Davisson: Addressing the rising prices of medication

Friday, February 7, 2020

More than 30% of Americans say their out-of-pocket costs for prescription drugs are rising, with many of them seeing prices actually increase by more than $100 in the past year. By improving transparency and oversight in the negotiations middlemen conduct between insurers, employers and pharmacies, Hoosiers could save money on medications. This could be achieved by requiring these negotiators, known as pharmacy benefit managers, to hold licenses in Indiana.  

Pharmacy benefit managers work with pharmacists, health insurers, large employers, some aspects of Medicare and others to provide pharmacy benefits. Their role includes negotiating rates for health insurance coverage on prescription drugs. These negotiations give PBMs a significant behind-the-scenes role in determining prices, but it doesn’t stop there. PBMs work with drug manufacturers to determine which medication brands are and are not covered, which can drive up prices for consumers who have to pay out-of-pocket without financial help from their insurance.

If PBMs were licensed and registered with the state, and required to provide transparent reporting data, it could help ensure they are operating fairly and only raising prices when appropriate. It could save taxpayers money, as prescription drugs purchased with Medicaid cost the state more than $120 million over what was paid to pharmacies by these middlemen in one year. At the very least, this would allow state officials to gather more data on how prices are determined and find answers as to why prices have skyrocketed.

I authored House Bill 1042, as part of a recommendation from a summer study committee, to help consumers save on prescriptions. PBMs would report to the state information on wholesale costs, how rebates are negotiated with manufacturers in regards to formularies as well as other fees and the amount paid to pharmacies compared to charges to the pharmacy plan sponsor (employer).

Across the country, 30 states have put similar licensing requirements on their PBMs and have shined a light on these middlemen and the rising costs of prescription drugs to help consumers better understand how prices are determined and increase competition. This proposed legislation already has the support of the Indiana House and is currently with the Indiana Senate to be considered as a new law. For more information on this proposal, visit iga.in.gov.

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State Rep. Steve Davisson (R-Salem) represents House District 73, which includes
Washington County, and portions
of Orange, Lawrence, Jackson, Clark and Harrison counties.
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