Kentucky legislators should not embrace pharmaceutical manufacturer “kickback” system

Published 9:23 am Friday, February 12, 2021

Tom Stephens
Executive Director
Kentucky Association of Health Plans

Big Pharma rang in 2021 by hiking prices on a whopping 800 drugs by an average of nearly 5 percent.  These additional costs far outpace the current 1.4 percent rate of inflation and came on the heels of increases since July 2019.  While affordability and economic recovery should be of paramount concern to members of the General Assembly, proposed legislation is being considered that would send even more dollars to drug companies and increase premiums.

Kentucky Senate Bill 45 and House Bill 114 would encourage a practice that is banned in federal programs like Medicare Part D.  The bills would increase health premiums for working Kentuckians and small businesses by mandating health plans apply the value of pharmaceutical manufacturers’ copay cards toward an insured’s deductible.  These copay cards are designed to keep insureds on higher-price drugs by removing incentives to use cheaper generic medication.  Researchers from UCLA, Harvard, and Northwestern estimate that for brand-name drugs facing generic competition, these copay cards boost retail sales by 60 percent or more. And they increase spending by anywhere from $30 million to $120 million per drug.

By steering patients toward more expensive brand name treatments, drug companies keep costs high for everyone—and keep their large profit margins, which are at least five times that of any other health care industry.  In Medicare Part D, this practice is even considered a “kickback” and pharmaceutical manufacturers are at risk of sanctions if they fail to take appropriate steps to ensure that their copay cards do not induce the purchase of Federal health care programs items or services.

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While these Kentucky bills apply to the private insurance market, they curiously do not apply to the Kentucky Employees’ Health Plan, presumably because this mandate will increase costs for the state’s self-funded program where our Legislators are eligible for coverage.  It is also notable that the copay cards do not apply to the uninsured, only to benefit plans whose premiums are paid by individuals and employer groups.

This is all part of an avalanche of health mandate bills that are filed and/or passed each year that increase health care costs for Kentuckians.  It’s estimated each health mandate can add as much as five percent to premiums, yet Kentucky now has more mandates on the books than the national average. The increases from mandates are most felt by small employers or individual payers who do not have the resources to self-insure. The rising cost pressures can force tough decisions. It may be that these small firms trim insurance or other employee benefits, increase the share their employees pay for premiums, eliminate health coverage altogether and/or reduce wages.

As Kentucky recovers from COVID-19, now is not the time to impose another mandate on employers and individual insurance payers that will increase premiums, reduce coverage, and take money out of working Kentuckians wallets.

Tom Stephens is Executive Director of the Kentucky Association of Health Plans, the trade organization representing the Kentucky health insurance community.