Michigan House Introduces Pharmacy Benefit Manager (PBM) Law Regulating PBM MAC Pricing

One of the most challenging issues for independent pharmacies throughout the United States is the issue of pharmacy benefit managers’ (PBMs) reimbursement practices. There are numerous ways in which PBMs dictate reimbursement to independent pharmacies which often results in pharmacies being reimbursed below their drug acquisition cost. PBMs also dictate pharmacy reimbursement to increase their own profit margins—one primary tactic relied on by PBMs to achieve this is “spread pricing,” a practice where PBMs reimburse a pharmacy one price for a drug but collect a higher or different amount from the plan sponsor and retain the difference. Maximum Allowable Cost (MAC) is one method by which a PBM effectuates spread pricing.

MAC pricing is distinct from other pricing benchmarks used in pharmacy as both MAC prices and MAC lists are created exclusively by PBMs and unilaterally deemed by PBMs to be proprietary and confidential. Thus, PBM MAC prices and MAC lists are often cloaked in secrecy and avoid public scrutiny. There are numerous issues with how PBMs create their MAC lists and set MAC prices—one of the most critical issues related to setting MAC prices is inconsistency as to what drugs should be included on a MAC list. Traditionally, MAC has been viewed as intended for multisource generics. But as PBMs have recognized opportunities to profit from MAC pricing, they have expanded the types of drugs included on their MAC lists to include single source generics and in some cases even branded drugs. 

In Michigan, Representative Julie Calley recently introduced House Bill 4348, which if enacted could serve as a model to ensure that PBM MAC pricing is used for its intended purpose—ensuring that widely available generic drugs are acquired smartly by pharmacies—and not as a mechanism to increase PBM profit margins at the expense of pharmacies. The important features contained in House Bill 4348 that make it stand out include a clear definition of “maximum allowable cost” that applies only to generic drugs and a definition of “multiple source drug” that is defined to require that such a drug be “a therapeutically equivalent drug that is available from at least 2 manufacturers.” These definitions combined mean that a PBM can only include drugs on a MAC list that are both generic and available from at least two manufacturers. This is significant because it appropriately limits the ability of PBMs to include brand drugs and single source generic drugs on their MAC lists thereby minimizing PBMs’ ability to under-reimburse for such drugs. Although this Bill will still be subject to additional scrutiny in the Michigan legislature, if enacted as currently drafted, this language would add significant protections to Michigan pharmacies.

How Frier Levitt Can Help

Frier Levitt represents numerous pharmacies across the United States in challenging PBM audits, network access, reimbursement practices and has extensive knowledge on all aspects of PBM MAC pricing and MAC reimbursement. Contact us today to speak with an attorney about how your pharmacy can leverage the various laws and protections afforded to pharmacies, including in Michigan, regarding Maximum Allowable Cost or MAC.