www.phoenixlawgroup.com

CBI 4TH ANNUAL PHARMACY BENEFIT OVERSIGHT &

COMPLIANCE CONFERENCE:

STATE MAXIMUM ALLOWABLE COST (MAC) LEGISLATION

SAMANTHA BROWN, ESQ.

LAUREL WALA, ESQ.

MAC Laws

Set requirements and limitations related to MAC lists:

What drugs can/cannot be on a MAC list

Required disclosures

Disclosure of pricing

Disclosure of sources

Other required disclosures

Pricing restrictions

Required updates

Notice of changes

Appeal requirements/timeframes

Pharmacy contract requirements

Current MAC Laws

Medicare Part D*

Arkansas

California*

Colorado

Florida

Georgia*

Hawaii

Iowa

Kansas

Kentucky

Louisiana

Maryland

Minnesota

Montana

New Mexico

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Tennessee

Texas*

Utah

Vermont

Virginia*

Washington

MAC – Drugs Eligible For MAC List

Medicare Part D: No requirements specified

Majority of the States Require:

“A” or “B” rated (typically Orange Book) or NR or NA (MediSpan)

Available for purchase by pharmacies in the state from national or regional

wholesalers operating in the state

Not obsolete

Outliers:

Iowa: Requires 2 or more “A” rated (not “B”) with a significant cost

difference

MAC – Pricing Disclosures

Medicare Part D

Individual drug prices must be disclosed to pharmacies

Changes must be disclosed to pharmacies in advance of reimbursement

Majority of the States:

Must provide access to the MAC list and notice of changes

Timing / Frequency of notice of changes varies by state

Some states require MAC list to be “readily accessible” and “useable”

California and Hawaii require web-based or other comparable format

MAC – Disclosure of Sources

Medicare Part D: No requirement

Most states require disclosure of sources used to establish MAC list

and pricing

Type and amount of disclosure varies by state

Means of disclosure varies by state

MAC – Other Disclosures

Some “Outlier” states have other/additional disclosures:

Iowa: Commissioner of Insurance may require PBM to submit information to the Commissioner related to the PBM’s pricing methodology for MAC pricing

Ohio: Requires PBMs to disclose to plan sponsors whether or not the PBM uses the same MAC cost list when billing a plan sponsor as it does when reimbursing a pharmacy

If a PBM uses multiple MAC lists, PBM must disclose to a plan sponsor the differences between the amount paid to a pharmacy and the amount charged to the plan

Disclosure above must be made within 10 days of a PBM and plan sponsor signing a contract or within 10 days of any applicable update to a MAC list(s)

MAC – Pricing Restrictions

Medicare Part D: No restrictions/requirements

Most states do not specifically impose pricing

requirements/restrictions; however, may allow pharmacies to appeal if

MAC price is below acquisition cost

Notable Outlier - Arkansas

Pharmacy can appeal if MAC price is lower than acquisition cost

Pharmacy can decline to provide service to patient

Cannot reimburse pharmacy less than the amount that the PBM reimburses

an affiliate

MAC – Required Updates

Medicare Part D

Must update MAC – January 1 and not less than once every 7 days

Most States Require MAC List Updates:

Frequency of minimum required updates varies by state

Examples: 3 business days, 5 business days, 7 calendar days

Notable Outliers:

Arkansas: No longer than 7 days from an increase of 10% or more in pharmacy

acquisition cost from 60% or more wholesalers doing business in the state

Iowa: Must update MAC list consistent with price increase within 3 business

days of the price increase notification by a manufacturer or supplier

MAC – Appeal Requirements/Timeframes

Medicare Part D: No appeal requirements specified

Majority of the States:

Require an appeal process - Timeframes vary by state (7 business days, 14 days, 14 business days, 15 days, 21 days)

Require pharmacy get paid on MAC appeals upheld and for it to apply to similarly situated pharmacies

Some of the States:

Require pharmacy be allowed to appeal if MAC price is below acquisition cost (e.g., Arkansas, California, Louisiana, Utah)

Require appeal denials to include NDC and wholesaler information (e.g., Arkansas)

Require a dedicated phone number and email address or website for MAC appeals (e.g., Arkansas)

MAC – Pharmacy Contract Requirements

Some states require that the pharmacy contract include certain information regarding the MAC.

Examples:

California and Kentucky require pharmacy contracts to include information identifying any national drug pricing compendia or other data sources used to determine the MAC

Colorado requires each contract provide the pharmacy with the right to obtain the list of sources used to determine MAC pricing within 10 days of request

Florida requires contract specifically state that the MAC pricing will be updated at least every 7 calendar days and that PBM will maintain a process for eliminating drugs from the MAC and modifying MAC pricing consistent with changes in pricing data used in formulating the MAC prices

Georgia, Iowa, and Kentucky require inclusion of appeal process (with specified requirements)

Maryland and Montana require contracts to provide a phone number at which pharmacy can contact PBM to speak to an individual responsible for processing appeals

MAC - Challenges

Tracking drug “eligibility” for MAC list

Nationwide MAC compliance

Requirements tied to pharmacy acquisition cost

Managing pricing commitments

MAC LITIGATION

Pharmaceutical Care Management Association v. Gerhart et al

U.S. District Court for the Southern District of Iowa

Filed September 2, 2014

Pharmaceutical Care Management Association v. Rutledge

U.S. District Court for the Eastern District of Arkansas

Filed August 13, 2015

Iowa House File 2297 (Iowa Code § 510B.8)1. The commissioner may require a PBM to submit information to the commissioner related to the PBM’s pricing

methodology for maximum reimbursement amount.

2. For purposes of the disclosure of pricing methodology, maximum reimbursement amounts shall be

implemented as follows:

a. Established for multiple source prescription drugs prescribed after the expiration of any generic exclusivity

period.

b. Established for any prescription drug with at least two or more A-rated therapeutically equivalent, multiple

source prescription drugs with a significant cost difference.

c. Determined using comparable prescription drug prices obtained from multiple nationally recognized

comprehensive data sources including wholesalers, prescription drug file vendors, and pharmaceutical

manufacturers for prescription drugs that are nationally available and available for purchase locally by

multiple pharmacies in the state.

3. For those prescription drugs to which maximum reimbursement amount pricing applies, a PBM shall include

in a contract with a pharmacy information regarding which of the national compendia is used to obtain pricing

data used in the calculation of the maximum reimbursement amount pricing and shall provide a process to

allow a pharmacy to comment on, contest, or appeal the maximum reimbursement amount rates or maximum

reimbursement amount list. The right to comment on, contest, or appeal the maximum reimbursement amount

rates or maximum reimbursement amount list shall be limited in duration and allow for retroactive payment in

the event that it is determined that maximum reimbursement amount pricing has been applied incorrectly.

PCMA v. Gerhart

PCMA argued that Section 510B.8:

Is preempted by ERISA because it relates to employee benefit plans

Court Dismissed

Violates the Takings Clauses of both the US Constitution and the Iowa Constitution because it destroys the value of PBM trade secrets

Court ruled that PCMA did not have standing

Violates the dormant Commerce Clause of the US Constitution by imposing an excessive burden on interstate commerce

Court Dismissed

Violates the Due Process Clause of the 14th Amendment to the US Constitution because it is overly vague.

Court Dismissed

Iowa House File 2297 (Iowa Code § 510B.8)

For those prescription drugs to which maximum reimbursement amount pricing applies, a PBM shall include in a contract with a pharmacy information regarding which of the national compendia is used to obtain pricing data used in the calculation of the maximum reimbursement amount pricing and shall provide a process to allow a pharmacy to comment on, contest, or appeal the maximum reimbursement amount rates or maximum reimbursement amount list. The right to comment on, contest, or appeal the maximum reimbursement amount rates or maximum reimbursement amount list shall be limited in duration and allow for retroactive payment in the event that it is determined that maximum reimbursement amount pricing has been applied incorrectly.

Iowa House File 2297 (Iowa Code § 510B.8)

1. The commissioner may require a PBM to submit information to the commissioner related to

the PBM’s pricing methodology for maximum reimbursement amount.

2. For purposes of the disclosure of pricing methodology, maximum reimbursement amounts

shall be implemented as follows:

a. Established for multiple source prescription drugs prescribed after the expiration of any

generic exclusivity period.

b. Established for any prescription drug with at least two or more A-rated therapeutically

equivalent, multiple source prescription drugs with a significant cost difference.

c. Determined using comparable prescription drug prices obtained from multiple nationally

recognized comprehensive data sources including wholesalers, prescription drug file

vendors, and pharmaceutical manufacturers for prescription drugs that are nationally

available and available for purchase locally by multiple pharmacies in the state.

PCMA v. Gerhart

PCMA is Appealing

During Appeal:

PBMs must disclose information related to MAC pricing methodology to

Iowa Insurance Commissioner.

Only restriction on application of MAC pricing is that MAC pricing must

be determined using comparable prescription drug prices obtained from

multiple nationally recognized comprehensive data sources.

PBM contracts with pharmacies must provide for a process to allow

pharmacies to comment on, contest, or appeal MAC rates.

Arkansas SB 688 (Act 900)

A PBM shall:

1. Provide access to its MAC List to each pharmacy subject to the MAC List;

2. Update its MAC List on a timely basis, but in no event longer than 7 calendar days from an increase of 10% or more in the pharmacy acquisition cost from 60% or more of the pharmaceutical wholesaler doing business in the state or a change in the methodology on which the MAC List is based or in the value of a variable involved in the methodology;

3. Provide a process for each pharmacy subject to the MAC List to receive prompt notification of an update to the MAC List; and

4. Provide a reasonable administrative appeal procedure to allow pharmacies to challenge maximum allowable costs and reimbursements made under a maximum allowable cost for a specific drug or drugs as:

a. Not meeting the requirements of this section; or

b. Being below the pharmacy acquisition cost.

Arkansas SB 688 (Act 900)

1. If the appeal is upheld, the PBM must:

a. Make the change in the MAC;

b. Permit the challenging pharmacy or pharmacist to reverse and rebill the

claim in question;

c. Provide the NDC number that the increase or change is based on to the

pharmacy or pharmacist; and

d. Make the change in MAC effective for each similarly situated pharmacy

as defined by the payor subject to the MAC List

Arkansas SB 688 (Act 900)

1. If the appeal is denied, the PBM must provide the challenging pharmacy or pharmacist the NDC number and the name of the national or regional pharmaceutical wholesalers operating in Arkansas that have the drug currently in stock at a price below the MAC List; or

2. If the NDC number provided by the PBM is not available below the pharmacy acquisition cost from the pharmaceutical wholesaler from whom the pharmacy or pharmacist purchases the majority of prescription drugs for resale, then the PBM shall adjust the MAC List above the challenging pharmacy’s pharmacy acquisition cost and permit the pharmacy to reverse and rebill each claim affected by the inability to procure the drug at a cost that is equal to or less than the previously challenged MAC.

PCMA v. Rutledge

PCMA arguing that Act 900:

Violates the dormant Commerce Clause of the US Constitution by imposing an excessive burden on interstate commerce

Violates the Contracts Clause of the US Constitution because it substantially impairs PBM customer contracts and pharmacy contracts

Violates the Due Process Clause of the 14th Amendment to the US Constitution because PBMs will not have knowledge necessary to fulfill a legal obligation created by Act.

Is preempted by ERISA because it relates to employee benefit plans

Is preempted by the Medicare Prescription Drug, Improvement, and Modernization Act because it applies to Medicare beneficiaries enrolled in Medicare Part D

PCMA v. Rutledge

Hearing for Preliminary Injunction was held on November 4, 2015.

Judge is expected to rule sometime this month.