Maximum Allowable Cost Information Center
Maximum Allowable Cost ("MAC"): MAC prices are the upper limits that a pharmacy benefit manager ("PBM") or prescription drug benefit plan will pay a pharmacy for generic drugs and brand name drugs that have generic versions available (multi-source brands).
The problem with MAC pricing: PBMs use arbitrary and opaque MAC pricing to derive record profits at the expense of independent pharmacies, plan sponsors and most importantly consumers. The lack of transparency surrounding MAC pricing allows PBMs to pay aggressively low reimbursement to pharmacies while charging significantly higher amounts for the for the same drug to plan sponsors, pocketing this "spread" at the cost of consumers.
Legislative solutions: A number of states have recently passed legislation or have legislation pending that is designed to provide clarity on PBMs' derivations of MAC pricing, and standardization for how products are selected for inclusion on MAC lists.
CURRENT STATE MAC LEGISLATION
Act 1194 - Regulates how drugs can be put on the MAC list as well as requires the MAC lists be made available to pharmacies. The act also requires that necessary updates be performed on the MAC list every 7 days. It also creates an appeals process for pharmacies to dispute MAC price billing with PBMs. (Act signed into Law April 12,2013)
HF 2297 - This law regulates PBM management of Maximum Allowable Costs. Among the various provisions is a requirement for the PBM to include in its contract information regarding which of the national compendia is used to obtain pricing data used in the calculation of the maximum reimbursement amount pricing and a process to allow a pharmacy to comment on, contest, or appeal the maximum reimbursement amount rates or maximum reimbursement amount list. (Signed into Law March 14, 2014)
S.B. 107 - Requires the PBMs to identify the sources used for their drug price data as well give the contracted pharmacies the actual cost MAC for each drug. Additionally it requires reviews and adjustments to the MAC for every drug every 14 days. (Signed into Law March 22, 2013)
H.B. 126 - This legislation would provide a reasonable degree of transparency over how MAC pricing is determined and reported. The legislation also takes additional steps to reform PBM activities in New Mexico. This law will help preserve patient access to prescription drugs and better protect New Mexico’s small business community pharmacies from being reimbursed at a financial loss. It will establish guidelines and notice provisions for Maximum Allowable Cost for drugs and a system for challenging the MAC pricing. (Signed into law by the Governor March 5th.)
H.B. 1363 - Requires the PBMs to every year divulge the market-based source utilized to determine MAC and update the pricing information every seven calender days. Also ensures that the MAC prices are not set below market-based sources available for purchases without limitations by pharmacy providers. (Signed into Law April 12, 2013) - See our letter in support of H.B. 1363.
H.B. 2123 - Requires PBMs to disclose to pharmacies the sources used to determine the MAC pricing at the start of each contract and upon each subsequent renewal of the contract. PBMs also can no longer include the dispensing fee in the calculation of the MAC. (Signed into Law July 1, 2013)
Texas:S.B. 1106 - his law regulates what drugs can be placed on the MAC cost list as well as spells out the frequency for how frequently the MAC information must be updated to reflect any modification in MAC pricing. Specifies information that must be given to pharmacies when entering or renewing contracts as well as creates an appeals process for pharmacies to contest MAC reimbursement rates. (Signed into Law June 14, 2013)
H.B. 113 - Would regulate certain reimbursement practices of Pharmacy Benefits Managers including the Maximum Allowable Cost as well as appeal rights for Pharmacies. The MAC may be determined be determined by using comparable and current data on drug prices obtained from multiple nationally recognized, comprehensive data sources, including wholesalers, drug file vendors, and pharmaceutical manufacturers for drugs that are available for purchase by pharmacies in the state. The PBM is however responsible for disclosing in their contract with a pharmacy the national drug pricing compendia and other sources used to obtain the drug prices, as well as review and make necessary changes to the MAC list once per week. (Signed into Law March 31, 2014)
SB 6137: This law requires PBMs to register with the Department of Revenue, imposes limits on audits of pharmacies by PBMs and other entities, places restrictions on the use of MAC pricing and includes appeals processes for pharmacy audits and MAC pricing. Would regulate how Pharmacy Benefit Managers operate in the State broadly as well as outlines specifics including how audits are to be conducted and take place as well as details surrounding the application of a Maximum Allowable Cost list. A PBM would be required to make available to each network pharmacy at the beginning of the term of a contract, and upon renewal of a contract, the sources utilized to determine the MAC pricing of the PBM. Additionally a PBM is mandated to update each list every seven business days and make said updated lists available to network pharmacies. (Signed into law by Gov. Jay Inslee (D) on April 3, 2014)
PENDING STATE MAC LEGISLATION (2014 LEGISLATIVE SESSIONS)
S.B 408 - Would impose certain requirements for the use of maximum allowable cost pricing by Pharmacy Benefit Managers. Such requirements would necessitate that in all contracts or agreements with pharmacists, pharmacies, or other licensed dispensing providers that the MAC methodology, basis of the methodology, and sources used to determine the MAC for each drug. Additionally updates on pricing information to pharmacies, pharmacists, and other licensed dispensing providers will be made available every seven calendar days.
H.B 1026 - Would require that any PBM that uses MAC pricing or MAC list pricing to determine reimbursement for pharmacies and other licensed dispensaries. Additionally the bill would require to allow for an administrative appeals process for the pharmacy or dispensing entity to contest the listed MAC rate as well as require the timely elimination or modification of products on the MAC list to reflect general market condition.
S.B. 1014 - Would specify contract terms that must be included in a contract between a PBM and and a pharmacy and provides restrictions on the inclusion of prescription drugs on a list that specifies the MAC for such drugs. Additionally this would require the PBM to disclose certain information to a plan sponsor as well create an appeals process for pharmacies wishing to contest charges or reimbursement with PBMs.
H.B. 1115 - Would regulate Pharmacy Benefit Managers generally as well as lays out guidelines what MAC information must be provided to a Pharmacy. Specifically that a PBM shall provide to pharmacies that it has contracted with the market based sources used to determine the maximum allowable cost price lists of the pharmacy benefits manager at the beginning of each calendar year as well as the updated price information at least every seven calendar days through an agreed upon updating process. Also included were provisions to allow for an agreed upon administrative appeals procedure to allow a pharmacy to appeal a listed maximum allowable cost price.
S.B. 3087 & H.F. 2297 - Would regulate Pharmacy Benefit Managers and require them to provide to Pharmacies information regarding which of the national compendia is used to obtain pricing data used in the calculation of the maximum reimbursement amount (MAC) pricing. It would also mandate the creation of a process to allow a pharmacy to comment on, contest, or appeal the maximum reimbursement amount rates or maximum reimbursement amount list.
S.B. 410 - Would regulate Pharmacy Benefit Managers and force them to make their Maximum Allowable Costs available to each pharmacy subject to the list. Additionally PBMs must update their MAC list on a timely basis, but in no event longer than seven calendar days from a change in the methodology on which the MAC list is based or in the value of a variable involved in the methodology.
H.P. 1196 - Would regulate pricing disclosure requirements of Pharmacy Benefits Managers including requirements surrounding Maximum Allowable Cost. Requires the basis of the methodology and the sources used to establish the MACs used by the PBM to be disclosed at the beginning of each calendar year. Additionally a PBM shall establish a process by which a pharmacy may contest a MAC, the PBM must then respond to the Pharmacy within 15 calendar days.
S.B. 952 & H.B 793 - Would force Pharmacy Benefit Managers to disclose pricing methodology to pharmacies and PSAOs to calculate reimbursement costs for each drug, medical benefit or device that is a covered benefit administered by the PBM. A PBM shall include in its contract information identifying the National Drug pricing compendia or other source used to obtain the drug, medical product, and device price data; and the methodology used to calculate the Maximum Allowable Cost. Additionally a PBM must make a process available through which a Pharmacy may appeal a MAC within 60 days after the date of the original submission.
S.B. 895 & H.B. 2152 - Would require that for every drug for which the Pharmacy Benefit Manager establishes a Maximum Allowable Cost to determine the drug product reimbursement, the PBM shall include in the contract with the pharmacy, information identifying the national drug pricing compendia or sources used to obtain the drug price data and the methodology used in preparing the maximum allowable cost. Additionally a PBM must provide a process for each pharmacy subject to the
MAC to receive prompt notification of an update to the MAC list.
H.B. 2100 - Would regulate the conduct and transparency of Pharmacy Benefit Manager as well as specify what information they must reveal to pharmacies with whom they contract. Such contracts would include the basis of the methodology and sources utilized to determine the maximum allowable cost pricing of the pharmacy and would require the MAC pricing updated every seven calendar days. Additionally a PBM would be required to provide a reasonable administration appeals procedure to allow a provider to contest MAC rates
S.B. 402 - Would require PBMs to specify methodology for determining MAC prices as well as creates a process for adjudication if the pharmacy disputes the MAC price. Also would specify the frequency for which the MAC list must be updated.
S.B 1089 - Would provide the groundwork for the regulation of Pharmacy Benefit Managers generally as well as in their interactions with Pharmacies and other providers. One aspect that was laid out dealt with the Maximum allowable cost list pricing disclosures between a PBM and its contracted pharmacies, specifically that beginning on January 1st of each calendar year, the PBM shall, provide or make readily available the applicable MAC to pharmacies. As well as include the basis of the methodology and sources utilized to determine the MAC.
S.B. 2531 & H.B 7643 - Would provide regulators the ability to oversee the business relationships between pharmacy providers and health service organizations. Some of the practices that will be overseen include auditing as well as changes concerning the Maximum Allowable Cost list. Specifically a PBM shall at the beginning of each calendar year disclose to pharmacies it contracts with, the basis of the methodology and the sources used to create the MAC pricing index or MAC rates used by the PBM. Additionally at least once every seven business days, the MAC pricing index or MAC rates used by the PBM.
H.B. 1554 - Would regulate the use of Maximum Allowable Cost lists by Pharmacy Benefit Managers and Covered Entities. The law would require a PBM or covered entity to provide to each pharmacy with which the PBM or Covered entity has a contract the methodology and sources used to determine the MAC for the multi-source generic drugs and medical products and devices on each MAC. Additionally a PBM shall not set the MAC for any multi-source generic drug or medical product or device it places on a MAC list in an amount which is below the amount found in the source used by the PBM to set the cost.
H.B. 1036 - Would regulate Pharmacy Benefit Managers widely in their contractual dealings with Pharmacies. Among the mandated changes include guidelines for how audits must be conducted by PBMs of Pharmacies including when such audits can occur and who must be on present for them to take place. Additionally this law would regulate factors relating to the Maximum Allowable Cost list, among which would be the frequency with which the list is updated and what requirements go into putting a drug on the MAC.
S.B. 509 - Would regulate Pharmacy Benefits Managers and their conduct with pharmacies through rules and guidelines. If enacted would impose restrictions upon audits conducted by PBMs and provide an internal review process applicable to disputed findings of a PBM upon audit. It would also require PBMs to provide notice to purchasers, pharmacists and pharmacies of information relating to maximum allowable costs as well as require pharmacy benefits managers to provide a process relating to the appropriate use of maximum allowable cost pricing.
Pending Federal MAC Legislation
S.B. 867 - A bill to amend title XVIII of the Social Security Act to provide for pharmacy benefit manager standards under the Medicare prescription drug program, to establish basic audit standards of pharmacies, to further transparency of payment methodology to pharmacies, and to provide for recoupment returns to Medicare.
OTHER STATE MAC PRICING INITIATIVES
The Kansas Department of Health and Environment requires in its Managed Care for Medicaid and CHIP Program (KanCare) contract with Health Insurers that: