Law Regulating Pharmacy Benefit Managers Takes Effect

Gov. Lee recently signed pharmacy benefit manager (PBM) reform legislation designed to preserve patient rights, address conflicts of interest and prevent certain pricing practices. The law took effect on July 1, 2021.

Among other items, the law prohibits a PBM or health plan from interfering with a patient’s right to choose a contracted pharmacy, including through inducement, steering, or offering financial or other incentives. Additionally, a patient covered under a group medical or pharmacy benefit contract cannot be required to pay an additional fee, higher copay, higher coinsurance or other penalty for using any contracted pharmacy.

To address pricing concerns, the regulation prevents a PBM from reimbursing a pharmacy for prescription drugs or devices that are below the actual cost to the pharmacy. As explained in our December 22, 2020, Compliance Corner article, the US Supreme Court decision in Rutledge v. PMCA confirmed this type of restriction may be applied to ERISA health benefit plans. The new law also prohibits spread pricing, where a PBM keeps a portion of the amount paid by the health plan for prescription drugs instead of passing the full payment on to the pharmacy. 

Additionally, a PBM must report any entitlement benefit percentage to both the plan and covered patient. Further transparency requirements are scheduled to take effect on January 1, 2022.

Employers that sponsor prescription drug benefit plans should be aware of the new legislation. As applicable, employers should consult with their pharmacy benefit managers and counsel regarding the potential implications and any related plan changes.

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