Unions Worry Drug Cost Legislation Could Hit Their Health Plans

As Congress takes on companies managing prescription drug benefits, newly emboldened unions are sending a message to lawmakers: Don’t mess with our health plans.

Why it matters: Unions have a history of shaping the health care agenda, and their voice could be especially notable as organized labor flexes its muscle this year.

State of play: There’s unusual bipartisan agreement among lawmakers on the need to rein in pharmacy benefit managers, who are facing increased scrutiny for their role in high drug costs.

  • Several committees have advanced bills that would mandate new PBM reporting requirements, remove incentives for the companies to favor higher-priced drugs, and ban “spread pricing” in Medicaid, among other measures.
  • PBM bills are still taking shape, and it’s possible they could be wrapped into a year-end legislative package.

Driving the news: The International Brotherhood of Electrical Workers, the International Brotherhood of Teamsters and dozens more unions and multi-employer organizations recently sent a letter to Senate lawmakers asking them to shield employer health plans from PBM legislation.

  • While current legislation doesn’t touch that coverage, the organizations wrote they “have seen drafts of language designed to gut” a federal law governing employer-sponsored plans.
  • The nearly 50-year-old law known as the Employee Retirement Income Security Act, or ERISA, sets minimum federal standards for employer health plans and bars states from regulating them.
  • “While we appreciate the need for meaningful and thoughtful regulation of PBMs, such regulation should not come at the expense of … the ability of plans to maintain uniform plan design and administration nationwide,” the unions’ letter said.

Their letter doesn’t lay out the specific policies they’re worried that lawmakers are considering, and union officials declined to elaborate. But recent state efforts to regulate PBMs could provide insight into unions’ concerns.

  • Unions and employers say PBM laws enacted by states in the past few years have run afoul of ERISA by affecting employers’ insurance costs, which in turn limits the benefits they’re able to offer.
  • The Supreme Court in 2020 found that an Arkansas law requiring PBMs to pay pharmacies no less than their cost of acquiring a drug didn’t interfere with ERISA. But in August, a federal appeals court ruled that an Oklahoma PBM law meant to support independent pharmacies went too far.

Between the lines: Other unions, including AFL-CIO and the United Auto Workers, also recently sent a letter to congressional leadership that advocated for protecting ERISA plans.

  • Their letter doesn’t call out PBM legislation, but an AFL-CIO official told Axios the unions are concerned about language undercutting ERISA being added into PBM legislation.
  • To be clear, they’re strongly supportive of PBM legislation that lowers their costs. Transparency provisions “will go a long way to making sure PBMs do their job,” said Tom Leibfried, legislative representative for the AFL-CIO.
  • Leibfried said they’re worried if lawmakers start opening up ERISA to allow state regulation of employer plans, then “suddenly we get into some really nasty politics.”
  • That could have repercussions for employer-sponsored coverage of reproductive care or gender-affirming treatment, he said.

Zoom out: There has been long-running debate about whether to open up ERISA to state regulation.

  • Giving states more flexibility to weigh in on employer health plans can help contain costs, the Commonwealth Fund wrote in a February issue brief.
  • But conservative health care experts argue that giving states authority over these plans will weaken private health care and raise consumer costs.


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