Chambana Sun

A University of Illinois (U of I) professor has released a white paper that could have an impact on legislation being considered in states across the country.

The paper by David A. Hyman, M.D., J.D., is the H. Ross and Helen Workman Chair in Law and Professor of Medicine at the University of Illinois. His paper shows that legislation limiting the circumstances under which maximum allowable cost programs (MACs) may be used could result in an increase in the cost of prescription drug coverage.

“This is immensely important at a specialized level for pharmacies and most of the action is happening at the state level where the issue is being addressed in individual state bills (SB),” Hyman told American Pharmacy News.

According to his white paper, The Adverse Consequences of Mandating Reimbursement of Pharmacies Based on Their Invoiced Drug Acquisition Costs, public and private payers usually rely on MACs to determine the reimbursement level for dispensed generic pharmaceuticals

MACs are set at a level that reflects the average acquisition cost of a well-run pharmacy, and they encourage pharmacies to buy generic drugs at the lowest cost. This sparks competition among wholesalers and drug manufacturers, and lowers overall pharmaceutical spending, Hyman explained.

The issue, he said, is that states have started restricting the circumstances under which MACs can be used.

In Arkansas, for example, recently enacted legislation that requires pharmacy benefit managers (PBMs) to pay pharmacies at least their invoiced acquisition cost, regardless of whether a lower priced option is available in the marketplace.

Such a provision, he said, effectively functions as a "guaranteed profits" term, meaning that no matter how much a pharmacy spends to buy a drug, the pharmacy is guaranteed to be repaid at least that amount and likely more.

“The ‘guaranteed profits’ term in Arkansas SB 688 is particularly pernicious because it imposes a cost-based approach to pharmaceutical purchasing and undermines the competitive forces that would otherwise result from the use of MACs,” Hyman, who previously served as special counsel at the U.S. Federal Trade Commission and who now focuses on the regulation of health care financing and delivery at UI, said.

“In the pharmaceutical setting, such legislation is designed to benefit pharmacies at the expense of consumers, employers and PBMs," he said.