1. No category

Legislative Budget and Finance Committee
A JOINT COMMITTEE OF THE PENNSYLVANIA GENERAL ASSEMBLY
Offices: Room 400 Finance Building, 613 North Street, Harrisburg
Mailing Address: P.O. Box 8737, Harrisburg, PA 17105-8737
Tel: (717) 783-1600 • Fax: (717) 787-5487 • Web: http://lbfc.legis.state.pa.us
SENATORS
ROBERT B. MENSCH
Chairman
JAMES R. BREWSTER
Vice Chairman
MICHELE BROOKS
THOMAS McGARRIGLE
CHRISTINE TARTAGLIONE
JOHN N. WOZNIAK
Impact of Act 2012-207 on
Access to Retail Pharmacies and
Cost of Prescription Medications
REPRESENTATIVES
ROBERT W. GODSHALL
Secretary
VACANT
Treasurer
STEPHEN E. BARRAR
JIM CHRISTIANA
SCOTT CONKLIN
PETER SCHWEYER
JAKE WHEATLEY
EXECUTIVE DIRECTOR
PHILIP R. DURGIN
Conducted Pursuant to
Act 2012-207
April 2015
Table of Contents
Page
Summary and Conclusions ............................................................... S-1
I.
Introduction ........................................................................................
1
II.
Findings ..............................................................................................
3
A. Eight States, Including Pennsylvania, Have Attempted to Limit
Required Use of Mail Order Pharmacies. ...............................................
3
B. The Pennsylvania Insurance Department Has Received Relatively
Few Complaints Concerning Act 2012-207 ............................................
7
C. Half of the Retail Pharmacies Applying to Offer Act 207 Dispensing
Were Not Approved or Elected to Withdraw Their Applications ..............
11
Appendices .........................................................................................
23
A. Act 2012-207 ..........................................................................................
24
B. Act 2012-207’s Impact on Access to and Cost of Prescription Drugs
Questionnaire for Pennsylvania Retail (Independent and Chain)
Pharmacies .............................................................................................
26
III.
i
Summary and Conclusions
In 2012, the Pennsylvania General Assembly enacted Act 2012-207 prohibiting state-licensed health insurance plans from requiring their consumers to obtain
prescription medications through mail order pharmacies. Act 207 was enacted in
an effort to provide greater consumer access to retail pharmacies and a “level playing field” between mail order and retail pharmacies. To accomplish such goals, it
required state-licensed health insurers that offer a prescription drug benefit to provide such benefits with copayments and coinsurance that are the same for mail order and retail pharmacies if the retail pharmacy agrees to the same terms and conditions that are in place for the plan’s mail order pharmacy.
The act also directed the Legislative Budget and Finance Committee
(LB&FC) to evaluate the impact of this program on access to prescription drugs at
independent and chain retail pharmacies and to evaluate whether its provisions
had a material impact on the cost of prescription medications for consumers and
health care plans. The act required the LB&FC to commence the evaluation by
September 2014 (i.e., 18 months after the effective date of the act1) and issue a report nine months after commencing the evaluation.
We found:

Pennsylvania is one of eight states that have attempted to limit required
use of mail order pharmacies, according to the National Community
Pharmacists Association. Such laws are applicable to state-licensed insurers in five states (Connecticut, Hawaii, Maryland, New York, and
Pennsylvania); employers in two states (Arkansas and Louisiana) and certain state benefit plans in one state (Texas).
 Four (Hawaii, New York, Pennsylvania, and Texas) states require that
consumer copayments or coinsurance be comparable for mail order and
retail pharmacies and that the retail pharmacy agrees to the same
terms and conditions as those established for the mail order pharmacy.
 Representatives of state pharmacy associations in Connecticut and
New York with whom we spoke indicate their state laws have had
minimum impact because of their limited applicability. As in Pennsylvania, their laws apply to state licensed health insurers, but not
“health coverage” benefits available through self-insured trusts, legally
permitted employer welfare arrangements, and federal Medicare and
Medicaid programs, which are governed under various federal laws.
1
The Act was approved November 1, 2012, and took effect 120 days after (March 2013).
S-1
Nationwide, 61 percent of covered workers in private, public, and private not-for-profit firms that receive health care through their employers receive coverage through such plans, according to the Kaiser Family Foundation and Health Research and Educational Trust, Employer
Health Benefits, 2013 Annual Survey.

The Pennsylvania Insurance Department has received relatively few
consumer complaints (i.e., 36) since the Act was implemented in March
2013, and notes there is considerable misunderstanding of the Act and
the role of the Department. In many instances, according to PDI, the
complaints were not covered by Act 207 since:
The filer of the complaint was enrolled in a plan not covered by
Act 207. For example, consumers asked if Medicare was covered
by the act, or if the law applied to self-funded plans. In other
cases, the retail pharmacy reported that it could not meet the
conditions or pricing offered by the mail order pharmacy, and
thus Act 207 would not apply in those instances….
The limited volume of complaints may also be due to the absence of widespread participation in the Act 207 program. One major health plan reported that
six months after the Act’s initial implementation date “… no retail pharmacy has
expressed interest in nor executed a contract…[with the insurer’s pharmacy benefit
manager] to participate as a mail service pharmacy.” Another advised a consumer
one year after the Act’s implementation that no pharmacy in Pennsylvania had accepted the contract for 90-day dispensing at retail under the same price, terms, and
conditions as mail order. As of late 2014, at least two major health insurers advised
LB&FC staff that they had not received completed applications from retail pharmacies seeking to participate under Act 207.
To assess the impact of Act 2012-207 on access to retail pharmacies and the
cost of prescription medications, we provided an opportunity for retail pharmacies2
to share their experiences with the implementation of the Act. We obtained such input through a web-based survey conducted in August and September 2014 with the
support of the Pennsylvania Pharmacists Association and the Pennsylvania Association of Chain Drug Stores. Our survey3 found:

Three-quarters (101 of 132) of our survey respondents, including all
chain pharmacy respondents, applied to insurers and pharmacy benefit
As of November 2013, the Pennsylvania Department of State licensed over 3,300 pharmacies. Such licenses
include retail pharmacies, along with hospital, long-term care, and specialty pharmacies. Based on the available state licensure data, it is not possible to determine the exact number of independent and chain retail pharmacies in Pennsylvania.
3 We received 132 survey responses, including five responses from chain pharmacies that reported operating
over 920 pharmacies in Pennsylvania.
2
S-2
managers to offer medication dispensing under Act 207; but only about
half (55 of 101) of those that applied were approved or chose to offer
dispensing under Act 207. Typically those not approved reported they
did not meet the insurer’s mail order pharmacy network requirements.
Several, however, reported withdrawing their applications after becoming
familiar with the insurer or the insurer’s benefit manager’s requirements
for Act 207 dispensing.

Just over half of those participating in Act 207 dispensing, including
two chain pharmacy respondents, think consumer out-of-pocket costs
have remained the same or decreased. In contrast, only 20 percent of
those not participating in Act 207 thought consumer out-of-pocket costs
have remained the same or decreased after the passage of Act 207.
LB&FC staff also asked major insurers if they had incurred material costs
with the implementation of Act 207. None of the major insurers reported
that they had incurred such costs. One noted that costs associated with
implementation typically involve the provider credentialing process,
which is in place and would occur with or without Act 207.

Over 80 percent of those providing Act 207 dispensing planned to continue such dispensing, including the approved chain respondents.4 The
primary reasons offered by the six respondents who indicated they would
not continue are the failure of the program to cover the pharmacy’s drug
acquisition and drug dispensing costs.

For the most part, independent pharmacists expressed disappointment
with the implementation of the Act in view of its original legislative intent to encourage consumer choice. Pharmacists responding to our survey typically indicated that the Act, while well intentioned, was ignored,
“lacked teeth,” or was not enforced.
One independent pharmacist involved in the drafting of the initial versions of
the Act and the compromises that were reached to obtain its passage advised us:
Unfortunately…health insurers, government programs and pharmacy
benefit managers have taken advantage of the legislation’s failure to
more clearly address a number of issues by interpreting the revised
legislation in a manner that prevented it from having any appreciable
impact on the availability of retail pharmacy services to Pennsylvania
consumers.
One of our chain pharmacy survey respondents dispensed 90-day supplies of medication prior to Act 207 and
planned to continue such dispensing after Act 207 was implemented. The pharmacy applied but subsequently
decided it would not provide such dispensing under Act 207’s terms and conditions.
4
S-3
Specific factors associated with such an outcome, according to the independent
pharmacist, include, for example:

Requirements that pharmacies already enrolled in the insurer’s provider network be approved for admittance into new provider networks
to participate in Act 207.

Discriminatory requirements for admission into provider networks
that either effectively block participation by retail pharmacies or make
their participation in networks unreasonably burdensome.

The general refusal of pharmacy benefit managers affiliated with mail
order pharmacies to include payments received from insurers and drug
manufacturers in amounts paid to retail pharmacies.

The lack of effective efforts by the Pennsylvania Insurance Department
to enforce the law in a manner consistent with the legislative intent.
The absence of widespread implementation of Act 207 provides little opportunity to fully assess the impact of the act, either positively or negatively on the cost
of medication services. There is, however, no evidence thus far that it has imposed
material costs on insurers or consumers.
Throughout our work to evaluate the impact of Act 207, we received several
suggestions as to how to improve the implementation of Act 207. Some independent
pharmacists see the need for analysis of the legality of the tactics and strategies of
pharmacy benefit managers and insurers, and possibly amendments to the act.
Others are concerned about the ability of the act to realize its goals given the many
health benefits that are provided through coverage outside of the scope of the state’s
regulatory authority. A chain pharmacy representative suggested that the number
of pharmacies participating in Act 207 might be increased if insurers and pharmacy
benefit managers offered community pharmacies “a reasonable rate that would not
result in the community pharmacy losing money filing prescriptions” and if the
scope of the act could be expanded to include the federally authorized health coverage plans. The Insurance Department suggests that it be involved initially and
throughout any process to revise the Act in view of the complexity of health insurance laws at the state and federal levels.
S-4
I. Introduction
Act 2012-207 (Appendix A) directed the Legislative Budget and Finance Committee (LB&FC) to evaluate the impact of its provisions on access to prescription
drugs at independent and chain retail pharmacies and whether its provisions had a
material positive or negative impact on the cost of prescription medications for consumers and health care plans. It further directed the LB&FC commence the evaluation by September 2014 (i.e., 18 months after the effective date of the Act1) and issue a report nine months after commencing the evaluation.
Act 207 was intended to prohibit health insurance plans providing prescription medications from requiring that such drugs be obtained only through mail order pharmacies. For this to occur, participating retail pharmacies had to be willing
to accept insurer and pharmacy benefit manager pricing, terms, conditions, and
other requirements associated with mail order prescriptions.
Study Scope and Objectives
Specifically, this study seeks to:
1. Identify the extent to which Act 207 has been implemented, and any challenges associated with its implementation.
2. Determine the added costs or savings, if any, for prescription drugs experienced by consumers and health plans as a result of Act 207’s consumer
choice provision.
3. Assess the extent to which Pennsylvania’s experience compares to other
states that provide for consumer choice when filling prescriptions.
To identify the extent to which Act 207 has been implemented and challenges
associated with its implementation, we spoke with representatives of independent
community and chain retail pharmacies. With the assistance of the Pennsylvania
Pharmacists Association and the Pennsylvania Association of Chain Drug Stores,
we made a web-based survey available to their members in August and September
2014 to provide them with an opportunity to share their experiences with the act.
Appendix B provides a copy of the LB&FC’s questionnaire for Pennsylvania retail
(independent and chain) pharmacies.
We met with Pennsylvania Insurance Department officials involved with the
implementation of Act 207, and reviewed materials prepared by the Pennsylvania
Pharmacists Association with input from the Pennsylvania Insurance Department
concerning the Act’s implementation. We also spoke with and reviewed materials
1
The act was approved November 1, 2012, and took effect 120 days after (March 2013).
1
prepared by independent pharmacy consultants identifying specific problems and
concerns associated with Act 207’s implementation.
To determine the added costs or savings, if any, for prescription drugs experienced by consumers we asked pharmacies responding to our survey and participating in Act 207 dispensing about such costs and savings. We also spoke with key insurers to identify any material added costs they may have encountered as a result
of Act 207’s implementation. Four major insurers responded to our request, with all
four noting they had not incurred material added costs as a result of Act 207. Two
of the four major insurers also noted they had not received any completed applications from pharmacies seeking to provide Act 207 dispensing.
To assess the extent to which Pennsylvania’s experience compares with other
states that have legislation prohibiting insurers from adopting mandatory mail order pharmacy benefit requirements, we reviewed legislation adopted in states with
such requirements. In particular, we considered the types of restrictions imposed,
those required to comply, and how such laws were enforced. We also spoke with
state pharmacy associations and officials involved in implementing “mandatory
mail order” legislation in their states about their experiences following the adoption
of state legislation.
Acknowledgements
LB&FC staff completed this study with consultation and assistance from the
Pennsylvania Pharmacists Association and the Pennsylvania Association of Chain
Drug Stores. We thank the Pennsylvania Insurance Department and its staff for
their valuable assistance throughout the study. In particular, we thank Arthur
McNulty, Deputy Insurance Commissioner for Market Regulation; Carmen DiCello,
R.Ph., the Director of Government and Public Affairs for the Value Drug Company;
Patricia Epple, CAE, CEO of the Pennsylvania Pharmacists Association; and Drew
Lyons, who represents the Pennsylvania Association of Chain Drug Stores.
Important Note
This report was developed by Legislative Budget and Finance Committee staff.
The release of this report should not be construed as indicating that the Committee
members endorse all the report’s findings and recommendations.
Any questions or comments regarding the contents of this report should be directed to Philip R. Durgin, Executive Director, Legislative Budget and Finance Committee, P.O. Box 8737, Harrisburg, Pennsylvania 17105-8737.
2
II. Findings
A. Eight States, Including Pennsylvania, Have Attempted to Limit
Required Use of Mail Order Pharmacies
Eight states (Arkansas, Connecticut, Hawaii, Louisiana, Maryland, New
York, Pennsylvania, and Texas) have enacted legislation intended to limit the required use of mail order pharmacies, according to the National Community Pharmacists Association. Such legislation is enacted to allow consumers the choice of obtaining prescription drugs from a community retail pharmacy or a mail order pharmacy.
The eight states, however, differ in who they require to comply, the nature of
the limitations and restrictions, and provisions for penalties and enforcement. In
most ways, Pennsylvania’s law is similar to those of other states; however, it has
certain unique features not found in most state laws.
Limitations on Use of Mail Order Pharmacies
Who Must Comply: Typically, state laws prohibiting required use of mail order pharmacies are applicable to state-licensed health insurers that provide prescription drug coverage. As shown in Exhibit 1, five (Connecticut, Hawaii, Maryland, New York, and Pennsylvania) of the eight states, including Pennsylvania,
place limits on state licensed insurers’ use of mail order pharmacies.
In addition to covering state-licensed health insurers, Exhibit 1 shows Pennsylvania’s legislative restrictions apply to certain state programs. Such programs
include the Pharmacy Assistance Program for the Elderly (PACE), which has always had the same copayment for retail and mail order pharmacies in its program.1
Pennsylvania’s legislation also explicitly states its limitations apply only to the extent they are not preempted by federal law.
Two (Arkansas and Louisiana) of the eight states impose limitations on employers rather than insurers. One (Texas) of the eight states limits its mail order
restrictions to health benefit plans administered by the State Employee Retirement
System and the State Teacher Retirement System.
Restrictions: Typically, state laws limiting use of mail order pharmacies include all mail order pharmacies. One (Arkansas) of the eight states, however, applies its prohibitions only to out-of-state mail order pharmacies.
ance2
As shown in Exhibit 1, states typically require that copayments and coinsurfor prescription drugs be equivalent for mail order and retail pharmacies.
Only 1.3 percent of PACE’s total claims are for mail order dispensing.
Copayments, or “copays” are a form of consumer out-of-pocket cost sharing that requires the consumer to pay a
fixed dollar amount for the medical service provided. Coinsurance is also a form of consumer out-of-pocket cost
sharing. It requires the consumer to pay a percentage of the cost of the medical service provided.
1
2
3
4
Health insurance policies
issued by hospital and
medical service corporations, (such as Blue Cross
and Blue Shield) and
health care centers
Prescription drug and
health benefit plans, mutual
benefit societies, pharmacy
benefit managers
Employers providing prescription drug coverage
Connecticut
Louisiana
Health insurance companies, health services and
hospital corporations, medical expense indemnity corporations
State licensed insurers, the
state Medicaid program,
the state Children’s Health
Insurance Program, and
the Pharmaceutical Assistance Program for the Elderly
Health benefit plans administered by the State
Teacher Retirement and
the State Employee Retirement Systems
New York
Texas
Prohibits requiring group benefit participants to purchase prescription drug
benefits through a mail order program
and requires plans to allow a participant to obtain a multiple-month supply
of drugs from either a retail or mail order pharmacy if the retail pharmacy
agrees to the same terms as a mail order pharmacy.
Policies and contracts may not establish the amount of reimbursement for a
pharmaceutical product to the insured
based on who the authorized prescriber is.
Policies must allow insured to obtain
prescription drugs from either retail or
mail order pharmacy if the retail pharmacy accepts the same terms and
conditions as mail order pharmacies.
Policies and programs must allow insured and participants to obtain prescription drugs from either retail or mail
order pharmacy if the retail pharmacy
accepts the same terms and conditions
as mail order pharmacies.
Prohibits employers from requiring use
of mail order pharmacy.
Retail pharmacies which accept pharmacy benefit manager (PBM) terms
and conditions must be allowed to participate in the PBM’s network.
Insured beneficiaries cannot be required to use a mail order pharmacy.
Restrictions
Prohibits employers from requiring the
use of an out-of-state mail order pharmacy.
Source: Developed by LB&FC staff based on review of pertinent state legislation.
Pennsylvania
Insurers, nonprofit health
service plans, HMOs
Maryland
Hawaii
Who Must Comply
Employers providing prescription drug coverage
State
Arkansas
Copayments, deductibles, coinsurance and other cost-sharing obligations must be the same for community retail pharmacies and mail
order pharmacies.
Copayment and other retail pharmacy prescription conditions must
be the same as those for mail order pharmacy if under the same
program, policy, or contract.
Copayments and other retail pharmacy prescription conditions must
be the same for community retail
pharmacies and mail order pharmacies.
Copayment and other retail pharmacy prescription conditions must
be the same as those for mail order pharmacy.
Copayment and other retail pharmacy prescription conditions must
be the same as those for mail order pharmacy.
Copayment and other retail pharmacy prescription conditions must
be the same as those for mail order pharmacy.
Copayment, Coinsurance, or
Other Fees
Copayment and other retail pharmacy prescription conditions must
be the same as those for mail order pharmacy.
Not specified
Specifically excludes accident only,
fixed indemnity, limited benefit, credit,
dental, vision, specified disease, Medicare supplement, Civilian Health and
Medical Program of the Uniform Services (CHAMPUS) supplement, longterm care or disability income, workers’
compensation or automobile medical
payment insurance.
Health benefit plans other than those
administered by the State Teacher Retirement and the State Employee Retirement Systems
Excludes a collective bargaining
agreement between an employer and
a recognized or certified employee organization.
Health services provided by plans or
contracts issued to an employer under
a collective bargaining agreement.
Excludes all employers who show that
their health benefits are not regulated
by the state.
Community retail pharmacies designated as rural pharmacies pursuant to
federal law
None specified
Specifically Identified Exclusions
Employers who allow employees to
choose where they have their prescriptions filled.
States With Legislation Limiting Required Use of Mail Order Pharmacy
Exhibit 1
None specified
None specified
None specified
None specified
Yes, violators
may be assessed
a fine up to
$10,000 and be
required to take
corrective action.
Yes, violators
may be fined up
to $500.
Enforcement
and Penalties
Yes, violators
may be fined between $100 and
$1,000.
None specified
Seven states (Arkansas, Hawaii, Louisiana, Maryland, New York, Pennsylvania,
and Texas) include such provisions in their laws. Only one state (Connecticut) does
not.
Four (Hawaii, New York, Pennsylvania, and Texas) of those seven states, including Pennsylvania, require copayment/coinsurance comparability between retail
and mail order pharmacies if the retail pharmacy agrees to the same terms and conditions as those established by the health insurer for the mail order pharmacy. Specially, Pennsylvania’s law requires that copayment/coinsurance comparability:
shall apply only if the retail pharmacy is willing to accept from the insurer the same pricing, terms, conditions or requirements related to
the cost of the prescriptions and the cost and quality of dispensing prescriptions that the insurer has established for a mail-order pharmacy
and any of such pharmacy’s affiliates, including any affiliated pharmacy benefit manager, pursuant to the health insurance policy.3
Exclusions: Most of the states explicitly specify parties not covered by their
state law. Three (Louisiana, Maryland, and New York) of the eight states, for example, specify that certain employer-based plans are not covered. Pennsylvania
also lists insurers that are covered under the state’s insurance law,4 but are not covered by Act 2012-207’s limitations concerning pharmacy mail order. As discussed in
Finding B, however, there are important forms of health coverage available in
Pennsylvania that are not governed by the state’s insurance law, and therefore not
affected by Act 207’s provisions.
Enforcement: Most states, including Pennsylvania, do not include penalties
or enforcement provisions in their statutes. Three states (Arkansas, Hawaii, and
Louisiana), however, do. In Arkansas, any person or entity violating its state law
provisions is guilty of a misdemeanor and upon conviction can be fined between
$100 to $1,000. In Hawaii, the Insurance Commissioner may assess a fine of up to
$10,000 for each violation by a pharmacy benefit manager or prescription drug benefit plan provider. The statute further allows the Insurance Commissioner to order
pharmacy benefit managers to take specific affirmative corrective action or make
restitution.5 In Louisiana, a person convicted of violating the provisions of the act
can be fined up to $500.
LB&FC staff spoke with representatives of the state pharmacy associations
in New York and Connecticut. Connecticut’s legislation has been in place since
40 P.S. §764l(b).
40 P.S. §764l(d)(2)(iii).
5 By March 31st of each year entities affected by Hawaii’s law must file with the Insurance Commissioner a report for the preceding year stating they are in compliance with the law. The report is intended to fully disclose
the amount, terms and conditions relating to copayments reimbursement options, and other payments associated with the drug benefit plan.
3
4
5
1989, and New York’s since 2011. Representatives of both state associations indicated their state legislation had minimal impact in preventing mail order only requirements because of its limited applicability. Specifically, both state associations
noted their legislation did not apply to various employer-based plans that are not
subject to state insurance regulation. New York also noted that its statute was ineffective because it did not specifically identify the “terms and conditions” that are
and are not permitted under the program.
6
B. The Pennsylvania Insurance Department Has Received
Relatively Few Complaints Concerning Act 2012-207
The Pennsylvania Insurance Department is responsible for investigating
complaints from consumers concerning unfair insurance practices, including unfair
practices of health insurers. Its Office of Consumer Services also responds to inquiries that are brought to its attention. Based on information provided by the Insurance Department and the Pennsylvania Pharmacists Association, the Department of Insurance has received relatively few complaints and inquiries from either
consumers or others concerning Act 207.
Act 207 Complaints Filed With the PA Insurance Department
From March 2013 through mid-November 2014, the Department received:

36 consumer complaints and

9 inquires.
The Department investigated each complaint and inquiry, and as appropriate responded to the request. According to the Department:
In many instances, the complaint was not covered by Act 207 since the
filer of the complaint was enrolled in a plan not covered by Act 207.
For example, consumers asked if Medicare was covered by the act, or if
the law applied to self-funded plans. In other cases, the retail pharmacy reported that it could not meet the conditions or pricing offered
by the mail order pharmacy, and thus Act 207 would not apply in those
instances as well.
The Department advised LB&FC staff that certain health “coverage” is outside of
the scope of Act 207. According to Department legal staff:
…With regard to situations where Act 207 does not apply, some concern has been expressed as to how Act 207 defines ‘insurer,’ which in
turn references ‘health insurance policy.’ Both definitions are critical
in determining what situations trigger application of the act. Notably,
this is a standard approach in legislation enacted by the General Assembly: use of exact definitions of ‘health insurance policy’ and ‘insurer’ can be found in a number of laws, and in essence, clarifies that
those laws only apply to policies of insurance issued by licensed commercial companies and the four Blue plans. In other words Act 207—
like many laws—would not apply to many situations where a person,
erroneously believing they have insurance, might conclude that it does
apply. That is because coverage through a variety of sources such as
7
self-insured trusts, legally permitted employer welfare arrangements,1
Medicare and Medicaid, is not insurance, but rather coverage subject
to one of several laws. Those federal laws preempt state regulations,
so it would be superfluous for the legislation to have included them in
Act 207’s definitions….
To protect consumer confidential information, the Department did not provide us with a list identifying each complaint and its disposition. From other
sources, however, we obtained copies of letters sent in response to complainants.
Such letters confirm the Department’s overall characterization of the complaints it
received. Exhibit 2 provides a few examples of responses provided by the Pennsylvania Insurance Department.
The complaint information we reviewed, as well as information provided by
major health insurers, further confirms the results of our survey (see Finding C)
that there is not widespread participation of retail pharmacies in Act 207 dispensing. One major health plan noted six months after the Act’s initial implementation
date that “to date, no retail pharmacy has expressed interest in nor executed a contract…[with the insurer’s pharmacy benefit manager] to participate as a mail service pharmacy.” Another advised a consumer one year after the Act’s implementation that no pharmacy in Pennsylvania had accepted the contract for 90-day dispensing at retail under the same price, terms, and conditions as mail order. As of
late 2014, moreover, at least two major health insurers advised LB&FC staff that
they had not received completed applications from retail pharmacies seeking to participate under Act 207.
As shown in Exhibit 2, some of those filing complaints with the Insurance Department did not have a clear understanding of the Act and its coverage. Some of
those filing complaints, for example, incorrectly thought that Act 207 provided for
“Any Willing Provider” legislation, i.e., any interested pharmacy could become part
of a plan or pharmacy benefit network’s provider network. Others, inaccurately understood Act 207 to permit them to operate a “specialty” pharmacy without meeting
the plan’s unique credentialing requirements for such pharmacies.
Several of the practices of concern to those considering or filing complaints
are practices that are allowed in the federal Medicare Part D prescription drug program. As the Insurance Department noted above, however, the Medicare Part D
Nationwide 61 percent of covered workers in private, public, and private not-for-profit firms that receive
health care through their employers receive coverage through such plans, according to the Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits, 2013 Annual Survey.
1
8
Exhibit 2
Examples of Pennsylvania Insurance Department Responses to
Consumer Act 207 Complaints
Example 1:
Thank you for contacting the Pennsylvania Insurance Department with your concern.
Act 207, also known as SB 201, is a newly enacted Pennsylvania law that prohibits a
Pennsylvania health insurance policy or government program providing prescription benefits from charging an individual using a retail pharmacy a copayment, deductible fee,
limitation or other condition or requirement not otherwise imposed on the covered individual using a mail order pharmacy.
The individual cost similarity created by the Act, however, only applies if the retail pharmacy is willing to accept from the insurer the same pricing, terms, conditions or requirements related to the cost of the prescription and the cost and quality of dispensing prescriptions that the insurer has established for a mail order pharmacy and its affiliates.
Act 207 does not provide guidance on how the insurer and/or its prescription benefit
manager will reach this agreement with the retail pharmacist.
The Pennsylvania Insurance Department has worked closely with the Pennsylvania
Pharmacists Association on this legislation. Please copy and paste the below URL into
your browser to learn additional information about Act 207, compliance with the Act, and
Act 207 complaints with the Pennsylvania Insurance Department.
http://www.papharmacists.com/diplaycommon.cfm?an=18subarticlenbr=35
Thank you for providing this opportunity to respond. Please do not hesitate in contacting
me with your additional concerns.
Example 2:
Thank you for writing our Department to share your concerns about…denial of your request to become a network provider.
I do understand your concern over this situation. At present time, Pennsylvania has not
enacted an ‘Any Willing Provider’ law, which would require an insurance company to accept all medical providers wishing to participate with that company.
The Pennsylvania Insurance Department does not have jurisdiction over the contractual
relationship between a medical provider and an insurance company. This is a business
relationship and either party can elect not to enter into this relationship.
Please understand that Act 207 does not [emphasis in the original] require insurers to
accept any retail pharmacy into their network.
I regret that I am unable to provide you with any relief in this unfortunate situation. You
may want to discuss your concerns with your State Senator and Representative to determine if Legislation should be introduced to address this problem….
Source: Developed by LB&FC staff.
9
program is not subject to Act 207. The Medicare Part D program, for example, requires plan sponsors to form pharmacy networks with participating pharmacies,
and such pharmacies must agree to meet all of the sponsor’s standard terms and
conditions. Medicare, moreover, requires plan sponsors to include in their networks
any pharmacy willing to accept their standard contracting terms and conditions. It,
however, allows plans to vary their terms and conditions for different types of pharmacies as long as the same standards and conditions apply to all pharmacies within
a given pharmacy type. As a result, Medicare Part D plan sponsors have separate
and differing standards and conditions for mail and retail pharmacies.
Like Act 207, Medicare Part D calls for “a level playing field” between mailorder and retail pharmacies. When a plan sponsor includes a mail order pharmacy
that provides extended supplies (e.g., a 90-day supply) of covered drugs within its
network, Medicare Part D plans must allow network retail pharmacies to offer extended day supplies of medications. Medicare, however, permits plan sponsors to
require consumers who elect to use a retail pharmacy for extended day supplies of
medications to pay any additional costs associated with such dispensing.
Given the complexities of health benefit coverage and prescription medication
benefits across the various types of health coverage and health programs, it is not
surprising that the Pennsylvania Insurance Department staff have concluded that
there is misunderstanding about Act 207. This misunderstanding exists among
both consumers and the industry, according to the Department.
10
C. Half of the Retail Pharmacies Applying to Offer Act 207 Dispensing
Were Not Approved or Elected to Withdraw Their Applications
In 2013, nationwide, according to Drug Channels:1




mail order pharmacies accounted for 15.2 percent of the number of prescriptions dispensed through retail channels,
independent pharmacies 17.2 percent,
chain stores 55.2 percent, and
supermarkets with pharmacies 12.5 percent.
Mail order pharmacies routinely offer extended medication dispensing (i.e., 90-day
medication supplies). Retail pharmacies can also provide such dispensing. The cost
to the consumer, however, may be greater at the retail pharmacy if the consumer’s
drug benefit plan has a higher retail pharmacy copayment or coinsurance than the
mail order pharmacy for the same medication. For example, if the consumer’s drug
plan has a $10 copayment for a 90-day supply of medication from the plan’s mail order pharmacy and the consumer has a $30 dollar copayment for the same supply
from a retail pharmacy, the consumer has a strong incentive to have the medication
dispensed from the mail order pharmacy.
Act 207 was enacted in an effort to provide greater consumer access to retail
pharmacies and a “level playing field” between mail order and retail pharmacies.
To accomplish such goals, it required state-licensed health insurers that offer a prescription drug benefit to provide such benefits with copayments and coinsurance
that are the same for mail order and retail pharmacies if the retail pharmacy agrees
to the same terms and conditions that are in place for the plan’s mail order pharmacy.
To assess the impact of Act 2012-207 on consumer access to retail pharmacies
and the cost of prescription medications, the Legislative Budget & Finance Committee provided opportunity for retail pharmacies to share their experiences with the
implementation of Act 207. We obtained their input through a web-based survey
conducted in August and September 2014 with the assistance of the Pennsylvania
Pharmacists Association and the Pennsylvania Association of Chain Drug Stores,
who made the survey available to their members. Appendix B provides a copy of
the LB&FC’s retail pharmacy survey questionnaire.
As shown in Table 1, independent retail pharmacies accounted for the largest
number of our survey respondents. Five retail chain pharmacies, however, also
The Drug Channels Institute is a provider of specialized management education and computer-based training
for and about the pharmaceutical industry.
1
11
participated in the survey. While not shown in Table 1, these chains reported operating over 920 Pennsylvania drug stores.2 Two-thirds of those responding to our
survey were from eastern Pennsylvania, as shown in Table 2.
Table 1
Retail Pharmacy Respondents
Type of Pharmacy
Number of Responses
Independent Pharmacy ....................
Regional Independent Pharmacy.....
Chain ................................................
Did not identify type of pharmacy.....
Total: ..............................................
117
8
5
2
132
Source: Developed by LB&FC staff from survey responses.
Table 2
Location of Survey Respondents*
Region
Number of
Respondents
Percent
Northeast ..................
39
30%
Northwest .................
4
3
North Central ............
10
8
Southeast .................
48
37
Southwest .................
18
14
South Central............
11
9
_________________
*N = 130 of 132.
Source: Developed by LB&FC staff from survey responses.
As of November 2013, the Pennsylvania Department of State licensed over 3,300 pharmacies. Such licenses
include retail pharmacies, hospital, long-term care, and specialty pharmacies. Based on the available state licensure data, it is not possible to determine the exact number of independent and chain retail pharmacies in
Pennsylvania.
2
12
As shown in Table 3, just over three-quarters (101 of 132) of our survey respondents, including all chain pharmacy respondents, reported applying to insurers
and pharmacy benefit managers3 to offer dispensing under Act 207. Fifteen percent (21 of 132) reported they did not apply.
Table 3
Applications for Act 207 Dispensing*
Respondent Type
Applied
Did not Apply
Independent ...........
96
21
Chain ......................
5
0
Total .....................
101
21
_______________
*N = 122 of 132.
Source: Developed by LB&FC staff from survey responses.
Reasons Applications for Act 207 Dispensing Were Not Approved
As shown in Table 4, just over half (55 of 101) of respondents that applied
were not approved for Act 207 dispensing. Those not approved included one chain
pharmacy, which offered extended medication dispensing prior to Act 207, and
planned to continue such dispensing outside of Act 207.
Table 4
Outcome for Applications to Provide Act 207 Dispensing*
Respondent Type
Applied
Approved
Not Approved
Independent ...
96
42
54
Chain ..............
5
4
1
Total..............
_______________
101
46
55
*N = 101 of 132.
Source: Developed by LB&FC staff from survey responses.
Employers and plans sponsors often hire pharmacy benefit managers (PBMs) to design and administer plans
for prescription drug benefits, including plan drug formularies. PBMs are often selected for their industry
knowledge, and their negotiating power (given their large patient base) to secure rebates and discounts from
drug manufacturers and pharmacies. PBMs also provide electronic claims processing, pharmacy networks, generic substitution, and patient services. They adjudicate approximately 80 percent of all prescriptions processed today, with three large PBMs handling 65 percent of outpatient prescription volume. Some PBMs are
organizationally affiliated with prescription mail order companies. Currently, PBMs are not regulated in Pennsylvania or in most states.
3
13
We asked those respondents who applied and were not approved to provide
Act 207 medication dispensing the reason(s) offered for their non-approval. As
shown in Table 5, almost three-quarters (19 of 26) of those not approved who provided a reason for their non-approval indicated they did not meet the insurer’s mail
order pharmacy network requirements. As one respondent noted:
[the insurers’ Pharmacy Benefit Manager] requires us to be open from 8
A.M. to 10:00 P.M. Monday thru Friday and Saturdays from 8:00 A.M.
to 4:00 P.M. Our normal hours are 9-7 Monday through Friday, Saturday 9-2 and Sunday 10-2. They would not allow us to participate even
though we have a pharmacist who is on call after our normal hours….
Table 5 also shows that almost one-third (8 of 26) of those that applied and reported
a reason for non-approval indicated they had withdrawn their applications after becoming familiar with the insurer’s or pharmacy benefit manager’s requirements for
Act 207 dispensing.
While not shown in Table 5, a sizeable portion (22 of 55) of respondents that
applied and were not approved, and did not check a reason for their denial from the
list of reasons identified on the questionnaire (see question 8 on the survey questionnaire in Appendix B), provided comments concerning their non-approval. Just
over half (12 of 22) of such respondents indicated the insurers or the insurers’ pharmacy benefit managers whom they contacted gave no response or reason for their
non-approval.
Table 5
Reasons for Non-Approved Act 207 Applications*
Reason
Unduplicated
Responsesa
1. Retail pharmacy did not demonstrate that it met all of the insurer’s mail order
pharmacy network requirements ........................................................................
14
2. Retail pharmacy did not meet the insurer’s minimum volume requirement .......
1
3. Retail pharmacy decided to withdraw and did not pursue its application after
review of the insurer’s network requirements and other conditions. ..................
6
Multiple Reasons Reported
1 and 2 above ........................................................................................................
1 and 3 above ........................................................................................................
3
2
_______________
*N = 26 of 55. Twelve respondents also indicated the insurer provided no reasons for their non-approval.
Source: Developed by LB&FC staff from survey responses.
14
Act 207’s Impact on Consumer Prescription Drug Out-of-Pocket Costs
Our survey asked respondents who were approved to provide dispensing under Act 207 if consumer out-of-pocket prescription medication costs had declined following Act 207’s enactment—one of the General Assembly’s desired outcomes for
the Act. As shown in Table 6, just over 50 percent (24 of 46) of the respondents participating in Act 207’s dispensing, including two chain respondents, think consumer
out-of-pocket costs have remained the same (10 of 46) or decreased (14 of 46).
The remainder (22 of 46) reported consumer out-of-pocket costs increased.
The reasons offered for such increases, however, are not necessarily related to Act
207. Changes in a prescription drug plan’s deductibles and coinsurance may account for some of the reported consumer prescription drug cost increases.
While not shown in Table 6, typically over half (12 of 22) of those reporting
increases in consumer out-of-pocket costs, including one chain, reported increases
under $10, and just under half (10 of 22) increases greater than $10. Only nine of
the survey respondents approved to offer Act 207 dispensing reported the amount
by which consumer out-of-pocket costs have decreased. Three of the nine reported
decreases under $10 and six of the nine reporting decreases greater than $10.
Table 6
Perception of Consumer Extended Medication Copayment Costs
After Act 207’s Enactment*
(Those Approved to Offer Act 207 Dispensing)
How Consumer Costs Were Affected
Unduplicated
Responses
Independents
Unduplicated
Responses
Chains
Consumer out-of-pocket costs have increased due to, for
example, higher copayments, coinsurance, and deductibles introduced by the insurer for both retail and mail order
customers .............................................................................
20
2
Consumer out-of-pocket costs have decreased due to, for
example, Act 207’s establishment of copayments, coinsurance, and deductibles equal to those encountered through
use of mail order pharmacies ...............................................
10
0
12
2
Consumer out-of-pocket costs have neither increased nor
decreased.............................................................................
_______________
*N = 46 of 46.
Source: Developed by LB&FC staff from survey responses.
Our survey did not ask those who applied and were not approved to provide
Act 207 dispensing their perceptions of consumer out-of-pocket prescription drug
costs after Act 207’s enactment. Many (35 of 55), however, offered them. As shown
15
in Tables 6 and 7, at times, survey respondents’ views about consumer out-of-pocket
costs differ for those who were approved to provide Act 207 dispensing and those
who were not.
As shown in Table 7, only 20 percent (7 of 35) of those not approved indicated
consumer prescription medication out-of-pocket costs remained the same or decreased—compared to over 50 percent for those approved.
While not shown in Table 7, just under half (14 of 29) of those not approved
who reported consumer out-of-pocket increases indicated such increases were under
$10. The remainder reported increases greater than $10. Such reported consumer
out-of-pocket increases are somewhat similar to those reported by respondents approved to offer Act 207 dispensing.4 Only nine of those not approved to offer Act 207
dispensing reported the amount by which consumer out-of-pocket costs had decreased. Eight of the nine reported such costs had decreased by less than $10, and
one reported such costs decreased by more than $10.
Table 7
Perception of Consumer Extended Medication Copayment Costs
After Act 207’s Enactment*
(Those Not Approved to Offer Act 207 Dispensing)
How Consumer Costs Were Affected
Unduplicated
Responses
Independenta
Unduplicated
Responses
Chains
Consumer out-of-pocket costs have increased due to, for
example, higher copayments, coinsurance, and deductibles introduced by the insurer for both retail and mail order
customers .............................................................................
27
1
Consumer out-of-pocket costs have decreased due to, for
example, Act 207’s establishment of copayments, coinsurance, and deductibles equal to those encountered through
use of mail order pharmacies ...............................................
2
0
5
0
Consumer out-of-pocket costs have neither increased nor
decreased.............................................................................
_______________
*N = 35 of 55
Source: Developed by LB&FC staff from survey responses.
Survey respondents who were approved to offer Act 207 dispensing were also similar to those who were not in
their estimates of the percentage of maintenance medications for ongoing chronic conditions that they dispensed. Over 53 percent of those approved reported maintenance medications accounted for less than 10 percent of the medications they dispensed, while 54 percent of those not approved reported maintenance medications accounted for less than 10 percent of their dispensed medications.
4
16
Plans to Continue Act 207 Dispensing
Our survey also asked those approved to offer Act 207 dispensing if they
planned to continue such dispensing. As shown in Table 8, over 80 percent (39 of
46) of those approved, including the four chains, indicated they would continue.
Six approved respondents, however, reported they did not plan to continue.
As shown in Table 9, the primary reasons given for not continuing are the failure of
Act 207’s program to cover the pharmacy’s drug acquisition and drug dispensing
costs.
Table 8
Act 207 Approved Respondents’ Plans for Continued Program Participation*
Approved to Offer
Act 207 Dispensing
Plan to Continue
Plan Not to Continue
42 Independent Pharmacies
35 Independent Pharmacies
6 Independent Pharmacies
4 Chain Pharmacies
4 Chain Pharmacies
_______________
*N = 45 of 46
Source: Developed by LB&FC staff from survey responses.
Table 9
Reasons Those Approved Will Not Continue to Participate in Act 207 Dispensing*
Reason
Unduplicated Responses
1. Few of the pharmacy’s customers participated in the program .....
0
2. Most pharmacy customers have prescription drug coverage
through ERISA plans that are not subject to Act 207’s requirements
0
3. The pharmacy’s drug acquisition costs are not fully covered under the terms of the program..............................................................
1
4. The pharmacy’s drug dispensing costs are not fully covered under the terms of the program..............................................................
0
5. Our pharmacy will no longer be participating in the plan’s overall
provider network .................................................................................
0
Combination of Reasons Provided
3 and 4 above ....................................................................................
2, 3 and 4 above ................................................................................
1, 3 and 4 above ................................................................................
_______________
*N = 6 of 6.
Source: Developed by LB&FC staff from survey responses.
17
3
1
1
Our survey provided opportunity for retail pharmacists to provide comments
about Act 207 and its implementation. Exhibit 3 provides some of the key comments about Act 207 offered by pharmacies responding to our survey.
Those providing comments typically indicated the Act, while well intentioned,
was ignored, “lacked teeth,” or was not enforced. They also often noted concerns
about the practices of pharmacy benefit managers (PBMs) with the way in which
drug prices are established, and differences in the way in which prices are determined for retail and mail order pharmacies by drug manufacturers and pharmacy
benefit managers. While some of the respondents’ concerns are outside of the scope
of Act 207 (e.g., how drug prices are established) and the current statutory authority of the of the state Insurance Department (see Finding B for additional information about the authority of the Pennsylvania Insurance Department with respect
to “health insurers” and Act 207), they have been included in Exhibit 3 in view of
their importance to retail pharmacies.
Our survey responses are also consistent with insights shared by an independent pharmacist involved in drafting the initial versions of Act 207 and the compromises that were reached to obtain its passage. This independent pharmacist, for
example, advised the LB&FC:
The retail pharmacy community agreed to revisions to the legislation in the
hope that the legislation, while not perfect and intentionally not addressing a
number of issues, would nonetheless significantly increase access to retail
community pharmacy services and pave the way for future constructive dialogue. Unfortunately…health insurers, government programs and pharmacy
benefit managers have taken advantage of the legislation’s failure to more
clearly address a number of issues by interpreting the revised legislation in a
manner that prevented it from having any appreciable impact on the availability of retail pharmacy services to Pennsylvania consumers.
18
Exhibit 3
Retail Pharmacists’ Comments About the Impact of Act 207 on Access to and
Cost of Prescription Drug Coverage

Act 207 had made no changes. Because of the copay structure, consumers are forced to use
mail order pharmacies.

We need a law with teeth. This was a good first step.

It has no “teeth” so to speak. There are too many ways left open for plans to exclude or restrict
independent pharmacies.

The act has been totally ignored by PBMs [pharmacy benefit managers]. I don’t think I have retained one patient due to ACT 207. I continue to lose patients on a monthly if not weekly basis
to mandatory mail order or exclusive chain contracts.

…While Act 207 was initiated with well intentions, it has NOT [emphasis in the original] accomplished anything, the PBMs [pharmacy benefit managers] still do whatever they want to regardless of this act and things will never change until there is transparency in their corrupt system.

While I answered the above positively [i.e., the respondent has been approved to participate in
at least one plan under Act 207], the option to be in these plans is very limited. There are still
some main plans in my market that I do not/cannot participate in.

The largest problem with extended medication dispensing is the reimbursement of medication
and dispensing costs. Some plans reimburse at costs below any of our suppliers’ charge for
medication. It is not possible to remain in business when there are reimbursements below our
WAC [Wholesale Acquisition Cost].a

Most patients are locked into mail order suppliers through employer provided insurance, and are
not able to utilize our pharmacy services to benefit them. The answer we get when we try to
submit the claims to insurance is that it is not their fault. The employer selected the mail order
option but they do not mention the fact about the better deal they offer to employers if their employees utilize the PBM mail order services. Mail Order facilities are inflating AWPs [Average
Wholesale Prices]b on repackaged medications causing their plan sponsors to pay more.
Spread pricingc is also costing plan sponsors more money while PBM profits flourish. Most plans
still excluding Independent Pharmacies from participating—such as Caremark insisting the use
of mail-order or CVS stores only. Mandates to participate are not realistic. PBMs take 3 months
to update manufacturer price increases, but are able to update price decreases within 1 day.
Patients prefer dealing with their local independent Pharmacy especially senior citizens & handicapped individuals. We have also found those people where English is their second language
have problems communicating with mail-order. Three months supplies are in many cases
wasteful. Mail-order automatic deliveries are even more wasteful as drugs are sent to patients
that have passed on for months after their passing. We are being asked to fill Rx’s at a loss with
many of the plans because of MAC [Maximum Allowable Cost] pricingd while Mail-Order contracts do not use MAC pricing. Nobody seems concerned that profits do not cover expenses in
Community Pharmacy—Cost of dispensing surveys are being ignored. Professional Fee of
$0.25/Rx are a disgrace and has become the norm. It was $2.50 in the 70s.

As a business owner, I cannot continue to accept below cost reimbursement. We lost $110 on
one generic prescription today!!!!! No other business in the world has to deal with this on a daily
basis!

How could plan sponsors mail out letters to PA residing members mandating MAIL ORDER [emphasis in the original] for maintenance drugs.
19
Exhibit 3 (Continued)

The intent of the law has been, in my opinion, ignored by the majority, if not all, PBMs and insurance companies. We have been offered, and in some cases, accepted extended prescription
benefits (as a courtesy to our patients/customers). BUT [emphasis in the original] we have been
shut out from any attempt to provide extended benefits at the same terms and conditions—be it
on the copay end or the reimbursement end. That is, we are offered lower rates [for drug acquisition costs] and patients pay higher copays [than they would for mail order]. The intent of the
law was to allow access to lower copays at retail under the same payment terms and conditions.
Retail pharmacy providers have been denied reimbursement at the same terms and conditions.
We were originally excited by Act 207 because we thought it would level the playing field for all
pharmacies. But we have not been accepted into any of the 90 day plans. In addition the PBMs
all tell us the law does not apply to Specialty medications and they continue to restrict us from
every network that involves Specialty medications. It has not helped us at all.

The manufacturer’s steep price increases, sometimes 1000% overnight and lack of payors response to those increases have made pharmacy a very difficult business to be in. In my opinion
there seems to be no end in sight for drug pricing increases by manufacturers and ignorance by
payors. PBMs are quick to drop reimbursement on medications but super slow to raise the
MACs, and when they do it is often raised for a short time, then dropped again days or weeks
later. Dispensing fees are comical, plans insult us with … reimbursement fees that are a joke
and make completing these cases a full time job. Soon health care will be a ‘you get what you
pay for’ type business. Good pharmacies and pharmacists will shift their attention to more rewarding less bureaucratic business models which will leave consumer wondering what happened. It is a crime that our elected officials do not do more for our small businesses in this
country!

Only one insurance has dealt with us according to Act 207, the other insurances (PBMs) have
totally ignored Act 207 by not even giving us a contract to let us choose to join or not. Patients in
the one contract that let us in are very happy to be able to deal with their local pharmacist for
quick service and answered questions instead of wondering if the drugs by mail would be delivered on time.

The Insurance Department doesn’t seem interested in upholding this law.

Until the Insurance Dept. starts enforcing 207, nothing much will change.

We need an Act to provide for Fair pricing of meds and fair reimbursements to all pharmacies!!
____________
a
Wholesale Acquisition Cost (WAC) is the price paid by a wholesaler for drugs purchased from the wholesaler’s supplier, typically the manufacturer of the drug. Publicly disclosed or listed WAC amounts may not reflect all available
discounts.
b Average Wholesale Price (AWP) is recognized as retail list price and is currently used by some public and private
third-party payers as the basis for reimbursement (e.g. AWP minus 5 or 25 percent). AWP has been widely criticized
as a price that is not reflective of the true market price and easily manipulated, according to the Kaiser Family Foundation.
c Spread pricing refers to the practice of pharmacy benefit managers (PBMs) billing health plans or employers more
for the drug than the PBM pays the local pharmacist. For example, the PBM pays the pharmacy $100 for filling a prescription for a 30-day supply of a drug. The PBM then bills the health insurance plan sponsor or employer or union,
$110 when an insured’s prescription is filled.
d MAC lists are designed to cap reimbursement for certain generic and multi-source brand products. States and private payers with MAC programs typically publish lists of selected generic and multi-source brand drugs along with the
maximum price at which the program will reimburse for those drugs. In general, pharmacies will receive payment no
higher than the MAC price when billing for drugs on an MAC list.
Source: Developed by LB&FC staff from survey responses.
20
This independent retail pharmacist further noted:
A number of factors, most of which are an outgrowth of the changes to Senate
Bill 201 and House Bill 511 have prevented Act 207 from improving access to
retail community pharmacy services as intended by the sponsors of the legislation. These factors include:

requirements that pharmacies already enrolled in the provider networks of insurance companies by pharmacy benefit managers must apply for and be approved for admittance into new provider networks to
enjoy the benefits of Act 207;

discriminatory requirements for admission into provider networks that
either effectively block participation by retail pharmacies or make
their participation in networks unreasonably burdensome;

a lack of transparency regarding the pricing terms and conditions being paid to mail-order pharmacies coupled with demands that such
pricing terms be accepted without adequate disclosure;

the general refusal of pharmacy benefit managers affiliated with mail
order pharmacies to include payments received from insurers and drug
manufacturers in amounts paid to retail pharmacies;

assertions that self-funded employee benefit plans created by collective
bargaining agreements for Pennsylvania government employees are
not subject to Act 207;

the failure of the Pennsylvania Insurance Department to apply the requirements of Act 207 to pharmacy benefit managers acting as riskbearing preferred provider organizations (PPOs), including pharmacy
benefit managers providing services to employee benefit plans subject
to the federal Employment Retirement Income Security Act (ERISA);
and

the lack of effective efforts by the Pennsylvania Insurance Department
to enforce the law in a manner consistent with the legislative objectives.
The absence of widespread implementation of Act 207 has provided little opportunity for the Act to impact (either positively or negatively) the cost of prescription
medication services, according to this independent retail pharmacist—a conclusion
consistent with our own based on data reported by LB&FC survey respondents and
several major insurers.
21
During the course of our study, we received several suggestions on steps to
improve the implementation of Act 207. The independent pharmacist recommends:
…a careful analysis of the legality of the tactics and strategies used by pharmacy benefit managers and insurance companies to impede implementation
of Act 207 and the adoption of regulatory policies, and perhaps amendments
to Act 207, to ensure that the legislation achieves its intended goals and objectives.
A chain pharmacy representative advised the LB&FC that to increase the
number of pharmacies participating in Act 207, the insurers and PBMs need to offer
community pharmacies a “reasonable rate that would not result in the community
pharmacy losing money filing prescriptions,” as can occur with Act 207’s requirement that a community pharmacy accept the same “terms and conditions” as a mail
order pharmacy. In addition, the limited scope of Act 207 would need to be addressed to increase utilization by community pharmacies.
The Pennsylvania Insurance Department advised us that it was not actively
involved in the drafting of Act 207. It suggested that should the Pennsylvania General Assembly plan to revise the statute, PDI be involved initially and throughout
the process in view of the complexity of health insurance in Pennsylvania and nationally.
22
III. Appendices
23
APPENDIX A
INSURANCE COMPANY LAW OF 1921 - COVERAGE OF PRESCRIPTIONS
Cl. 40
Act of Nov. 1, 2012, P.L. 1670, No. 207
Session of 2012
No. 2012-207
SB
201
AN ACT
Amending the act of May 17, 1921 (P.L.682, No.284), entitled
"An act relating to insurance; amending, revising, and
consolidating the law providing for the incorporation of
insurance companies, and the regulation, supervision, and
protection of home and foreign insurance companies,
Lloyds associations, reciprocal and inter-insurance
exchanges, and fire insurance rating bureaus, and the
regulation and supervision of insurance carried by such
companies, associations, and exchanges, including
insurance carried by the State Workmen's Insurance Fund;
providing penalties; and repealing existing laws," in
health and accident insurance, providing for coverage of
prescriptions.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of May 17, 1921 (P.L.682, No.284),
known as The Insurance Company Law of 1921, is amended by
adding asection to read:
Section 635.6. Coverage of Prescriptions.--(a) A health
insurance policy or government program providing benefits
for prescriptions shall not impose on a covered individual
utilizing a retail pharmacy a copayment, deductible, fee,
limitation on benefits or other condition or requirement not
otherwise imposed on the covered individual when using a
mail-order pharmacy.
(b) Subsection (a) shall apply only if the retail
pharmacy is willing to accept from the insurer the same
pricing, terms, conditions or requirements related to the
cost of the prescriptions and the cost and quality of
dispensing prescriptions that the insurer has established for
a mail-order pharmacy and any of such pharmacy's affiliates,
including any affiliated pharmacy benefit manager, pursuant
to the health insurance policy.
(c) Beginning eighteen months after the effective date
of this section, the Legislative Budget and Finance Committee
shall conduct an evaluation of the impact of this section
regarding the access to prescription drugs at both
independent and chain retail pharmacies and whether the
provisions of this section have had a material positive or
negative impact upon the cost of prescription medications to
24
Appendix A (Continued)
consumers and health care plans and shall issue a report to
the General Assembly within nine months of the commencement of
the study regarding its findings and recommendations.
(d) As used in this section:
(1)
"Government program" means any of the following:
(i) The Commonwealth's medical assistance program
established under the act of June 13, 1967 (P.L.31,
No.21), known as the "Public Welfare Code."
(ii)
The Children's Health Care Program established
under Article XXIII.
(iii)
The program of pharmaceutical assistance for the
elderly established under Chapter 5 of the act of August
26, 1971 (P.L.351, No.91), known as the "State Lottery
Law."
(2) "Health insurance policy" means a group or
individual health or sickness or accident insurance policy,
subscriber contract or certificate issued by an entity subject
to any one of the following:
(i) This act.
(ii) The act of December 29, 1972 (P.L.1701, No.364),
known as the "Health Maintenance Organization Act."
(iii) 40 Pa.C.S. Ch. 61 (relating to hospital plan
corporations) or 63 (relating to professional health
services plan corporations).
The term does not include accident only, fixed indemnity,
limited benefit, credit, dental, vision, specified disease,
Medicare supplement, Civilian Health and Medical Program of
the Uniformed Services (CHAMPUS) supplement, long-term care
or disability income, workers' compensation or automobile
medical payment insurance.
(3) "Insurer" means any entity that issues a group or
individual health, sickness or accident policy or
subscriber contract described under paragraph (2).
(4) "Mail-order pharmacy" means a pharmacy as defined in
the act of September 27, 1961 (P.L.1700, No.699), known as
the "Pharmacy Act," where prescriptions are dispensed to
covered individuals via the mail.
(5) "Prescription" and "dispensing" mean those terms as
defined in the act of September 27, 1961 (P.L.1700,
No.699), known as the "Pharmacy Act."
(6) "Retail pharmacy" means a pharmacy as defined in
the act of September 27, 1961 (P.L.1700, No.699), known as
the "Pharmacy Act," where prescriptions are able to be
dispensed to covered individuals on the premises of such
pharmacy.
Section 2. This act shall apply to all health insurance
policies and government plans issued or renewed on or after
the effective date of this section.
Section 3. This act shall take effect in 120 days.
APPROVED--The 1st day of November, A.D. 2012.
TOM CORBETT
25
APPENDIX B
Act 2012-207’s Impact on Access to and Cost of Prescription Drugs
Questionnaire for Pennsylvania Retail (Independent and Chain) Pharmacies
The identity of individuals responding to this questionnaire will remain confidential. Thank you
for your assistance and cooperation with this study.
Pharmacy Characteristics
1. Are you an independent pharmacy (≤4 stores)? ___ Yes ___ No
2. Are you a regional independent pharmacy (> 4 stores)? ___Yes ___ No
3. Are you a publicly traded chain pharmacy? ___Yes ___No If yes, how many retail
pharmacies (not including specialty or long–term care pharmacies) does your chain operate in
Pennsylvania? ________________
4. If you are a chain pharmacy, with which major chain is your pharmacy a part?
___ CVS
___ Rite Aid
___ Walgreen
___ Wal-Mart
___ Kmart
___ Costco
___ Target
___ Grocery store pharmacy
___ Other (Please specify) __________________________________________________
5. Geographically, where in the state is your pharmacy located?
___ Northeast Pennsylvania
___ Southeast Pennsylvania
___ North Central Pennsylvania
___ South Central Pennsylvania
___ Northwestern Pennsylvania
___ Southwestern Pennsylvania
6. Did your pharmacy apply to at least one insurer or its Pharmacy Benefit Manager to offer
extended medication dispensing (i.e., typically 90 day supply of a maintenance medication) at
retail on the same terms and conditions as mail order pharmacies as provided for in Act 207?
___ Yes ___No
26
Appendix B (Continued)
Legislative Budget and Finance Committee PO Box 8737 Harrisburg PA 17105‐8737 Phone (717) 783‐1600 Fax (717) 787‐5487 [email protected] 7. Did at least one of the insurers or Pharmacy Benefit Managers to whom your pharmacy
applied approve your application to offer extended medication dispensing on the same terms and
conditions as mail order pharmacies in the plan’s provider network? ___ Yes ___ No
Pharmacies that Applied and Were Not Approved to Provide Extended Medication
Dispensing at Retail—Please Answer Question 8
8. What reasons were given for your pharmacy not being approved to provide extended
medication at retail? Check all that apply.
___ Our retail pharmacy did not demonstrate that it met all of the insurer’s mail order
pharmacy network requirements.
___ Our retail pharmacy did not meet the insurer’s minimum volume requirements.
___ Our retail pharmacy decided to withdraw and did not pursue its application after
review of the insurer’s network requirements and other conditions. Please specify
the requirement that led your pharmacy to decide not to seek approval.
_____________________________________________________________________
___ Other (Please specify) __________________________________________________
Pharmacies Currently Providing Extended Medication Dispensing at Retail -- Please
Answer Questions 9 through 15
9. In the extended medication dispensing at retail program in which you currently participate,
are consumer copayments, coinsurance, deductibles, other out-of-pocket costs and other
requirements the same as those for mail order customers?
___ Same
___ Consumer out-of-pocket costs and other requirements differ for retail and mail order
for the same supply of the same prescription. Please identify the key differences.
________________________________________________________________________
10. What percentage of the maintenance medications (i.e., prescription drugs used to treat
ongoing medical conditions such as diabetes, high blood pressure, high cholesterol, asthma, etc.)
dispensed by your pharmacy are dispensed under the program? Please estimate.
___ Less than 5 percent
___ Between 5 and 10 percent
___ Between 10 and 25 percent
___ Between 25 and 50 percent
___ More than 50 percent
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Appendix B (Continued)
Legislative Budget and Finance Committee PO Box 8737 Harrisburg PA 17105‐8737 Phone (717) 783‐1600 Fax (717) 787‐5487 [email protected] 11. How have costs to consumers for maintenance medications been affected by your
pharmacy’s extended medication dispensing at a retail program with the same terms and
condition as mail order pharmacies?
___ Consumer out-of-pocket costs have increased due to, for example, higher
copayments, coinsurance, and deductibles introduced by the insurer for both retail
and mail order customers.
___ Consumer out-of-pocket costs have decreased due to, for example, Act 207’s
establishment of copayments, coinsurance, and deductibles equal to those
encountered through use of mail order pharmacies.
___ Consumer out-of-pocket costs have neither increased nor decreased.
12. If, in your view, consumer out-of-pocket costs have increased due to extended medication
dispensing at retail, by how much have they increased?
For a 90 day prescription drug supply, consumer out-of-pocket costs have increased by:
___ $1.00
___ $2.00 - $5.00
___ $6.00 - $10.00
___ More than $10.00
___ In my view, consumer out-of-pocket costs have not increased.
13. If, in your view, consumer out-of-pocket costs have decreased due to extended medication
dispensing at retail, by how much have they decreased?
For a 90 day prescription drug supply, consumer out-of-pocket costs have decreased by:
___ $1.00
___ $2.00 - $5.00
___ $6.00 - $10.00
___ More than $10.00
___ In my view, consumer out-of-pocket costs have not decreased.
14. Does your pharmacy plan to continue participation in the extended medication dispensing at
retail program in the upcoming year? ___ Yes ___ No
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Appendix B (Continued)
Legislative Budget and Finance Committee PO Box 8737 Harrisburg PA 17105‐8737 Phone (717) 783‐1600 Fax (717) 787‐5487 [email protected] 15. If your pharmacy does not plan to continue participation in the extended medication
dispensing at retail program, what are the reasons for discontinuing participation? Check all that
apply.
___ Few of the pharmacy’s customers participated in the program.
___ Most pharmacy customers have prescription drug coverage through ERISA plans
that are not subject to Act 207’s requirements.
___ The pharmacy’s drug acquisition costs are not fully covered under the terms of the
program.
___ The pharmacy’s drug dispensing costs are not fully covered under the terms of the
program.
___ Our pharmacy will no longer be participating in the plan’s overall provider network.
___ Other (Please explain.)___________________________________________
16. Do you have comments you would like to make regarding Act 207? ____________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
16. Name: (Optional) ___________________________________________________________
17. Telephone: (Optional) ________________________________________________________
18. Email: (Optional) ___________________________________________________________
The identity of individuals responding to this questionnaire will remain confidential. Thank you
for your assistance and cooperation with this study.
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