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Unions and employers speak out against costly PBM restrictions


Labor unions are making headlines across the country this fall – and not just due to high-profile strikes in the headlines. As union members join picket lines for better pay and benefits, they’re also putting pressure on Congress and state governments to protect their trust funds and preserve the robust health benefits they negotiate along with better wages.

A recent Axios story summed it up succinctly: “Newly emboldened unions are sending a message to lawmakers: Don’t mess with our health plans.” The piece quoted a letter from a number of prominent labor groups recently sent to Congress advocating for federal protection from state efforts to regulate their health care benefits under the guise of PBM reform. 

Describing the impact of these state efforts, the letter stated that “Taft-Hartley plans are the result of a collective bargaining process, and that the only money that such a plan has is the participants’ money, held in trust to provide healthcare benefits.” 

In the letter, unions ask Congress to use ERISA to protect them from ill-advised state laws and regulations that can impact their solvency, like PBM regulations recently proposed and rescinded in New York State. If enacted, the New York regulations have would have drained union trusts across the state by limiting access to convenient pharmacy options like home delivery of prescriptions and placing a new $10 fee on every prescription filled.

That proposal was withdrawn last week in response to overwhelming criticism from unions and other stakeholders. 

As the Empire Center’s Bill Hammond wrote:

A range of other stakeholders – including insurers, employers and labor unions – argued the dispensing fee and other regulations would inevitably drive up health-care costs which they are already struggling to afford.

In its comments to the department, the United Federation of Teachers warned that the dispensing fee “will irreparably harm – and likely bankrupt – union benefit funds.” It estimated the cost to the UFT Welfare Fund at more than $20 million annually.

Unfortunately, strengthening ERISA alone cannot protect unions from the unintended consequences of state PBM reform – not when Congress is considering passing some of the same proposals nationally.  In fact, some of the so-called “delinking” proposals currently circulating on the Hill would upend the structure and value of current union benefits – just as they would have in New York.  These bills are about much more than just “delinking” PBM fees from drug prices.  In fact, little understood provisions in this legislation could actually “delink” union members from their current health care benefits plan.

All of this comes on the heels of new research released by CAPD showing a substantial majority of union households see significant value in their pharmacy benefits and the cost-savings they provide.  Specifically, 83% of union households are highly concerned about policies that would increase the amount they pay for health care and prescription drugs and weaken their current union pharmacy benefits.

It is not just unions that rely on pharmacy benefits to provide good health care coverage to their members. Private-sector employers also depend on their PBMs to provide high-quality benefits – and oppose restrictions that would jeopardize the savings they rely on. A recent study by benefits consultant Mercer showed that large majorities of employers either oppose or need more information about efforts to limit their ability to structure their benefits.

This study follows another survey by CAPD, showing employers value their PBM with 93% saying it is essential to have flexibility and a range of choices in how they offer prescription drug benefits to employees.

In their rush to pass PBM reform before year’s end, Congress is running headlong into the same coalition that blocked the implementation of the Affordable Care Act’s (ACA) “Cadillac tax.”   In a similar dynamic, legislators at the time failed to fully appreciate the unintended consequences of a seemingly popular proposal to tax executive health care benefits. The good news is that unions and employers have seen this play before – and many are already mobilizing.

For Congress, the message is clear: restricting health care benefit options in a complicated commercial marketplace can translate into higher costs for both unions and employers, not to mention the more than 150 million Americans who rely on their employers for their health insurance.

Congress still has time to fully analyze the impact of these bills, intended and otherwise.  Instead of rolling the dice on the possible consequences of untested proposals, Congress should instead tackle what is driving higher prescription drug costs:  Big Pharma’s high prices and constant price hikes. Learn more on our resources page.