Diagnosis For 7.12.22: Checking The Pulse Of Florida Health Care News And Policy

By Christine Jordan Sexton

OK, so a new budget is in place — time to begin the annual ritual of preparing for the next one.

State economists will meet over the next few weeks to draw up the all-important forecasts that prove pivotal for long-term budget outlooks — and eventually, the next budget that legislators will work on during the 2023 Session.

The current fiscal year kicked in on July 1 and runs until the end of June 2023.

Economists hold estimating conferences throughout the year, but the summer ones are important since they are the building blocks for the three-year outlook to be submitted to the Legislative Budget Commission in early September.

Everyone expects that the bottom line will be good, and the state will have a substantial budget surplus (along with large reserves), although the recession clouds over the economy are hanging in there. One key factor regarding health care expenses is the expectation that President Joe Biden’s administration will extend the public health emergency related to COVID-19, which is set to expire Friday.

An extension means two items of importance for Florida: The state will continue to collect a higher matching rate for Medicaid from the federal government (needing less state money). But also, Florida cannot begin to remove enrollees from Medicaid until the public health emergency, first put in place two years ago, ends.

I welcome your feedback, questions and, especially, your tips. You can contact me by emailing me at SextonHealthNewsletter@gmail.com or call me at 850-251-2317.

— DeSantis vs. PHARMA —

At a Cape Coral news conference late last week, DeSantis called PBMs a cottage industry, saying the pricing process is “so opaque you can see why money is potentially being skimmed.”

But the EO doesn’t apply to all PBMs, just the ones contracted with the state or subcontracted with entities that have contracts with the state.

That leaves the people with commercial health insurance (other than state employees) without protection from PBMs. According to the Florida Office of Insurance Regulation, there were 3,807,574 people enrolled in commercial policies in 2020.

PBMs represent health insurers, employers, and state government in the selection, purchase, and distribution of pharmaceuticals. They also organize and service pharmacy networks. Customers pay the PBMs to manage prescription drug costs, PBMs negotiate with the drug manufacturer to receive rebates.

PBMs also negotiate reimbursement and dispensing fees with network pharmacies and pharmacists.

The executive order notes that several states have enacted laws that increase reporting requirements to protect consumers and ensure transparency and accountability.

In the order, the Governor directs all agencies that contract for health care services to include language in future contracts that prohibit PBMs from using spread pricing and financial “claw backs.”

Spread pricing occurs when the PBM retains a part of the amount — known as “spread” — between what the employer or health plan pays the PBM for a member’s prescription and the amount that the PBM reimburses the pharmacy.

Claw backs refer to a contractual provision that allows PBMs to keep a part of the money it recoups during pharmacy audits.

The Agency for Health Care Administration and the Department of Management Services, which will obtain the managed Medicaid program and the state group health insurance plan, respectively, did not need the executive order to include the prohibitions in their upcoming contracts.

Agencies can include restrictions in their contracts without the order.

The Governor also notes in the executive order that several states have passed PBM reforms, but that “significant” reforms filed by lawmakers over the last several years “have been met with resistance from special interests.”

It’s worth noting that the DeSantis administration has avoided the PBM legislative debate so far, but with this latest effort it will be worth watching whether the administration continues to stay out of the debate.

AHCA Secretary Simone Marstiller said her agency would use the executive order as a baseline and that AHCA will be working on ways to ensure independent pharmacists “can serve not just the Medicaid population but all the members of (the) community without going out of business at the hands of the PBMs.”

— Keeping up with California? —

After expressing dissatisfaction with PBMs, a key part of the new executive order issued by DeSantis directs the AHCA to move ahead “expeditiously” in hiring a vendor to help the state negotiate prices for insulin and epinephrine.

The Legislature gave the agency authority to hire a vendor to obtain the drugs on behalf of the state as part of the new 2022-2023 budget that just took effect.

However, the Legislature didn’t appropriate any money to the agency to employ a vendor.

Instead, the vendor will be compensated on a contingency basis, paid from a part of the savings achieved by its price negotiation (or purchase) of insulin and epinephrine.

That means the vendor will be doing the work of a PBM, which DeSantis slammed in his news conference Friday.

The budget clarifies that the AHCA must competitively bid for the vendor service and that the agency must announce the bid and hire a vendor before June 30, 2023, when the budget and the agency’s authority negotiate for the costly drugs expire.

DeSantis made the announcement as California Gov. Gavin Newsom declared his state is preparing to produce its own supply of insulin. The California budget allocates $100 million to develop and manufacture biosimilar insulin products for Californians.

Half the $100 million will support the development of low-cost insulin products for residents. The remaining funds will be appropriated to a California-based insulin manufacturing facility to create high-paying jobs and a new insulin supply chain for residents.