S.7909 A.9165 – Managed care pharmacy bill

This legislation, S.7909/A.9165, would require reimbursement to retail pharmacies at the fee-for-service (FFS) dispensing fee rate, and establish an “any willing provider” provision to allow all pharmacies to receive Medicaid reimbursement whether contracted with a health plan or not. The bill purports to pay for these mandates with a reduction to health plan administrative funding – which would actually cover less than one-quarter of the cost of the bill. This proposal threatens patient safety, enriches community pharmacists at the expense of patients, and will result in increased pharmaceutical costs.  The previous iteration of this bill, S.6603/A.7598 of 2021, was vetoed by Governor Kathy Hochul, who cited concerns with cost and impact to Medicaid recipients in Veto Message 85 of 2021 that have not been addressed in the current draft. The New York Health Plan Association (HPA) opposes its passage.

First, mandating that plans pay the FFS dispensing fee to retail pharmacies would cost the state over $600 million on an annual basis, and was the most expensive part of the state’s proposal to carve the pharmacy benefit out of managed care. In order to afford such a substantial cost increase, the state would be required to make devastating cuts to reimbursement for 340B providers including the community health centers who serve Medicaid’s most vulnerable populations and the HIV/AIDS providers who are critical to the state’s efforts to end the AIDS epidemic. Retail pharmacies seemed uninterested in the cost of that trade-off on Medicaid members and the patients they serve, seeking only to enrich themselves.

In addition, the state’s assumption regarding “savings” related to reduced plan administrative costs from a pharmacy carve-out was vastly overestimated. The state assumed that 3.1% of pharmacy premium dollars go to administrative expenses. However, a survey of several large Medicaid plans indicated that the percentage was actually closer to 1.4%, meaning that the state’s projected savings of $285 million was overstated by more than 50%. Unlike the carve-out proposal, which would have shifted some (but not all) administrative costs away from plans, this legislation would keep all of those functions with plans and merely eliminate the funding for them, resulting in plan premiums which would not be actuarially sound as required by federal and state law. Therefore, the financial scheme of this legislation does not work, and in any event would cover less than one-quarter of the cost.

This bill also creates an “any willing provider” standard, requiring managed care plans to reimburse retail pharmacies for prescription refills regardless of their network status. Integrated health care networks are the foundation of health care plans. Plan networks are subject to oversight and approval by the Department of Health, and health plans recognize that choice is important to Medicaid members, offering broad networks of available pharmacies to ensure that they have access and making any willing provider provisions unnecessary.

Further, providing coverage through a network increases quality, enhances medical competency and encourages greater coordination and collaboration by providers. This acts as an important consumer protection, allowing health plans to screen medical professionals based on quality, thereby assuring that members will receive the best possible care.  Networks also promote cost efficiencies, which help make health care more affordable and accessible. Requiring health plans to accept providers into their network irrespective of need and performance, undercuts those efforts.  Further, mandating health plans to reimburse out-of-network providers as an in network participant regardless of their network status disincentivizes participation in a health plan network and ultimately will contribute to increased cost.

Finally, New York is working diligently to evolve the health care delivery system away from one based on FFS, volume based care to one based on outcomes and value-based care. By mandating inflated FFS reimbursement and including “any willing provider provisions,” this bill slows that progress and seeks to support the structures that have been failing patients and taxpayers for years.

This legislation is protectionist legislation of the worst kind. It will engender higher costs for consumers and payers to subsidize community pharmacists, while at the same time lowering the quality of care delivered to New Yorkers by exempting retail pharmacies from providing the same level of care as provided by mail order pharmacies, but yet paid at the “same price.”

For all these reasons, HPA opposes S.7909/A.9165.