Vermont Issues Report Recommending Action Against PBM Abuses Citing Frier Levitt’s PBM Exposé for Support

On January 15, 2023, the Vermont Department of Financial Regulation (the “Department”) issued a report titled “Act No. 131 (2022) Report: Pharmacy Benefit Management” (the “Report”). As the title suggests, the Department was required under a 2022 Act to issue this report, considering, among other things:

• Whether pharmacy benefit managers (“PBMs”) should be required to be licensed to operate in Vermont;
• Whether PBMs should be prohibited from conducting or participating in spread pricing;
• The cost impacts of pharmacy benefit manager licensure and related regulatory measures in other states that have enacted such legislation;
• Whether there should be a minimum dispensing fee that PBMs and health insurers must pay to pharmacies and pharmacists for dispensing prescription drugs;
• How a pharmacy should be reimbursed for a claim if a PBM denies a pharmacy’s appeal in whole or in part, including whether the pharmacy should be allowed to submit a claim to the health insurer for the balance between the PBM’s reimbursement and the pharmacy’s reasonable acquisition cost plus a dispensing fee; and
• Whether there is a problem in Vermont of PBMs soliciting health insurance plan beneficiaries directly to market the pharmacy’s services.

Based upon the Department’s research, the Commissioner offered the following recommendations for the Vermont Legislature to consider:

• Prohibiting third parties, such as PBMs, from altering prescription drug orders or the pharmacy chosen by the patient without the patient’s consent.
• Applying the advertising standards applicable to health insurers under existing Vermont law prohibiting “solicitation which is materially misleading or deceptive” to PBMs.
• Requiring the Department to approve all solicitations sent by PBMs to patients.
• Expanding required disclosures to health plans entering into spread pricing arrangements to include aggregate revenue derived from spread pricing by drug class at least biannually and, at the request of the Commissioner or the health plan client, the spread on specific prescription drugs.
• Entitling pharmacies to reimbursement at their acquisition cost if the PBM does not provide a reasonable maximum allowable cost (“MAC”) appeal process.
• Tying the existing spread pricing disclosure under Vermont law with new reporting about aggregate rebates and amounts received from fully insured health plan clients to support a new requirement imposing a minimum loss ratio of 85% on PBMs.

Significantly, in discussing the problem of PBMs soliciting beneficiaries through “Claim Hijacking,” the Report cites to Frier Levitt’s publication: “Pharmacy Benefit Manager Exposé: How PBMs Adversely Impact Cancer Care While Profiting at the Expense of Patients, Providers, Employers, and Taxpayers,” commissioned by the Community Oncology Alliance (“COA”) in February 2022.  Claim hijacking occurs when a PBM processing a prior authorization, typically for a high-cost prescription drug, communicates with the patient, the patient’s medical provider, or both to get the prescription filled at a pharmacy owned or affiliated by the PBM. The Report notes that, while it cannot provide details, it has received consumer complaints related Claims Hijacking by PBMs.

The Report is comprehensive and sheds much-needed light (and calls for more transparency on) PBM practices and abusive behavior against independent pharmacies, plans, and patients that Frier Levitt has continued to report on for many years. It is important to note, however, that the Report does not require action by the Legislature. Vermont pharmacies, plans, and patients should contact their legislators immediately to call for legislation to address the Report’s recommendations.

How Frier Levitt Can Help

Frier Levitt’s PBM Litigation Group is highly experienced in litigation and arbitration against PBMs over abuses, including MAC law violations, DIR fees and other clawbacks, abusive audits and terminations, and other disputes that arise between independent pharmacies and PBMs. Our attorneys also have vast experience drafting proposed legislation on behalf of pharmacy groups and other interested parties on the federal and state level. Frier Levitt recommends that Vermont pharmacy providers, plans and other stakeholders in the pharmaceutical industry write to their Vermont legislators to urge legislation as recommended in the Report. Contact Frier Levitt to learn more about how we can help prepare support letters and our other services.