PBM reform: A closer look at state legislation this year.

Pharmacy Benefit Managers (PBMs) are facing scrutiny for their opaque pricing practices and the role they play in driving up drug costs. These practices have led to higher costs for members and employers, sparking demands for greater transparency and accountability. In response, Congress is taking action to ensure PBMs operate more transparently and fairly.

Recognizing the problem, states are starting to follow Congress's lead in addressing the need for price transparency and tackling unsavory market practices. Several states have proposed and adopted legislative measures targeting licensing, pharmacy networks, PBM spread pricing, and plan design requirements. These measures aim to curb the tactics used by some of the largest PBMs to boost their profits at the expense of members and employers.

Below is a selection of recently adopted legislation in various states. This list is not exhaustive but highlights some of the more significant actions taken. For more information on Congressional actions, see our blog from March 2024.

1. Idaho House Bill 596.

Set to take effect on January 1, 2025, H 596 introduces several measures to enhance PBM transparency. H 596 prohibits PBMs from:

• Limiting pharmacy networks: The bill prevents PBMs from limiting a pharmacy network to only those pharmacies affiliated with the PBM, ensuring fair competition and access. 

• Restricting network participation: It forbids PBMs from making participation in one pharmacy network conditional on participation in another network. This allows pharmacies to enroll in a network to serve members without needing to enroll in more restrictive or cost-prohibitive networks. 

• Penalizing non-participation: The legislation prevents PBMs from penalizing pharmacies for not participating in specific networks, ensuring that pharmacies are not unfairly treated for their network choices.

2. Kentucky Senate Bill 188.

Kentucky SB 188 introduces the reforms essential to preserve access to pharmacy care for Kentucky residents while promoting pharmacy choice. Key provisions of SB 188 include:

• Maintaining pharmacy options: The bill prohibits PBMs from requiring patients to use specific pharmacies, such as the PBM's own affiliates or mail-order services. This ensures that patients have the freedom to choose their preferred pharmacy without facing incentives or restrictions from PBMs.

• Ensuring fair access to pharmacy networks: SB 188 mandates that PBMs must offer contracts with the same terms to all pharmacies, not just their affiliates. This includes allowing any pharmacy willing to accept these terms to join the network.

3. New York Senate Bill 9040.

NY S 9040 aims to enhance drug pricing transparency for patients when they pick up medication at the pharmacy. The bill focuses on:

• Preventing pharmacy penalization: The bill prohibits PBMs from penalizing pharmacies for providing customers with information about prescription medications and services. This transparency is aimed at helping patients make better-informed decisions about their medication purchases and understanding the financial dynamics behind pharmacy stocking decisions.​

4. Oregon House Bill 4149.

Oregon House Bill 4149 enacts comprehensive regulations to enhance oversight of PBMs in the state and create 340B protections. Key elements of HB 4149 include:

• Requiring licensing: HB 4149 requires PBMs to be licensed by the Department of Consumer and Business Services starting January 1, 2025. This move aims to ensure that PBMs operate under stricter regulatory oversight to protect consumers and pharmacies​.

• Protecting 340B drug programs: The bill includes provisions to protect pharmacies that dispense 340B drugs, which are typically provided at reduced prices to healthcare organizations that serve vulnerable populations. The bill prohibits PBMs from discriminating against these pharmacies and ensures they are not unfairly restricted or reimbursed at lower rates​.

5. Vermont Act No. 127.

Vermont Act No. 127 focuses on regulating deceptive pharmacy marketing and pricing tactics. The bill specifically addresses:

• Prohibiting spread pricing: The act bans spread pricing, where PBMs charge health plans more than what they reimburse pharmacies, keeping the difference as profit. This measure aligns the prices charged to health plans with the reimbursements to pharmacies, aiming to reduce inflated drug costs and increase transparency.

• Banning deceptive marketing and advertising: The legislation prohibits PBMs from engaging in deceptive marketing and advertising practices. This protects consumers and pharmacies from misleading information that could influence their decisions regarding medications and pharmacy services​.

As state legislative sessions continue, more legislation will likely be proposed and passed. In the meantime, having a PBM that supports full transparency and medication access is crucial. With audit-level reporting, Rightway sets a new standard in PBM transparency, ensuring that every dollar saved is returned to you and your teams. 

Uncover a new level of PBM transparency today with Rightway. Learn more here.

Bills are long, dynamic, and far-reaching. This overview covers some of the current legislation as of July 10, 2024.