Today’s post comes from guest author Jon Rehm, from Rehm, Bennett & Moore.
Drug formularies are touted as a way to fight prescription drug abuse and contain prescription drug cost. But one major Nebraska employer appears to be questioning whether drug formularies really contain prescription costs.
In a fiscal note for LB 408, a bill introduced in the Nebraska legislature to create drug formularies for opioid pain medications in workers’ compensation claims, the City of Omaha expressed concern that the inability to substitute for generic medication in a drug formulary could lead to higher prescription costs.
The City of Omaha was echoing widespread concerns about the possibility of conflict of interests in drug formularies. Those concerns were explained by me in a blog post published last December. In short, drug formularies are administered by pharmacy benefit managers. Pharmacy benefit managers make money by negotiating discounts from drug manufacturers. This gives pharmacy benefit managers incentive to put more expensive drugs on drug formularies because they can negotiate a more lucrative discount than they could for a less expensive generic drug.
LB 408 was held in committee by the Business and Labor committee so it is unlikely it will be considered in this legislative session. Opioids abuse is a topic of high interest for political leaders so drug formularies as a way to reduce opioid use will likely be discussed further in Nebraska.
The City of Omaha has a workforce this is more heavily unionized than most other workplaces in Nebraska. In some instances, labor and management will collectively bargain how some aspects of a workers’ compensation program is to be administered. Supporters of organized labor originated the idea of “labor pluralism” during the New Deal and Post-War era. (4) Labor pluralism means that government should minimize interference between the labor-management relationship. In a unionized workplace, labor and management have a complicated relationship that is both cooperative and confrontational depending on the circumstances. A mandate from the state requiring the use of drug formularies could be as undermining labor-management relations when a labor and management have bargained about the administration of workers’ compensation benefits.