Recently, the West Virginia Office of the Insurance Commissioner (the “Commissioner”) entered into a series of Consent Orders with four Pharmacy Benefit Managers (“PBMs”) because the PBMs operated in West Virginia without an appropriate state license. Ultimately, each of the PBMs were forced to pay fines worth tens of thousands of dollars and obtain a valid state license. While regulations governing what type of registration or licensure is required in any given state may seem straight forward, they are often filled with nuances, leaving those who do not thoroughly review such regulations vulnerable to state imposed discipline.
States impose various regulatory requirements upon a wide range of entities operating in the healthcare space. A foundational element of operating any entity is understanding where, when, and under what circumstances your company is required to register with relevant state agencies or obtain a license from the state in which it is operating and/or organized. However, the question of where an entity is operating may not always be as simple as expected. For instance, in the recent discipline imposed against the West Virginia PBMs, one of the PBMs was cited for operating in the state without a license despite neither it, nor the prescription drug plan it managed being located in West Virginia. Rather, some of the members that belonged to the prescription drug plan lived in West Virginia and, according to the Commissioner, this required the PBM to obtain a license.
Another example of how licensing requirements can often be complex despite appearing straightforward in the abstract is requirements surrounding prescription discount card programs and operators. For example, in the select states that do require prescription discount card companies to obtain a license, certain states only require a license where the patient-user obtains the discount card in exchange for payment “other consideration.” This begs the question, what constitutes “other consideration”? Has a patient provided consideration simply by utilizing the prescription discount card company’s BIN and Group numbers, thus giving the prescription discount card program access to patient data that it may sell for a profit? Ultimately, regardless of the specific type of entity you seek to operate, these are the types of questions that must be asked to ensure your business operates within the confines of the law. As illustrated in the previous example, as well as the West Virginia Commissioner’s Consent Orders, these requirements are often complex and warrant a thorough analysis prior to operating your business.
How Frier Levitt Can Help
Navigating the often-complex regulatory scheme surrounding operations of a healthcare entity like a PBM, TPA, and prescription discount card company, amongst others, can be onerous. Critically, failure to comply with applicable state laws and regulations may result in potentially significant penalties, including, but not limited to, substantial monetary fines. Thus, before operating a business, owners and operators must be sure their company is compliant with the requirements of each state in which it operates. For help understanding the legal requirements applicable to your business, contact Frier Levitt. Our attorneys have the experience and knowledge to help guide your business and ensure it operates in compliance, including providing 50-state surveys analyzing which laws may impact your business in each state.
