Two States Enact PBM Licensure Requirements

Many states have enacted legislation to reform the business practices of the Pharmacy Benefit Manager (PBM) industry. For example, a number of states have enacted such laws as the Fair & Uniform Pharmacy Audits, PBM Regulation/Transparency, and Anti-Mandatory Mail Order. However, it appears that some states have required even more from PBMs—specifically, a state licensure requirement.

Of note, both Kentucky and New Mexico have issued a new PBM licensure requirement in the past year. Under Kentucky Senate Bill 117, PBMs are now obligated to provide: (1) an appeal process for certain parties; and (2) MAC to determine the drug product reimbursement. Furthermore, PBMs must have obtained a license from the Kentucky Insurance Department by January 1, 2017.  If the PBM does not obtain such a license, Kentucky withholds the right to restrict the entity from doing business in Kentucky as a PBM until its PBM license has been issued. The application itself requires the PBM to disclose certain information including the name, address, official position, and professional qualifications of each individual responsible for the conduct of affairs of the PBM, including all members of the board of directors, board of trustees, executive committee, other governing board or committee, the principal officers in the case of a corporation, the partners or members in the case of a partnership or association, and any other person who exercises control or influence over the affairs of the PBM.

As for New Mexico, the New Mexico Superintendent of Insurance issued Bulletin 2016-021, which required any unlicensed PBM doing business in New Mexico to submit application to New Mexico Office of the Superintendent of Insurance by November 1, 2016. Failure to comply with provisions of the New Mexico Pharmacy Benefits Manager Regulation Act may result in a monetary penalty of up to $10,000 per violation and cessation of business operations in New Mexico.

Other states besides Kentucky and New Mexico have required PBMs to apply and obtain a license to engage in business in that state. These requirements constitute just one of the many manners in which the state legislatures have been responding to the ever-growing PBM presence in the states. Moreover, the language of Kentucky Senate Bill 117 seems to indicate that legislatures are beginning to respond to reports of abusive PBM auditing practices.

For more information regarding these new state licensure requirements, contact Frier Levitt today.