By Annette Meeks
When another state develops a proven and creative way to save state taxpayers a projected $2.5 billion over the next five years, I pay attention.
And thankfully, several Minnesota legislators from both sides of the aisle did too – they introduced legislation (Senate File 2178 and House File 2327) that would allow Minnesota taxpayers to save tens of millions here, too.
Former New Jersey Governor Chris Christie led this first-in-the-nation effort to drive down prescription drug prices by creating a “reverse auction” process when securing a contract for their state employee insurance program in the Garden State. This action was in response to the question most every American asks every time they pay for a prescription at the pharmacy counter: who is to blame for high prescription drug costs?
There aren’t any easy answers on how to answer that question or on how to save consumers more money at the pharmacy counter. However, as we work on lowering consumer costs and increasing health care transparency, we know that one of the biggest profit makers from prescription drugs is the “pharmacy benefit managers (PBM).”
PBMs are the middlemen companies that administer prescription drug benefits for health insurance plans and set drug reimbursement rates paid at retail pharmacies. In recent years they have made enormous profits off the cost of your prescription drugs. They are able to do this because they play a key role in determining which medications are covered by your insurance plan and how much patients, businesses, and state governments pay for them. Since Minnesota state government is one of the state’s largest employers, this idea from New Jersey garnered some genuine interest at the legislature.
This plan works by creating a reverse auction process to secure a contract for Minnesota State Employee Group Insurance Program (SEGIP). PBMs would only be allowed to participate in the auction for this lucrative state government employee agreement if they agree upfront to the state’s terms set out by the commissioner of management and budget – which isn’t the case now. This agreement would allow the administration to remain in control from start to finish of negotiating this important and very expensive SEGIP contract, not the PBMs.
This process would bring much-needed transparency to the process by requiring PBMs to bid for the state’s business through open, market-based competition. This process would likely drive down prescription costs in Minnesota like it has in New Jersey since the administration would be in the driver’s seat. This fact would allow the state (and ultimately taxpayers) to reap the prescription drug savings obtained in the SEGIP contract.
This idea merits adoption not only because of the potential to save taxpayers enormous sums of money but also because it’s a bipartisan policy solution – that’s real progress on a very tough issue.
Annette Meeks is the founder and CEO fo Freedom Foundation of Minnesota.