Regulation of the Prescription Drug Benefit

Legislative and Regulatory Position: 

The Academy of Managed Care Pharmacy (AMCP) believes that the government should encourage an environment in which pharmacy professionals working within managed care organizations (MCOs) and pharmacy benefit managers (PBMs), can continue to develop innovative and integrated strategies to manage prescription drug benefits. A properly developed and managed pharmacy benefit optimizes patient outcomes while helping to maintain the affordability of the prescription drug benefit itself and providing equitable access for patients. It is essential that managed care pharmacy professionals have the latitude to exercise their professional judgment in structuring drug benefit programs to ensure a safe, clinically effective, and valuable prescription benefit that helps to moderate costs for individuals and payers. 

AMCP opposes statutory and regulatory proposals that unduly restrict the ability of pharmacy professionals working within MCOs and PBMs from utilizing tools and services that are essential for the management of a prescription drug benefit. These health professionals have the expertise to analyze clinical trial and cost-effectiveness research, implement medication evaluation policies, and design benefits that promote higher value therapies. Managed care pharmacy and other health professionals approach formulary design by considering available clinical (safety and efficacy), regulatory, quality‐of‐life, patient and provider experience, pharmacoeconomic data (such as total cost of care), and the unique needs of populations., These factors form the basis for the design and implementation of drug benefit strategies and programs.¹ The goals of these drug benefit strategies and programs are to improve access to medication, enhance health outcomes through promoting evidence-based drug utilization, and enable the responsible use of health care dollars.² Examples of strategies and programs that pharmacy benefit managers have developed and successfully implemented include drug utilization review, formulary and utilization management, and disease and health management. These tools promote the appropriate, safe, and effective use of prescription drugs to improve patient outcomes. Statutory or regulatory policies aimed at prescription drug benefits—specifically those that target or restrict prior authorization, drug utilization review, or other utilization management tools—make it more difficult for pharmacy professionals to ensure that patients receive the care they need at an affordable cost. 

Regulation of Formulary Design 

AMCP opposes legislation that would require certain plans to cover either specific treatments or all treatments for a given indication or disease state. Mandated formulary content, mandated coverage parity terms, and mandated coverage of medications for specific indications limit a plan’s ability to develop and implement an effective formulary, assure high quality care to improve health outcomes, and achieve cost savings specific to the plan’s population. When coverage of a particular drug is mandated, MCOs and PBMs must offer coverage of that drug to all patients, even in cases where an alternative drug may be more appropriate based on effectiveness, safety, or cost. 

Another impact of drug coverage mandates includes raising overall costs for payers and patients.³ First, the overall net costs of a plan increase as expanded coverage requirements facilitate the utilization of additional health care resources. Second, coverage mandates reduce or eliminate an MCO’s purchasing power to negotiate lower medication costs on behalf of their members and discourages competition amongst manufacturers. As prescription drug costs rise, so do patient costs through premium increases and cost-sharing requirements. 

Regulatory mandates requiring coverage of all treatments of a certain disease state on a “no less favorable” basis to other treatments have grown in popularity in recent years.⁴ Mandated coverage on a “no less favorable” basis forces MCOs to cover self-administered and provider-administered medications at the same cost-sharing levels. Mandated coverage parity requirements may also result in unintended consequences due to the different structures of pharmacy and medical benefits (e.g., significant cost-sharing differences arise between self-administered and intravenous medications). Even though MCOs might otherwise choose to offer more favorable cost‐sharing requirements for new treatments shown to be more effective than existing treatments, coverage parity mandates remove the ability to offer more favorable cost‐sharing requirements for that treatment relative to other treatments. This can lead to increased drug costs with little to no improvements on overall health outcomes. 

Additionally, tiering requirements may make it more difficult for plans to control costs. For example, in Colorado, there is a requirement that, “No more than fifty percent (50%) of drugs on a formulary used to treat a specific condition are placed in the highest cost tier.”⁵ This type of requirement may restrict plans’ ability to drive greater use of generics. For high-cost specialty drugs especially, this type of tiering requirement reduces plans’ ability to design a formulary that effectively manages costs.

See also:

• AMCP Legislative and Regulatory Positions

Revised by the AMCP Board of Directors, February 2025

Revised by the AMCP Board of Directors, October 2022

Revised by the AMCP Board of Directors, October 2021

Revised by the AMCP Board of Directors, October 2014 

Revised by the AMCP Board of Directors, June 2010 

Approved by the AMCP Board of Directors, April 2002 

¹ Mental Health Parity. American Psychiatric Association. 2022. Available online: https://www.psychiatry.org/psychiatrists/advocacy/federal-affairs/health-insurance-coverage-access-to-care/mental-health-parity  

² Li D. List Price Increases for Medications Lead to Higher Costs for Consumers. Good Rx Health. December 21, 2020.  Available online: https://www.goodrx.com/healthcare-access/drug-cost-and-savings/drug-list-price-increases-lead-to-higher-consumer-costs  

³ Rome BN, Egilman AC, Kesselheim AS. Trends in Prescription Drug Launch Prices, 2008-2021. JAMA. 2022;327(21):2145–2147. doi:10.1001/jama.2022.5542  

⁴ Kirzinger A, Muñana C, Fehr R, Rousseau D, for the Kaiser Family Foundation. US Public’s Perspective on Prescription Drug Costs.  JAMA. 2019;322(15):1440. doi:10.1001/jama.2019.15547 

⁵ Mulcahy A. Biosimilar Drugs Could Generate $38.4 Billion in Savings over Five Years. Rand Corporation. January 10, 2022. Available online: https://www.rand.org/news/press/2022/01/10.html