PBM Reform: State Legislative Focus - Pennsylvania
Due to the heightened public exposure to current Pharmacy Benefit Manager (PBM) practices as well as more vocal independent pharmacies verbalizing the downstream effects of PBM mandates on themselves and the community at large, it is no surprise that PBM’s are receiving more legislative attention on the state and national level.
Nationally resolutions have been proposed to alter current PBM business practices such as. H.R. 6283, the Delinking Revenue from Unfair Gouging (DRUG) Act. In March of 2024 there was also a multidisciplinary listening session facilitated by the White House to discuss additional perspectives of difficulties associated with PBM’s interactions with medical professionals, especially independent pharmacy.
For a state perspective, Pennsylvania’s most recent action in the 2023-2024 legislative session are HB 1993 and SB 1000. Directly these are amendments to the Pharmacy Audit Integrity and Transparency Act of 2016, which dealt primarily with auditing and registration of PBMs in Pennsylvania as well as pricing transparency with PBMs and the PACE/PACENET program.
Current edits of note:
· The definition of Patient Steering as patients being directed to fill through mandatory mail order via pharmacies controlled or associated with the PBMs.
· Use of different co-pays between PBM contracted and non-PBM contracted pharmacies are also listed as Patient Steering.
· PBM’s may recoup dispensing fees for errors discovered during an audit that are not associated with fraud/waste/abuse. This is limited only to the dispensing fee, not the cost of medication.
· Removal of language around “effective” rates of direct and indirect reimbursement.
· Participation within the PBM network may not be contingent on compensation lower than the ‘National Average Drug Acquisition Cost.”
· Mid-contract adjustments to fees are no longer allowed.
· Clawbacks/Chargebacks remain prohibited.
· Provides that the commonwealth of Pennsylvania establishes and regulate PBMs that are operating or contracted within the state.
· Reimbursement rates established by the commonwealth are not lower than the established CMS reimbursement rate for Medicare and Medicaid
· Pharmacies looking to join PBM networks must be provided the response within 30 days and if rejected the response must be a written reasoning of the rejection.
“REQUIRE CONTRACTED PHARMACIES TO PARTICIPATE IN PATIENT STEERING SOLELY BASED ON COST SAVINGS TO THE PHARMACY BENEFIT MANAGER RATHER THAN TO REIMBURSE THE PHARMACY AT COST PLUS A DISPENSING FEE AS IS OTHERWISE REQUIRED BY A PHARMACY CONTRACT” Section 601 SB1000
This section is significant as it put the onus of benefit proof on the PBM to explain an explicit benefit provided via the patient steering. This does not preclude a participating PBM from providing metrics of alternative benefit to avoid discussion of avoiding outside pharmacy dispensing fees. If these “alterative benefits” are not of true medical influence, then the commonwealth will need to amend the wording of this section.
“A PHARMACY BENEFIT MANAGER SHALL SUBMIT A QUARTERLY REPORT TO THE DEPARTMENT OF THE TOTAL NUMBER OF REBATES, REBATE AMOUNTS AND PAYMENTS RECEIVED FROM DRUG MANUFACTURERS AND AN EXPLANATION OF HOW THE REBATES AND PAYMENTS WERE DISTRIBUTED BY THE PHARMACY BENEFIT MANAGER. IF AUDITS REQUIRED UNDER SECTION 604(4) DETERMINE THAT A PHARMACY WAS REIMBURSED LESS THAN THE COST OF ACQUIRING AND DISPENSING A DRUG, THE DEPARTMENT SHALL HAVE THE AUTHORITY TO REQUIRE THE PHARMACY BENEFIT MANAGER TO RECOUP THE LOSS FROM THE MANUFACTURER REBATES RECEIVED AND REQUIRE THAT THE AMOUNT OF THE LOSS BE PAID TO THE PHARMACY WITHIN 30 DAYS OF THE AUDIT SUBMISSION.” Section 606 SB1000
This regulatory reporting framework is the real transparency of the amendment. This will have a regular explanation of financial flow that the PBM’s contend is for patient benefit. This scrutiny may result in legal challenges from the PBM as this information may be considered by them to be proprietary between the PBM and their insurance payor customer. The latter section of financial correction by the PBM being found on audits (by the commonwealth) has an explicit financial source via the rebates that the PBM collects and with a defined pay period is easily enforces and could been seen as beneficial for independent pharmacies.
Limitations is that this mostly has teeth for only PACE/PACENET programs within Pennsylvania but provides framework of transparency and direct state accountability on a regular basis to the commonwealth as well as a mechanism for corrections in the favor of retail pharmacies. As PBM reform seems to be a more popular bipartisan issues, steps such as this within state legislatures may become more and more common. As legislature of this type evolves, other states can take inspiration of these acts causing less “growing pains” such as some seen here in Pennsylvania with the prior act being ties to “effective” reimbursement costs without defining tied values, in turn the amended act references both a “National Average Drug Cost” without giving the mechanism of which to derive it. It links compensation rates to be not lower than the CMS rates for Medicare/Medicaid which is a much more solid foundation and less susceptible to misinterpretation.
As of the writing of this article, SB 1000 had been considered by the Health and Human Services subcommittee and had been referred to the Rules and Executive Nominations Committee. It has not yet been up to a full vote in the Pennsylvania Senate.
1. H.R.6283 — 118th Congress (2023-2024) Text - H.R.6283 - 118th Congress (2023-2024): Delinking Revenue from Unfair Gouging Act | Congress.gov | Library of Congress
2. Regular Session 2023-2024 House Bill 1993 Bill Information - House Bill 1993; Regular Session 2023-2024 - PA General Assembly (state.pa.us)
3. Regular Session 2023-2024 Senate Bill 1000 Bill Information - Senate Bill 1000; Regular Session 2023-2024 - PA General Assembly (state.pa.us)