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HARTFORD — A bill addressing high health care costs passed with overwhelming support in both legislative chambers this week, and includes measures to lower prescription drug prices and tighten regulations regarding insurance companies and hospitals.
The bill was finalized Monday after Gov. Ned Lamont reached an agreement with the Connecticut Hospital Association, the lobbying group representing the state’s largest health care systems.
Democrats and Republicans in the House and Senate hailed the bill as an effective cost-saving measure for consumers.
“This is going to reduce the cost of medication. It is also going to reduce the cost of providing health care and it is also going to make some consumer protection policies on insurance. It’s a good bill,” said State Sen. Saud Anwar, D-South Windsor, during a debate Wednesday.
Organizations representing physicians, hospitals and insurance companies also praised the bill.
“This is a good first step to address some of the health care cost drivers, examine the role of pharmacy benefit managers and seek greater transparency in how health insurance carriers set their networks,” Connecticut State Medical Society President David Hass, told CT Examiner in a statement.
Under this bill, Connecticut will offer a Discount Drug Card Program to residents by entering into a consortium called ArrayRx, which includes the states of Nevada, Oregon and Washington. The program would allow the state to purchase drugs in bulk and offer them at a lower price to consumers.
Comptroller Sean Scanlon said in testimony to the legislature during a public hearing in March that the program has saved consumers up to 80 percent on generic drugs and 20 percent on brand-name drugs.
During a House debate on Tuesday, State Rep. Nicole Klaridis-Ditria, R-Seymour, noted that the average American spends about $1,300 on prescription drugs.
“I’m sure all of us know that that’s a pretty hefty price we have to pay, whether insured or uninsured,” Klaridis-Ditria said. “And a lot of times people that have good insurance still have to pay a lot of these out-of-pocket costs.”
Brand name versus generic
The bill also requires the Department of Consumer Protection to establish a program, alongside the UConn School of Pharmacy, to inform doctors when a drug patent expires, allowing them the opportunity to prescribe a less costly generic drug.
State Rep. Anne Dauphinias, R-Killingly, one of the few legislators who voted against the bill, said she thought physicians would already be aware of a generic drug if it were on the market.
“It’s been my experience that most manufacturers of pharmaceuticals know well in advance that a pharmaceutical will be expiring, and they are usually communicating that to the physicians as well to prepare for either a replacement therapy or some kind of generic form or another one that’s on the market,” Dauphinias said.
Marie Smith, a professor of pharmacy practice and an assistant dean at the UConn School of Pharmacy, told CT Examiner that doctors might discover when a generic drug becomes available from their insurers or when a co-pay might change, but that there was no “established framework” for informing people. As a result, she said, there can be delays how quickly that information is conveyed.
“A lot of times these notices come out and they’re like a memo or e-blast or something, and they are irrelevant because I don’t remember and store that in my head — as to what’s generic and what’s not,” Smith said.
Smith suggested the ideal way to inform physicians would be the moment they’re prescribing a medication, through an e-prescribing software that is able to rank drugs based on quality and cost, and show which drugs would require a higher co-pay.
But she added it’s not clear how many hospital systems or physicians groups subscribe to that sophisticated software.
Ellen Andrews, executive director of the nonprofit CT Health Policy Project, said doctors simply may not have time to make comparisons between drug prices.
“Many, many people I’ve talked to are amazed to find out there’s a generic,” she said.
Andrews said now is a critical time to require these provisions because there are several drugs whose patents have either recently expired or are on the verge of expiration — including the expensive drug Humira, which is used to treat arthritis.
“The very expensive drugs are coming up onto a patent cliff now, and we’re just concerned that people will still keep getting the drug they always got, and paying higher copays,” Andrews said.
The ‘black box’ of pharmacy benefit managers
Another piece of the bill requires a study on the role of pharmacy benefit managers – organizations that often exist under the umbrella of insurers and who are responsible for negotiating drug prices for insurance companies.
These entities have been criticized for artificially raising the price of drugs well above the cost required to manufacture them.
Smith noted that, as of 2018, at least 42 other states had laws regulating PBMs, including 35 states that require these entities to be transparent about the maximum amount they will reimburse pharmacies for drug costs.
“There are … probably 20-plus states now that have tightened up their laws so that you can’t have this lack of transparency and cost shifting and that sort of thing,” she said.
Smith said a PBM may charge a pharmacy more than it paid for a certain drug, allowing the PBM to profit from the sale.
“It’s a black box,” Smith said. “A pharmacy doesn’t know at all. There’s no transparency about what happens.”
The end goal of the study is to find ways to regulate PBMs and further reduce the cost of prescription drugs in Connecticut.
Hospital costs and facility fees
The legislation also aims to lower the cost of hospital care by limiting the amount of money hospitals can charge in “facility fees” — a charge to patients who see a doctor or health care provider in an outpatient facility. If a hospital owns a doctor’s office, for example, a patient may be required to pay a “facility fee” in addition to the cost of seeing the doctor.
Susan Halpin, who represents the Connecticut Association of Health Plans, the lobbying group for the health insurers, praised the governor for focusing his efforts on health care costs and the unit costs of hospitals.
“As we have long said, insurance premiums are merely a reflection of what it costs to deliver medical treatment and services,” Halpin wrote in an email.
According to a fact sheet provided by the governor’s office, Connecticut hospitals charged $410 million in facility fees from 2016 to 2020. And a study from the RAND Corporation found hospital facility fees account for over 80 percent of the price of services.
Hospitals will no longer be able to charge facility fees for routine doctor visits that take place in a hospital, or in a facility that a hospital owns. But a far more wide-ranging ban on these fees was pared down during negotiations between Lamont and the hospital association.
Connecticut Hospital Association President Paul Kidwell told CT Examiner that the association felt the original proposal — which would have included a ban on facility fees for certain services offered in emergency departments — was too restrictive. He said eliminating facility fees would make it difficult to pay for services the emergency room provides.
In March, the hospital association released a report stating that hospitals had lost $164 million in 2022, the result of increased labor and drug costs, low Medicare and Medicaid reimbursement rates, and sicker patients. Kidwell said that Medicaid reimbursement had not kept pace with the cost of care.
“Hospitals are experiencing pretty financially rough times right now,” he said. “And so proposals that would eliminate potentially hundreds of millions of dollars in reimbursement — it just was not sustainable.”
An analysis by the Kaiser Family Foundation found that, from 2004 to 2021, facility fees in emergency departments increased at four times the rate of “professional fees,” or the cost of seeing a doctor or provider.
But Andrews said she wished the bill had completely eliminated emergency department facility fees, since they generally represent a “big humongous surprise bill” for people needing care.
“By the definition, it’s an emergency, so you can’t shop ahead,” she said.
Eliminating anti-competitive clauses
During a news conference Tuesday, Lamont said he believed one of the most important components of the bill dealt with language in contracts between health insurers and hospital systems known as an “anti-steering clause,” which prevents health insurers from “steering” customers to hospitals in another hospital system, even if they are higher quality or better priced.
Under the bill, hospital systems can no longer include these clauses in a contract.
“It’s going to give you, as a consumer, much better value for your dollar,” Lamont said.
The bill also bans the “anti-tiering clause,” which either prevents tiering or requires an insurer to place all hospitals in one system within the same benefits tier, even if the quality of care or price diverges drastically between individual hospitals. “All-or-nothing clauses,” which require a health insurer to include all hospitals or health care facilities within its network, are banned as well.
“We want to have providers that have high-quality results and make sure that carriers are steering patients to those high-quality providers,” State Rep. Kerry Wood, D-Rocky Hill, told legislators during the House debate Tuesday.
In a conversation with CT Examiner, Andrews noted a class-action lawsuit filed last year, accusing Hartford Healthcare of using these clauses to require insurers to cover services at all Hartford Healthcare facilities. This allowed Hartford Healthcare to raise prices far above its competitors. The lawsuit alleges that the cost of an average stay at Hartford Hospital is $4,000 more than nearby St. Francis Hospital.
Kidwell said he was pleased with the new requirements that insurers disclose their reasoning behind assigning hospitals to different tiers, which determine how much a consumer will pay out-of-pocket at that facility.
Andrews said this would help ensure the tiers were based on quality, rather than which offered care at the lowest price.
“If you choose the better tier and you know it’s meaningful, you can actually share in the savings. You get a lower deductible, lower cost sharing, so you get some of the savings. It doesn’t all go back to insurers or to employers or the government, which I think is awesome,” she said.
Community health centers
In another attempt to lower drug costs, the bill also prohibits PBMs from forcing some health care centers with in-house pharmacies — such as hospitals and Federally Qualified Health Centers — from taking back portions of revenue that these health centers save through a federal program called 340b.
Katherine Yacavone, interim chief executive officer for the Community Health Center Association of Connecticut, told CT Examiner that the 340b program allows the centers to offer drugs to their patients — many of whom are poor — at a discounted price. But the clawbacks from the PBMs she said, were costing the health centers millions of dollars.
“Many of our health center clients have serious chronic diseases — hypertension, diabetes, asthma, other kinds of conditions that require daily medication. And through the 340b program, those are offered at a substantial discount,” Yacavone said.
But Yacavone said the final version of the bill eliminated another important protection for the Community Health Centers — prohibiting PBMs from limiting drug shipments to a single pharmacy. Yacavone said this practice meant that low-income patients may now need to travel to pharmacies far away from where they live.
“The health centers serve clients who may live in areas that aren’t very close to the health center site,” Yacavone said. “For example, [in] the city of Hartford, you have clients that live all over the city, and you serve clients from East Hartford or Bloomfield … so you need to make pharmacies accessible and the medications accessible.”
She said while the health centers were pleased with the PBMs regulations, the lack of action regarding drug shipment limitations was disappointing.
“It’s not what we had hoped in terms of furthering the goal of health equity and furthering the goal in Connecticut of ending health disparities,” she said.