Texas: PBM Discounts after January 1, 2011

Texas: PBM Discounts after January 1, 2011

 The following information concerns emergency rule amendment adoption regarding pharmacy fee guidelines and continued use of Pharmacy Benefit Managers (PBM).

By statute, informal networks or silent PPOs are prohibited unless they choose to become certified by the Texas Department Insurance as a certified workers’ compensation healthcare network.  Some believe this prohibition prevents Pharmacy Benefit Managers (PBM) from operating to reduce the costs of prescription medications.  In April 2010, DWC requested a Texas Attorney General opinion.  On December 10, The AG’s office issued its decision (discussed below) that raised more questions than it answered.  DWC was forced to consider and adopt an emergency rule.

Today, the DWC issued emergency rule amendments to clarify and essentially extend the status quo until the Legislature can frontally address the issue in 2011.  DWC also published a memo explaining its actions.  The memo states:

The adopted amendments permit insurance carriers to continue to reimburse prescription drugs dispensed on or after January 1, 2011 at rates either above or below the fees determined by the Division’s fee guideline using written contracts between insurance carriers and pharmacies or their processing agents, if applicable.  In the absence of a negotiated or contracted rate, insurance carriers shall reimburse prescription drugs using the lesser of the fees established under the Division’s pharmacy fee guideline or the health care provider’s billed amount.  If an amount to calculate the prescription drug cannot be determined using contracts or through the fees determined by the Division’s fee guidelines, reimbursement shall be determined in accordance with 28 TAC §134.1.

DWC listened to stakeholders’ complaints and recognized the potential problems if they did not act quickly and before the January 1, 2011 deadline.  DWC noted:

If the Division does not adopt these amendments on an emergency basis, uncertainty regarding insurance carriers’ continued authority, after January 1, 2011, to negotiate for contracts that permit them to pay for prescription medications and services at the fee rates currently permitted under the Labor Code could lead to mass expiration of currently existing insurance carrier contracts and the inability to negotiate new contracts in their place. 

The rule is a temporary fix allowing the Legislature to consider statutory changes or clarifications.  Representative Burt Solomons stressed to DWC that carriers may contract for pharmaceutical services at fees lower than the fee schedule and can use PBMs for those purposes as reported by Bill Kidd at Workcomp Central.  No doubt his opinion was considered by DWC before the Emergency rule was issued.

Rep. Solomons is drafting a bill authorizing the continued use of PBMs outside of networks.

The Texas Attorney General Opinion

The Commissioner of Workers’ Compensation requested an attorney general’s opinion addressing this issue asking whether a workers’ compensation carrier may pay for a prescription drug at a rate lower than the fee rate guidelines.

In Section 1 of the report, the Attorney General (AG) concludes nothing in the statute or the guidelines prohibits paying a rate lower than the guideline.  Specifically, the AG finds references to a maximum allowable rate but not a minimum allowable rate.

Section 2 is not as clear.  The AG concludes an insurance carrier can enter into a contract to obtain prescriptions at a negotiated rate lower than what is found in the guides or statute.  The AG’s opinion specifically allows the carrier to use a healthcare network to obtain a contract with a healthcare provider to pay for prescriptions at a negotiated rate lower than the MAR after January 1, 2011.  Unfortunately, the AG’s opinion does not reference, discuss, or mention whether a carrier can pay a negotiated rate outside of a healthcare network beginning on January 1, 2011.  The opinion is confusing and at times contradictory.

Should you have any questions, please contact any one of our Workers’ Compensation attorneys at 214-748-7900.

Founded in 1989, Downs & Stanford handles a wide variety of civil legal matters including the defense of catastrophic injury and wrongful death cases, the defense of workers compensation claims, insurance coverage matters, business and commercial litigation, business entity formation, commercial transactions, family law, probate and estate planning, appellate law and subrogation. The firm is able to provide these services on a statewide level.  Our firm is headquartered in Dallas and has offices in Austin, Houston and Tulsa.  For more information about our firm, practice areas or attorneys, please visit our website at www.downsstanford.com.

© Copyright 2010 Downs Stanford,P.C. Reprinted with permission.