States are experiencing a huge rise in the number of people without health insurance in the wake of mass layoffs resulting from the COVID-19 pandemic and are seeking strategies to protect them from high prescription drug prices. The uninsured are sometimes the only consumers left paying the full list price for a drug, while the insured benefit from drug discounts negotiated on their behalf.
States have considerable prescription drug purchasing power through their state employee health plans and other public purchasers. The National Academy for State Health Policy’s (NASHP) newest legislative model, State Purchasing Pool Buy-in, leverages this purchasing clout by creating a program that allows individuals and businesses to buy into the state’s drug benefit plan to lower costs for all.
To achieve this, the model authorizes non-state public employers, self-insured private employers, and insurance carriers who provide coverage to small groups or individuals to purchase drugs for their beneficiaries under the purchasing authority of the state. State governments are often one of the largest employers in many states, and this model allows additional participants to buy into the state purchasing pool to expand state government’s purchasing power.
By expanding the number of people buying prescriptions in a pool, states’ purchasing and bargaining powers grow to benefit both current state employee health plan enrollees and those who buy into the prescription purchasing pool. Notably, while health plan benefits can rise in cost when there is an increase in “sicker” enrollees, prescription drug pricing is different – the more covered lives the better as the rise in membership also boosts the plan’s ability to negotiate lower rates.
NASHP’s model legislation also creates a way to help uninsured and those with high-deductible plans by creating a consumer discount card program.
In the NASHP white paper outlining this new model – Proposal for a State Purchasing Pool for Prescription Drugs – NASHP legal consultants Erin Fuse Brown, MPH, JD, and Mark Hunter, MPH, JD, examine “purchasing pool” options available to states and explore legal landmines and how states can avoid them. This paper provides a roadmap for states to explore how to best implement a prescription purchasing pool.
NASHP has also released a new document, Model Pharmacy Benefit Manager Contract Terms, for states to use when contracting with pharmacy benefit managers (PBMs) to ensure lower costs and adequate oversight. This is an essential first step before expanding the state employee prescription drug plan’s purchasing power to include other participants in the state purchasing pool.
This new model is the latest initiative from NASHP’s Prescription Drug Pricing Center, funded with support from Arnold Ventures. In the coming months, NASHP will release a series of additional policy options and will continue to report on state efforts to implement new laws promoting drug price transparency, PBM oversight, importation, and drug affordability review boards.