSFNA Trustee Michael F. Sabitoni. “The LHSFNA regularly assists these funds and serves as their advocate when health care reform has the potential to weaken these benefits.”

PBMs & LIUNA Health and Welfare Funds

In November, Matthew Brown, the LHSFNA’s Health and Welfare Fund Specialist, attended a series of meetings with bipartisan members of the House and Senate who have introduced PBM reform legislation. Brown, along with LIUNA representative Jim Ray, met with members of the Senate Finance Committee, the House Energy and Commerce Committee and the House Education and Workforce Committee.

“While most draft reform legislation is focused on drug pricing, PBM reform could also result in other changes that have the potential to negatively impact LIUNA health and welfare funds,” said Brown. “Specifically, the LHSFNA expressed our concern for any PBM reform that would erode ERISA pre-emption protections.”

The Employee Retirement Income Security Act of 1974 (ERISA) applies to most private retirement and self-funded health plans, including LIUNA’s health and welfare funds. ERISA sets federal laws that these types of plans have to follow at a national level, which leads to uniform coverage for the people insured by them. Proposed PBM legislation would erode some of this national framework, meaning LIUNA health and welfare funds and other self-funded plans would have to follow rules set by individual states. This could create a costly and cumbersome administrative burden on insurers, including LIUNA’s health and welfare funds. Eroding ERISA rules could also potentially reduce insurance coverage for workers crossing state lines, such as utility line workers traveling during natural disasters or construction workers who are temporarily in another state for a project.

Services Provided by PBMs

While most of the current push for PBM reform focuses on their role in prescription drug costs, PBMs argue that they provide a valuable service for insurers. PBMs negotiate pricing with pharmaceutical companies and structure rebates to create lower costs for participants.

“Currently, PBMs essentially serve as the insurers’ representative when negotiating drug prices,” said Brown. “Without them or another third-party, staff at LIUNA’s health and welfare funds would have to take on that responsibility. This is a highly specialized skill set and isn’t readily available across all LIUNA self-funded health and welfare funds.”

During November meetings with House and Senate committees and their staff, the LHSFNA shared its view that PBMs provide a service that LIUNA health and welfare funds can’t easily replace. LIUNA and the LHSFNA support keeping ERISA protections intact and ensuring that LIUNA health and welfare funds can offer benefits uniformly across the U.S.

The Fund’s Health Promotion Division regularly monitors pending healthcare legislation and provides guidance to LIUNA health and welfare fund staff and other LIUNA affiliates. Pending PBM reform has been a regular topic on LIUNA Health and Welfare Fund Administrators’ Quarterly Forum webinars hosted by the Health Promotion Division. For more information or an invitation to these quarterly discussions, contact Matthew Brown at 202-628-5465.

[Nick Fox]

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