April 28, 2023

Patient advocates are hopeful about bills taking aim at hospital prices and drug costs

Rodnae Productions/Pexels

Rodnae Productions/Pexels

Health care prices in Indiana are among the highest in the nation. Two bills aiming to lower hospital and prescription drug prices in Indiana passed both the House and Senate and are now headed to Gov. Eric Holcomb’s desk. 

Hospital prices

House Bill 1004 takes aim at Indiana’s largest nonprofit hospital systems. The bill’s original language called for penalties if hospitals charge higher than a certain benchmark. In its current form, instead of penalties, the bill would establish a “health care cost oversight task force” to study a range of issues related to health care costs in the state and recommend ways to reduce them. 

The bill would also provide tax credits for independent physician practices and small employers who chose to implement a health reimbursement plan in lieu of traditional health insurance.

HB 1004 is aimed at the state’s five biggest nonprofit health systems: Indiana University Health, Ascension, Franciscan Health, Parkview Health and Community Health Network. 

Gloria Sachdev, president of the Employers Forum of Indiana, said these large nonprofit hospital systems contribute the biggest share to Indiana’s inflated health care costs. 

The bill would require a third party contractor to look at Indiana’s nonprofit hospital prices and compare them to 285 percent of Medicare, a new benchmark that state lawmakers and hospital leaders negotiated, Sachdev said.

“It's a really big win for Hoosiers,” she said. “My hope is that hospitals will voluntarily reduce their prices below that” 285 percent benchmark.

But hospital leaders take issue with the way the bill singles out certain hospitals. They say lawmakers are not doing enough to address the state’s low Medicaid reimbursement rates, which they say drives them to raise their prices. Nor is enough being done to address the role of insurance companies and drug makers in driving up health care costs.

“Instead, these issues are left unaddressed, and we have an unprecedented picking of winners and losers within an industry,” said Brian Tabor, president of the Indiana Hospital Association. 

“Lawmakers acknowledged that appropriately funding hospitals' Medicaid rates would reduce the cost-shifting burden on Hoosier consumers and businesses but unfortunately they have chosen to provide no direct relief and allow over $500 million in unspent Medicaid dollars to revert to the General Fund at a time of great financial strain on hospitals.”

The bill passed 90-to-7 in the House and 45-to-5 in the Senate.

Drug prices

Senate Bill 8 would require that most drug discounts and rebates are passed onto consumers in Indiana effective July, 2023.

The bill’s authors said they hope the measure will lower health care costs in Indiana by taking aim at pharmacy benefit managers and health insurers. 

Pharmacy benefit managers or PBMs liaise between drug companies, pharmacies and health insurance companies, leveraging the big networks of health insurers and millions of patients they represent to negotiate lower prices for medications. 

In its current form, SB 8 would require PBMs to submit reports to the Indiana Department of Insurance every six months detailing how much they make from working as the middlemen between pharmacies and insurance companies. The reports would include aggregate data on the amount charged to health plans and the amount paid to pharmacies.

The bill would also require insurers to pass on most of the drug discounts or rebates they receive to consumers, either through lowering health insurance premiums or charging less for drugs at the pharmacy counter. 

The bill also allows the Department of Insurance to impose penalties not exceeding $10,000 per violation if insurers and PBMs do not comply.

George Huntley of the Diabetes Patient Advocacy Coalition said SB 8 is a step in the right direction, describing it as a “major victory for patients.”

“Fundamentally, a Hoosier who is on the exchanges buying their health insurance from the exchanges, their drug costs will drop and, on average, cut in half, if they're buying a branded drug on the exchange,” Huntley said. “Prior to that, that negotiated rebate was being kept by the pharmacy benefit manager and the health plan.”

But some drug pricing researchers and analysts are concerned that the current version of SB 8 would be ineffective. 

“SB 8 has been watered down to the point of near irrelevance,” said Antonio Ciaccia, president of the consulting firm 3 Axis Advisors and CEO of the drug pricing research nonprofit 46brooklyn Research, in an email April 12 after the House passed the bill. “[SB 8] has been stuffed with hollow language that will provide limitless ways to undermine the original intent of the bill.”

Some lawmakers have also expressed concern that the bill’s definition of key elements, like insurers, PBMs and rebates are not clear enough. 

The bill passed with a 40-to-9 Senate vote and a 72-to-21 House vote. It now awaits the governor’s signature before it becomes law.

Contact Farah at fyousry@wfyi.org. Follow on Twitter: @Farah_Yousrym

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