Update Regarding Recent Legislative Efforts to Regulate Pharmacy Benefit Managers

Throughout the country, several states have engaged in ongoing efforts to enact or enhance state laws aimed at regulating pharmacy benefit managers (PBMs) and certain PBM practices, including audit and reimbursement practices, causing economic harm to independent pharmacies nationally. Examples of such states include Florida, Michigan, and Wisconsin. In addition to these state legislative efforts, there have also been recent efforts at the federal level.

In Wisconsin, Governor Tony Evers recently signed a bipartisan bill into law. Wisconsin’s law is significant because, prior to its enactment, Wisconsin did not regulate PBMs. Wisconsin’s law regulates certain PBM practices including improper audit practices, retroactive claim reduction/recoupments, and collection of manufacturer rebates. This law is a significant step forward for Wisconsin and Wisconsin pharmacies and pharmacists should be aware of the law, learn about the law, and seek to take advantage of the many protections afforded to Wisconsin pharmacies under this law.  

In Michigan, House Bill 4348 will head to the Senate for consideration after recently being passed by the House. House Bill 4348 is also aimed at regulating PBMs and limiting their ability to use certain specified practices including spread pricing, charging pharmacy dispensing fees, maximum allowable cost (MAC), auditing, and retroactive claim reduction. House Bill 4348 would expressly prohibit the use of spread pricing in Michigan, eliminate DIR fees, and add clear limitations on PBMs’ use of MAC pricing. If House Bill 4348 is enacted in its current form, it will provide substantial protections to Michigan pharmacies.

Missouri’s House has also recently passed HB 834 which, if enacted, will require greater transparency from PBMs in reporting rebates. We have previously highlighted how PBMs often use rebate aggregators and opaque practices to hide self-serving rebate arrangements, and this bill seeks to address such practices. Notably, the bill also reforms the state’s MAC law to provide that where reimbursement is below the pharmacy’s cost to purchase the drug, the PBM must sustain an appeal and increase reimbursement to the pharmacy and other contracted pharmacies to cover the cost of the drug. If the bill passes the Senate in its current form it could serve as a powerful protection for independent pharmacies in the state and pharmacies should being preparing now to enforce this law through their contracts.

In contrast to the laws/bills in Wisconsin, Michigan, and Missouri, Florida continues to struggle to find meaningful ways to regulate PBMs doing business in Florida. Senate Bill 390 is no exception. Although initial legislative efforts in Florida looked promising to strengthen PBM regulation, Senate Bill 390 offers only minimal PBM regulation and protections for independent pharmacies and patients in Florida. Senate Bill 390 is silent on the most crucial issues facing pharmacies including DIR fees and spread pricing. Senate Bill 390 also does very little to regulate PBMs use of MAC. In addition, Florida remains one of a minority of states that does not have an Any Willing Provider Law and any law/bill addressing PBMs that does not include an Any Willing Provider provision is largely ineffective. It is disappointing to see Florida not take this opportunity to include such provisions in this bill.

At the federal level, in December 2020, Congressmen John Rose and Raja Krishnamoorthi penned an article calling for DIR reform; unfortunately, major efforts in this area have yet to appear.  Congresswoman Diana Harshbarger recently introduced the PBM Accountability Study Act of 2021 which is a bill aimed at increasing transparency into how PBMs operate. Representative Harshbarger’s bill is a companion to Senator Marsha Blackburn’s Senate Bill 298. If enacted, this legislation would require the U.S. Comptroller General to submit a report addressing a variety of topics involving PBMs including the role PBMs play in the pharmaceutical supply chain, PBM rebates, and spread pricing. Representative Harshbarger and Senator Blackburn have stated that among the goals of this legislation is increasing PBM transparency, lowering healthcare costs, and protecting patients. Existing federal laws provide substantial protection to pharmacies and specialty pharmacies relating to DIR fees and participation in the Medicare Part D program. Pharmacies should continue to take advantage of these laws and learn more about them if they are not familiar with them.

These legislative efforts at both the federal and state level reflect that PBM practices are becoming more heavily scrutinized as various stakeholders gain a better understanding of how certain PBM tactics and practices can harm independent pharmacies, patients, and American taxpayers.

How Frier Levitt Can Help

Frier Levitt has extensive experience working on behalf of independent pharmacies and patients throughout the United States, including in legislative efforts, regarding a variety of PBM matters. In considering and drafting legislation related to PBMs, it is critical to have experienced and knowledgeable attorneys, including attorneys that have a comprehensive understanding of the complexities in how PBMs actually operate. For more information about how Frier Levitt can assist in legislative efforts, contact us today to speak to an attorney.