Indiana Senate panel advances bill that would pass along drug rebates to consumers

An Indiana Senate panel has approved a bill that would pass along discounts to consumers at the pharmacy checkout on drug rebates negotiated between pharmaceutical companies and insurance companies.

The Senate Health and Provider Services Committee voted 10-2 to approve Senate Bill 62 after more than two hours of debate and testimony.

The bill pitted the two largest companies headquartered in Indianapolis—drugmaker Eli Lilly and Co. and health insurer Anthem Inc.—on opposite sides of the issue.

The bill would pass along at least 85% of all rebates received by insurers or health maintenance organizations to consumers at the pharmacy counter. Currently, insurers or pharmacy benefits managers are not required to pass along any rebates, and many of the rebates are kept secret.

The hearing demonstrated the complexity of drug pricing. Big buyers, such as insurance plans, can negotiate lower prices on drugs than the drugmaker’s retail list price, and then demand additional rebates on certain drugs.

That leads to a huge disparity in how much people pay for prescription drugs, depending on whether they have insurance, and if so, what kind of plan they have. Most people in Indiana are covered by plans negotiated by employers.

Lilly said the bill would help control out-of-pocket costs of drugs for patients by passing along rebates that it and other drugmakers give on certain drugs to insurers and pharmacy benefits managers.

“The  majority of rebates drugmaker manufacturers give on their medicines should go directly to patients using them,” said Michael O’Connor, Lilly’s director of state government affairs. “This should be done by requiring rebates for each patient at the point of sale.”

He pointed to a study by actuarial firm Milliman that found that sharing rebates would help lower patients and have minimal effect on premiums.

But several insurers, including Anthem, said the move would take away choice from employers, which negotiate their employee plans, and could raise prices.

They pointed out the bill would apply to only fully insured health plans, which cover about 11% of Hoosiers. Most employers buy so-called “self-insured” health plans, meaning they pick up more of the cost and assume a greater portion of the risk.

“If you have constituents that work for Cummins or General Motors, who are self-funded, this bill does nothing,” said Logan Harrison, senior director of public affairs at Anthem.

Heather Willey, representing CVS, parent of health insurer Aetna and pharmacy benefit manager Caremark, said the bill would apply only to brand-name drugs, which represent only 12% of the drug spending in the United States. The vast majority of drugs purchased are generic.

The Indiana Chamber of Commerce testified against the bill, saying it could drive up premiums.

But some consumer and patient advocates testified in favor, saying it could help.

“This bill gives a plan participant what they are paying for; it gives them value for their premium dollar,” said George Huntley, a patient advocate and Type 1 diabetic. “A participant who pays a premium to an insurance company or their employer has a right to receive the discount the plan receives. That’s the whole point of paying for insurance.”