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Losing the Freedom to Choose Pharmacy Services
Losing the Freedom to Choose Pharmacy Services By Tom P. Christensen, JD he freedom of choice issue - preT serving the right of patients to use the pharmacy of their choice has sparked intensive legislative efforts by pharmacists throughout the country. A number of states, including Alabama, Colorado, Connecticut, Illinois, Maryland, North Dakota, Oklahoma, and Wisconsin, have already enacted freedom of choice legislation. Many other states have bills pending in their legislative houses. But pharmacists and others in favor of freedom of choice legislation must be aware that state and federal laws governing health care benefits can affect such legislative efforts. These laws must be kept in mind if advocates are to avoid legal challenges to freedom of choice laws.
Losing the Freedom to Choose patient who loses the freedom A to choose a pharmacist usually does so because a prepaid pharmaceutical plan, under tremendous pressure to reduce costs, is trying to save money. To do this, the prepaid plan contracts with select providers, health maintenance organizations, or preferred provider organizations that the plan believes will offer the lowest price and the best service. Pharmacies that participate in prepaid pharmaceutical plans are encouraged to keep costs low on the assumption that they will receive increased business in prescription orders and other sales. Patients, however, are left out of a vital decision-making process:
Tom P. Christensen, a pharmacist and lawyer, is APh~s executive resident for 1989-90. 16
that of choosing their pharmacists. Often, program beneficiaries are forced to use new pharmacies, dissolving long-standing pharmacistpatient relationships. Also, financial incentives can be used to encourage patients themselves to select certain pharmacies or to order their medications by mail. For example, offering patients lower deductibles and copayments encourages them to use selected phannacies, thus prompting patients to choose a pharmacist on the basis of cost, not personal need.
through exclusive contracting with selected phannacies, it may seek a waiver from freedom of choice requirements. The federal government may grant a waiver if it considers the proposed exclusive arrangement to be cost-effective and efficient. Again, the ability of patients to establish the pharmacistpatient relationship that they believe best meets their personal needs is secondary to monetary considerations.
Stemming the Tide o stem this tide of exclusive preT paid contracting, pharmacists have lobbied for legislation that al-
The ability of patients to establish the pharmacistpatient relationship that they believe best meets their personal needs is secondary to monetary considerations.
Medicaid recipients also can lose their ability to choose a pharmacist. This can happen when a state seeks a waiver from provisions of the Social Security Act so that the state will be allowed to limit the pharmacies to which beneficiaries can go. The Social Security Act requires that Medicaid beneficiaries be allowed the freedom to choose their health care providers. However, if a state believes that it can save money
lows patients the freedom to choose their phannacists. As of December 1989, eight states had passed freedom of choice laws (see related story). Enacting such legislation, however, is not an easy task. It requires a strong, informed grassroots network of phannacists dedicated to the cause. But even after such legislation is passed, the freedom of choice battle may not be over. * Pharmacists face potential legal challenges in attempting to enforce these laws. Thus, to avoid legal problems, it is advisable to consult an attorney before drafting a bill.
Legal Challenges here are several laws affecting T freedom of choice legislation that phannacists must take into consideration. One is the Employee Retirement Security Act of 1974, commonly known as ERISA. This
* APhA has provided legal analysis to state associations on freedom of choice and will continue to provide help in the future.
American Pharmacy, Vol. NS30, No.2 February 1990/80
law regulates employee pension plans, but it also governs employee welfare plans, including prepaid pharmaceutical care programs. Congress intended ERISA to regulate all employee benefits; therefore, ERISA preempts all state laws that "relate to" employee benefit plans. The term "relate to" is the key to understanding ERISA's preemption. The preemption provision was intended to displace all state laws that fall within ERISA's sphere, even state laws only indirectly bearing on benefit plans. Even so, ERISA is not the death knell offreedom of Choice legislation. While Congress intended to prohibit states from enacting or enforcing laws that affect employee benefit plans, there was a concern with overriding areas traditionally regulated by states, such as insurance. Thus, Congress continues to allow states to regulate insurance despite ERISA. Therefore, the only sure way to indirectly regulate freedom of choice plans is through changes in state insurance laws. A second federal law that presents a potential challenge to enforcement of freedom of choice laws is the commerce clause of the U.S. Constitution. This clause limits the power of states to erect barriers to interstate trade. Some freedom of choice legislation, especially laws that prohibit different copayments for traditional and mail service pharmacies, may have indirect effects on interstate commerce and thus be open to legal challenge. Courts analyzing the constitutionality of a state law affecting interstate commerce also will consider "legitimate state interest." In other words, why did the state feel it necessary to pass such a law? In determining this and in balancing the reasons against the importance of interstate commerce, courts look to the legislative history of the statute. For example, if the public health, safety, and welfare is furthered by a restriction on interstate commerce, the courts may well uphold the restriction. Therefore, it is extremely important that state legislators in favor of freedom of choice legislation clearly articulate these reasons in the legislative record.
Competition Is Important he Federal Trade Commission (FTC), whose job it is to prevent T unfair methods of competition and deceptive acts, also has expressed informal opinions on freedom of choice legislation. The FTC is concerned that eliminating exclusive contracting could increase pharmacy prices because participating pharmacies would not receive the high volume of sales that allow them to keep down prices and increase patient services. The FTC believes that this could result in higher prices, higher premiums, or reduced patient benefits. Although FTC opinions issued thus far have been informal staff opinions, they have reportedly had a chilling effect on some states considering freedom of choice legislation. (Supporters of pharmacy freedom of choice believe that eliminating exclusive contracting will lower prices
by allowing a greater number of pharmacies to inject competition.) Despite these problems, pharmacists continue to believe that allowing patients to choose their own pharmacists creates the highestquality pharmaceutical care. Pharmacists provide essential health care services by reviewing prescription orders before dispensing medications, maintaining patient profiles, advising patients on proper drug use, and counseling patients on interactions between prescribed drugs and other prescription and nonprescription medications. Pharmacists are concerned about anything that reduces the opportunity for meaningful face-to-face interaction with patients. This concern and pharmacy's commitment to high-quality health care will, no doubt, continue to provide incentives for pharmacists to lead the freedom of choice battle. ®
States Enact Freedom of Choice Laws The lllinois freedom of choice bill, which was signed into law on September 1, 1989, is typical of legislation that deals with exclusive contracting and closed-panel health maintenance organizations (HMOs) and preferred provider organizations. The law requires that third party prescription programs provide an annual period of at least 30 days during which any pharmacy may decide to participate in the program for at least one year. HMOs that serve their enrollees exclusively through "in-house" pharmacies are exempt. Similar legislation has been enacted in Wisconsin. The Oklahoma law is aimed primarily at mail order pharmacy. The law prohibits an employer who offers coverage for prescription medications as part of a health plan from requiring a beneficiary to use a mail order pharmacy to :receive reimbursement for prescription drugs. Furthennore, the act prevents employers from imposing copayments and other conditions on patients not using the plan's selected pharmacies.
American Pharmacy, Vol. NS30, No.2 February 1990/81
The Connecticut and Maryland statutes are similar. The Alabama statute is very broad. It prohibits any health insurance policy or employee benefit plan from denying a beneficiary the freedom to select the pharmacy of his or her choice or from denying any pharmacy or pharmacist the right to participate in the policy or plan. The North Dakota statute is similar but also includes a prohibition against the use of discriminatory copayments. Colorado Senate Bill No. 58, signed into law in June 1989, addresses the issue of Medicaid waivers. The law prohibits the state department of social services from excluding any pharmaceutical vendor meeting certain conditions from contracting with the department to provide pharmacy services under the Colorado Medical Assistance Act. The law does not apply to counties with fewer than 1,000 Medicaid recipients or to HMOs or prepaid plans that enroll fewer than 40% of the Medicaid recipients in a county.
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Losing the Freedom to Choose patient who loses the freedom A to choose a pharmacist usually does so because a prepaid pharmaceutical plan, under tremendous pressure to reduce costs, is trying to save money. To do this, the prepaid plan contracts with select providers, health maintenance organizations, or preferred provider organizations that the plan believes will offer the lowest price and the best service. Pharmacies that participate in prepaid pharmaceutical plans are encouraged to keep costs low on the assumption that they will receive increased business in prescription orders and other sales. Patients, however, are left out of a vital decision-making process:
Tom P. Christensen, a pharmacist and lawyer, is APh~s executive resident for 1989-90. 16
that of choosing their pharmacists. Often, program beneficiaries are forced to use new pharmacies, dissolving long-standing pharmacistpatient relationships. Also, financial incentives can be used to encourage patients themselves to select certain pharmacies or to order their medications by mail. For example, offering patients lower deductibles and copayments encourages them to use selected phannacies, thus prompting patients to choose a pharmacist on the basis of cost, not personal need.
through exclusive contracting with selected phannacies, it may seek a waiver from freedom of choice requirements. The federal government may grant a waiver if it considers the proposed exclusive arrangement to be cost-effective and efficient. Again, the ability of patients to establish the pharmacistpatient relationship that they believe best meets their personal needs is secondary to monetary considerations.
Stemming the Tide o stem this tide of exclusive preT paid contracting, pharmacists have lobbied for legislation that al-
The ability of patients to establish the pharmacistpatient relationship that they believe best meets their personal needs is secondary to monetary considerations.
Medicaid recipients also can lose their ability to choose a pharmacist. This can happen when a state seeks a waiver from provisions of the Social Security Act so that the state will be allowed to limit the pharmacies to which beneficiaries can go. The Social Security Act requires that Medicaid beneficiaries be allowed the freedom to choose their health care providers. However, if a state believes that it can save money
lows patients the freedom to choose their phannacists. As of December 1989, eight states had passed freedom of choice laws (see related story). Enacting such legislation, however, is not an easy task. It requires a strong, informed grassroots network of phannacists dedicated to the cause. But even after such legislation is passed, the freedom of choice battle may not be over. * Pharmacists face potential legal challenges in attempting to enforce these laws. Thus, to avoid legal problems, it is advisable to consult an attorney before drafting a bill.
Legal Challenges here are several laws affecting T freedom of choice legislation that phannacists must take into consideration. One is the Employee Retirement Security Act of 1974, commonly known as ERISA. This
* APhA has provided legal analysis to state associations on freedom of choice and will continue to provide help in the future.
American Pharmacy, Vol. NS30, No.2 February 1990/80
law regulates employee pension plans, but it also governs employee welfare plans, including prepaid pharmaceutical care programs. Congress intended ERISA to regulate all employee benefits; therefore, ERISA preempts all state laws that "relate to" employee benefit plans. The term "relate to" is the key to understanding ERISA's preemption. The preemption provision was intended to displace all state laws that fall within ERISA's sphere, even state laws only indirectly bearing on benefit plans. Even so, ERISA is not the death knell offreedom of Choice legislation. While Congress intended to prohibit states from enacting or enforcing laws that affect employee benefit plans, there was a concern with overriding areas traditionally regulated by states, such as insurance. Thus, Congress continues to allow states to regulate insurance despite ERISA. Therefore, the only sure way to indirectly regulate freedom of choice plans is through changes in state insurance laws. A second federal law that presents a potential challenge to enforcement of freedom of choice laws is the commerce clause of the U.S. Constitution. This clause limits the power of states to erect barriers to interstate trade. Some freedom of choice legislation, especially laws that prohibit different copayments for traditional and mail service pharmacies, may have indirect effects on interstate commerce and thus be open to legal challenge. Courts analyzing the constitutionality of a state law affecting interstate commerce also will consider "legitimate state interest." In other words, why did the state feel it necessary to pass such a law? In determining this and in balancing the reasons against the importance of interstate commerce, courts look to the legislative history of the statute. For example, if the public health, safety, and welfare is furthered by a restriction on interstate commerce, the courts may well uphold the restriction. Therefore, it is extremely important that state legislators in favor of freedom of choice legislation clearly articulate these reasons in the legislative record.
Competition Is Important he Federal Trade Commission (FTC), whose job it is to prevent T unfair methods of competition and deceptive acts, also has expressed informal opinions on freedom of choice legislation. The FTC is concerned that eliminating exclusive contracting could increase pharmacy prices because participating pharmacies would not receive the high volume of sales that allow them to keep down prices and increase patient services. The FTC believes that this could result in higher prices, higher premiums, or reduced patient benefits. Although FTC opinions issued thus far have been informal staff opinions, they have reportedly had a chilling effect on some states considering freedom of choice legislation. (Supporters of pharmacy freedom of choice believe that eliminating exclusive contracting will lower prices
by allowing a greater number of pharmacies to inject competition.) Despite these problems, pharmacists continue to believe that allowing patients to choose their own pharmacists creates the highestquality pharmaceutical care. Pharmacists provide essential health care services by reviewing prescription orders before dispensing medications, maintaining patient profiles, advising patients on proper drug use, and counseling patients on interactions between prescribed drugs and other prescription and nonprescription medications. Pharmacists are concerned about anything that reduces the opportunity for meaningful face-to-face interaction with patients. This concern and pharmacy's commitment to high-quality health care will, no doubt, continue to provide incentives for pharmacists to lead the freedom of choice battle. ®
States Enact Freedom of Choice Laws The lllinois freedom of choice bill, which was signed into law on September 1, 1989, is typical of legislation that deals with exclusive contracting and closed-panel health maintenance organizations (HMOs) and preferred provider organizations. The law requires that third party prescription programs provide an annual period of at least 30 days during which any pharmacy may decide to participate in the program for at least one year. HMOs that serve their enrollees exclusively through "in-house" pharmacies are exempt. Similar legislation has been enacted in Wisconsin. The Oklahoma law is aimed primarily at mail order pharmacy. The law prohibits an employer who offers coverage for prescription medications as part of a health plan from requiring a beneficiary to use a mail order pharmacy to :receive reimbursement for prescription drugs. Furthennore, the act prevents employers from imposing copayments and other conditions on patients not using the plan's selected pharmacies.
American Pharmacy, Vol. NS30, No.2 February 1990/81
The Connecticut and Maryland statutes are similar. The Alabama statute is very broad. It prohibits any health insurance policy or employee benefit plan from denying a beneficiary the freedom to select the pharmacy of his or her choice or from denying any pharmacy or pharmacist the right to participate in the policy or plan. The North Dakota statute is similar but also includes a prohibition against the use of discriminatory copayments. Colorado Senate Bill No. 58, signed into law in June 1989, addresses the issue of Medicaid waivers. The law prohibits the state department of social services from excluding any pharmaceutical vendor meeting certain conditions from contracting with the department to provide pharmacy services under the Colorado Medical Assistance Act. The law does not apply to counties with fewer than 1,000 Medicaid recipients or to HMOs or prepaid plans that enroll fewer than 40% of the Medicaid recipients in a county.
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