Insurers and Pharmacy Benefit Managers (PBMs) have taken center stage in the nationwide effort to save independent pharmacies from financial ruin and to lower the costs of prescription drugs. The Kentucky legislature recently enacted a law (KY SB188) that joins this effort by helping to level the playing-field for independent pharmacies. Below is a summary of the new provisions introduced through KY SB188.
I. Expand Patient Access to Pharmacies
Under KY SB188, insurers and PBMs must establish reasonably adequate and accessible pharmacy networks with respect to the provision of pharmacy or pharmacist services. To be “reasonably adequate and accessible,” the network must offer an adequate number of accessible pharmacies that are not mail-order pharmacies and ensure that these pharmacies are located within a reasonable distance from any insured’s residence.
This is a tremendous victory for independent pharmacies. While convenient access standards help to ensure patients have reasonable access to pharmacy providers, plans and PBMs often saturate those networks with their own affiliated pharmacies to meet access standards while excluding independent pharmacies. To avoid this scenario, KY SB188 prohibits plans from discriminating against pharmacies that agree to meet the plan’s reasonable terms of network participation. The bill also requires plans to provide equal access and incentives to all pharmacies within the plan’s networks. Suffice it to say, independent pharmacies willing and able to meet the reasonable terms of network participation now have an affirmative right to participate in those networks free from discrimination.
II. Contract Requirements and Minimum Reimbursement
Section 3 of KY SB188 requires that every contract between plans/PBMs and pharmacies to:
- Contain clear terms of network participation;
- Avoid terms allowing the collection of direct and indirect remuneration fees (DIR Fees), generic effective rates, dispensing effective rates, or other effective rates or retroactive fees that reduces payment for pharmacy services; and
- Avoid terms allowing the plan or PBM to retroactively deny previously paid claims unless the claims were submitted fraudulently or where the pharmacy received an overpayment.
In addition, Section 3 sets the floor for reimbursement by requiring plans to reimburse pharmacies no less than the national average acquisition costs for drugs dispensed. Together with the non-discrimination provision discussed above, KY SB188 promises major state-level reform for independent pharmacies in the prescription drug marketplace.
III. Freedom of Patient Choice
KY SB188 not only provides independent pharmacies a right to participate in plan networks and receive reasonable reimbursement for the services they provide, but the bill includes additional provisions designed to promote patient freedom of choice. In particular, Section 4 of KY SB188 prohibits plans and PBMs from:
- Requiring or incentivizing the use of a mail-order pharmacy;
- Imposing cost-sharing or other conditions that are greater or more restrictive than what would otherwise be imposed if the patient used a mail-order pharmacy;
- Prohibiting pharmacies from selling lower cost alternative drugs if available;
- Prohibiting pharmacies from providing patients with information on lower cost alternatives;
- Discriminating against pharmacies willing to agree to or accept the reasonable terms and conditions of network participation;
- Requiring or otherwise incentivizing patients to use pharmacies affiliated with the plan or PBM; and
- Interfering with a patient’s right to choose the network pharmacies of their choice.
These provisions strengthen existing regulatory protections for independent pharmacies in Kentucky. For instance, KY § 304.17A-270 prohibits plans from discriminating against providers within the health plan’s coverage area. KY § 205.5512 prohibits spread pricing along with direct and indirect remuneration fees. Together with these protections, KY SB188 helps to level the playing field between plans and independent pharmacies.
IV. Complaint Procedure
Aggrieved pharmacies and patients may file a complaint with the commissioner of insurance. Upon receiving a complaint, the commissioner must review the complaint and issue a determination as to whether a violation has occurred. The commissioner may order reimbursement to any person who suffered monetary losses as a result of a violation of Sections 2 through 5 of this Act. While a welcome addition to the protections afforded to independent pharmacies, the Act could go further by providing pharmacies with a private right of action to recover damages caused by violations of these Sections.
How Frier Levitt Can Help
Frier Levitt has extensive knowledge regarding PBM contracts, activities, and policies. Frier Levitt attorneys regularly litigate and arbitrate disputes against PBMs on behalf of pharmacies and other providers to curb abusive PBM practices, including patient steerage, gag clauses, spread pricing, PBM audits and network access/termination issues. Frier Levitt also has experience drafting letters to lawmakers to effectuate change at both the state and federal levels. For more information, contact us today to speak with an attorney.
