Michigan

SUMMARY

Michigan has enacted a ban on Most Favored Nation (MFN) clauses in healthcare contracts between providers and health care corporations.  The ban resulted from a dispute between the Department of Justice and Blue Cross Blue Shield of Michigan, which prior to the passage of the ACA was the responsible for insuring Michigan residents with pre-existing conditions. Michigan is also engaged with the federal Centers for Medicare and Medicaid Services to test innovative service delivery and payment reform models. Finally, although the Michigan Data Collaborative, a nonprofit healthcare data organization at the University of Michigan, built a Multi-Payer Claims Database that began collecting data in 2010, the state has not implemented an All-Payer Claims Database (APCD). The state introduced an APCD bill in 2015, but the bill has seen no action since then.

 

LEGISLATION/REGULATION

Legislative Calendar

Michigan’s current regular legislative session runs from 1/10/2018 – 12/31/2018.

 

Recent Legislative Developments

Healthcare Transparency

2018 SB 825 ANNUAL REPORT ON THE COSTS ASSOCIATED WITH PRESCRIPTION DRUGS: Beginning January 1, 2019, a manufacturer of a prescription drug that is made available in this state and that has a wholesale acquisition cost of $40.00 or more per course of therapy shall file an annual report with the department of insurance and financial services on the costs associated with the prescription drug for the preceding calendar year. A report filed under this subsection must be filed before May 1 of each year in a form and manner prescribed by the department of insurance and financial services. Active – currently in committee
SB 899 / HB   5691 INCREASE OF WHOLESALE ACQUISITION COST OF PRESCRIPTION DRUG: Beginning October 1, 2018, a manufacturer of a prescription drug that has a wholesale acquisition cost that is more than $40.00 for a course of treatment and that is made available in this state shall, within 60 days of the effective date of the increased cost, notify a qualified purchaser if the manufacturer is increasing the wholesale acquisition cost of the prescription drug by 12% or more during any 24-month period. Active – currently in committee
SB 900/

HB 5690

PROHIBIT MANUFACTURERS FROM CHARGING EXCESSIVE PRICES OR UNCONSCIONABLE INCREASES IN WHOLESALE ACQUISITION COSTS: A manufacturer of prescription drugs that is engaged in the conduct of trade or commerce shall not charge an excessive price for a prescription drug or change the price for a prescription drug in a manner that results in an unconscionable increase in the wholesale acquisition cost of that drug.

If the drug consumer protection commission alleges that a manufacturer is charging an excessive price for a prescription drug or that there has been an unconscionable increase in a manufacturer’s wholesale acquisition cost for a prescription drug, the Attorney General must investigate.  The Attorney General can bring a class action suit for violations.

Active – both bills currently in committee
2017-2018

 

HB 5223 ANNUAL REPORT ON THE COSTS ASSOCIATED WITH PRESCRIPTION DRUGS: beginning January 1, 2019, if a prescription drug has an annual wholesale acquisition cost of $10,000.00 or more or a wholesale acquisition cost of $10,000.00 or more per course of treatment, and the manufacturer of the prescription drug distributes the prescription drug for sale in this state, the manufacturer shall file an annual report with the department of health and human services on costs associated with the prescription drug for the preceding calendar year. A report filed under this subsection must be filed on or before May 1 of each year, beginning May 1, 2019, in a form and manner prescribed by the department of health and human services. Active – currently in committee
2017 SB287 PHARMACY BENEFIT MANAGERS: The contract entered into by the pharmacy benefit manager must include a current list of the sources used to determine the prescription drug pricing standard. The pharmacy benefit manager shall update the prescription drug pricing standard not less often than every 7 days and provide a means by which the pharmacy may promptly review the updates in a format that is readily available and accessible.

The pharmacy benefit manager shall use the same prescription drug pricing standard or set of prescription drug pricing standards for all covered individuals and pharmacies participating in the same pharmacy benefit.

This law would also apply other standards to PBMs.

Inactive – referred to committee on 3/30/17.
HB5229 REQUIREMENT THAT PHARMACIES DISCLOSE PRICE INFORMATION TO CONSUMERS: A pharmacy or pharmacist may not enter into a contract that prohibits the disclosure of price information to consumers as outlined in MI ST 333.17757. Inactive – referred to committee on 11/8/17.

 

Healthcare Costs

2017-2018 HB4472 TO ALLOW PHARMACISTS TO DISPENSE FDA-DESIGNATED INTERCHANGEABLE BIOLOGICAL DRUG PRODUCTS: When a pharmacist receives a prescription for a brand name drug product or biological drug product, the pharmacist may dispense a lower cost but not higher cost generically equivalent drug product or interchangeable biological drug product if available in the pharmacy.  When a purchaser requests a lower cost generically equivalent drug product or interchangeable biological drug product, the pharmacist shall dispense a lower cost but not higher cost generically equivalent drug product or interchangeable biological drug product if available in the pharmacy.

If a drug or biological drug product is dispensed that is not the prescribed brand, the pharmacist must notify the purchaser and the prescription label must indicate both the name of the brand prescribed and the name of the brand dispensed.

Passed – Signed by governor on 2/28/18.

 

Healthcare Markets

  • None identified.

 

Key Statutes

We compile state statutes relate to healthcare price and competition, including healthcare transparency, markets, and costs. For a complete listing of all health related statutes visit the State Health Practice Database for Research.

 

Transparency in Healthcare

  • Although the state has not established an all-payer claims database (APCD), the Michigan Data Collaborative, a nonprofit healthcare data organization at the University of Michigan, built a Multi-Payer Claims Database which began collecting data in 2010. The Michigan Data Collaborative has made these efforts to support state-wide care transformation efforts funded by the payers participating in these projects. The database includes approximately 80% of the Michigan healthcare market and includes payers such as Medicare, Medicaid, and the three largest commercial payers in the state.

 

  • MI ST 333.17757 mandates that upon request of the consumer, a pharmacist must provide the price of a prescription drug and comparative current selling price of generic and brand name drugs dispended by that pharmacy. The pharmacy must also display a conspicuous notice that informs consumers that they are not under an obligation to buy from this pharmacy and may shop around based on price.

 

  • MI ST 400.105f establishes a health care cost and quality advisory committee within the Department of Community Health, which issued a report with recommendations on the creation of a health care cost and quality database in 2014.

 

  • MI ST 550.1901 to 1929 gives patients the right to an internal grievance and external review process at the time a health carrier sends written notice of an adverse determination.

 

Healthcare Contracting

  • MI ST 550.1400/MI ST 500.3405a prohibits most-favored nations (MFN) clauses in a contract between a health insurance carrier and a health care provider. A most-favored nation clause is a type of contractual provision that requires that the provider give the health carrier a rate equal to or lower than the most favorable between the provider and any other health insurance carrier. A most-favored nation clause in a healthcare contract can prevent smaller insurance carriers with less market power from competing on price.

 

  • Section 4a of MI ST 752.1004a prohibits fraud in the obtaining of benefits or payments in connection with health care coverage and insurance; to prohibit kickbacks or bribes in connection with such coverage and insurance; to prohibit conspiracies in obtaining benefits or payments; to provide for certain powers and duties of certain state and local officers and agencies; to provide for and preclude certain civil actions; and to prescribe penalties.

 

Healthcare Markets

  • MI ST 333.22209 et seq. prohibits health care providers from acquiring, replacing, or adding to their facilities and equipment, except in specified circumstances, without the prior approval of the Department of Community Health through the state’s Certificate of Need process. A Certificate of Need regime aims to reduce healthcare overheard by reducing unnecessary or duplicative services, but can be anticompetitive by increasing regulatory barriers for new entrants.

 

  • MI ST 550.1504 directs that reimbursement arrangements between health care corporations and providers must maintain a rate of change in the total corporation payment per member to each provider class that is not higher than the compound rate of inflation and real economic growth.

 

  • MI ST 550.51 through 63 enables an organization to enter into a prudent purchaser agreement with health care providers of a specific service “to control health care costs, assure appropriate utilization of health care services, and maintain quality of health care.” The organization must give all providers in the geographic area that perform the applicable service an opportunity to apply for membership. The organization must disclose to purchasers of coverage the financial arrangement between the organization and providers, such as whether payments are fee-for-service, capitated, or under other criteria like outcome quality or patient satisfaction. Agreements between health care providers and purchasers of health care services are not per se antitrust violations under the law.

 

Network Adequacy

  • MI ST 550.1504 directs health care corporations to contract with providers to assure subscribers have reasonable access to health care services throughout the state of a reasonable cost and quality.

 

Healthcare Costs

  • MI ST 333.17702, 333.17704, and 333.17755 permit a pharmacist who receives a prescription for a brand name drug product or biological drug product to dispense a lower cost generically equivalent drug product or interchangeable biological drug product if available in the pharmacy. If a consumer requests a lower cost generically equivalent drug product or interchangeable biological drug product, the pharmacist is required to dispense this lower cost product.

 

FY 2018 BUDGET

Michigan’s fiscal year begins on October 1st and ends on September 30th of the following calendar yearWhile there is no specific legal time requirement for passage of the budget bills, this task is accomplished prior to the beginning of the new fiscal year. Appropriations bills are usually considered and passed in April by the first house, in early June by the second house, and usually final action is completed in July. To view Michigan’s FY 2018 Budget, click here.

 

LITIGATION/ENFORCEMENT

  • On June 25, 2015, , the Antitrust Division of the Justice Department and the Michigan Attorney General’s Office filed a civil complaint against four Michigan hospitals, alleging the providers had agreed not to compete with one another in violation of Sherman Act §1 and Michigan state law. DOJ and the Michigan AGO filed a proposed settlement (in the form of a proposed final judgment) simultaneously with that complaint, which means that the parties had reached a settlement before either document was filed. Read our blog post on the case.

 

  • Aetna’s antitrust suit against Blue Shield of Michigan that began with this 2011 complaint had been set to go to trail on May 26, 2015, but the court dismissed the suit in light of a settlement on May 22. The suit followed DOJ’s investigation into Blue Shield’s use of most-favored nations clauses in insurer-provider contracts, alleging that Blue Shield violated Sherman Act Section 1 and Michigan law by entering into exclusionary contracts with providers that drove up health care costs and inhibited competition.

 

  • In October 2010, the U.S. Department of Justice and the Michigan Attorney General filed suit against Blue Cross Blue Shield of Michigan alleging the insurer violated antitrust laws by forcing hospitals to charge higher prices to rival insurers though the use of most-favored nations clauses in its contracts. In March 2013, DOJ and the Michigan AG dropped the suit when Michigan passed legislation banning MFNs in healthcare provider-insurer contracts. The DOJ case summary and documents are available here, and Michigan AG Office press release about filing the case here.

 

KEY RESOURCES

Michigan State Legislature

Michigan Office of the Attorney General