Most State Efforts to Block Mid-Year Formulary Changes Fail in 2017
State lawmakers and regulators made numerous attempts in 2017 to block or significantly limit health insurers from altering their formularies during a plan year, but nearly all the bills proposed during the most recent legislative sessions have failed.
The pharmaceutical lobby has backed laws that prohibit changes to a plan’s formulary year more than one time annually unless the FDA has issued new safety guidance or rescinded a drug’s approval. Pharma also supports prohibitions on changes to cost sharing and on moving drugs between tiers during a plan year.
In a letter backing regulations in Nevada, the Pharmaceutical Research and Manufacturers of America, a trade group, states: “Mid-year formulary changes impose a tremendous burden on enrollees, as well as on physicians and pharmacists.
“Without the proposed protections, enrollees who select a particular plan based on their individual drug needs will have no assurances that the plan will maintain coverage for those particular drugs they need during the course of the enrollment year.”
While such laws do not typically prohibit the addition of drugs to a formulary during a plan year, pharma lobbyists have advocated for language that expressly allows newly approved drugs to be added to formularies mid-year. In addition, pharma has sought the inclusion of language that would prohibit mid-year changes to plan coverage policies for medical-benefit drugs.
Payers have argued against such laws, stating that health plans should be allowed to move more-expensive branded drugs to higher cost tiers and make generics available to members. PBMs view the laws as an obstruction to cost-savings strategies. PBM further argue that the regulations create an administrative headache for payers because all formularies must be coordinated at the renewal date of a coverage plan, regardless of whether new drugs are introduced to the market that lower overall drug spend.
Ten states already regulate mid-year formulary changes, via either statute (Arkansas, California, Connecticut, New Mexico, Oklahoma, Rhode Island, Texas, Virginia) or administrative rules (Louisiana and Nevada). California and Connecticut do not prohibit a drug’s removal during a plan term. California does not permit mid-year formulary changes that involve cost sharing. Connecticut prohibits coverage denial for drugs used to treat chronic illnesses and for drugs that a physician has deemed medically necessary and more beneficial than other drugs on a formulary.
Ten states (Connecticut, Florida, Illinois, Maryland, Minnesota, New Mexico, New York, Oregon, Tennessee, Washington) considered bills addressing mid-year formulary changes during the 2017 legislative session, but eight of those states did not enact laws; only New York and Illinois are still considering bills that would prohibit the removal of drugs from formularies during the policy year.
If enacted, the New York legislation would prohibit the removal of a prescription drug from formularies that have two or more tiers with different cost sharing in each tier, and it would further prohibit the addition of utilization management restrictions during the plan year (from the start of open enrollment through the end of the plan year). An exception provides that a drug may be removed if the FDA determines it should be removed from the market.
The New York Health Plan Association issued a statement in June in opposition to S5022-A/A2317-A, which is pending in committee. In its statement, the New York Health Plan Association argues, “this legislation would prohibit health insurance plans from making mid-year pharmacy formulary changes to account for drug safety or the increasing cost of some prescription drugs. If enacted, this proposal will result in higher health insurance premiums, and exacerbate the increasing cost of drugs, one of the fastest rising components of healthcare costs. More importantly, the bill will endanger consumers by continuing to expose them to drugs discovered to be unsafe or with serious side effects which has not yet been recalled by the federal Food and Drug Administration.”
Stephanie Hoops is market analyst at DRG and specializes in healthcare policy and regulatory issues with special emphasis on value-based contracting, PBMs, and formulary plan design. Follow her @StephHoopsDRG
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