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Pennsylvania House of Representatives
04/16/2024 05:25 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20130&cosponId=12399
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House of Representatives
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: April 5, 2013 01:42 PM
From: Representative Matthew E. Baker
To: All House members
Subject: Pharmacy Benefit Managers Regulation and Transparency Legislation
 
In the near future, I am planning to introduce legislation which would regulate Pharmacy Benefit Managers (PBMs) requiring transparency in their management of pharmacy benefits. Currently, there are no oversight or regulation requirements in place for PBMs in Pennsylvania.

PBMs provide a useful service as middlemen between payers and pharmacies, managing the pharmacy benefits for nearly 95 percent of all Americans with medical coverage. In recent years, PBMs have moved beyond being a basic claims processor into other areas of prescription drug benefit administration, including: drug utilization review (DUR), developing and managing formularies, negotiating with prescription drug manufacturers for rebates, operating mail order pharmacies to fill prescriptions directly, therapeutic interchange and drug switching, sale of claims data, and reimbursement of providers. Frequently, the plan sponsor (payer) is not fully aware of many or all of the specifics of these activities and the contract terms. Some examples include:

  • The PBM may be accepting rebates, which may not be shared with the plan sponsor or used to reduce costs, from manufacturers in return for placing their often higher priced medications on the preferred formulary for the plan.
  • The PBM may create a “spread” between prices charged to the payer and the price actually reimbursed to the pharmacy, which is not disclosed as such to the payer and which is retained by the PBM.
  • The PBM may sell, for their own benefit, prescription claim data reflecting prescribing practices to pharmaceutical manufacturers, without the plan sponsors or patient’s consent.

This regulation would require these practices to be fully disclosed and transparent to the plan sponsor and the patient when appropriate. Standards for PBMs are not contained in any current federal law or regulation, nor do they exist in Pennsylvania. Across the country, state boards of pharmacy, attorney generals, consumers, and practitioners have had growing concern regarding the lack of oversight and transparency of PBMs and in many cases have taken action. Eleven states have some form of PBM regulation/transparency laws, three states require PBM licensure by the Department of Insurance or State Board of Pharmacy, others have audit provisions or Maximum Allowable Cost stipulations, and this list is growing.

Additionally, the proposed legislation would contain Maximum Allowable Cost (MAC) language which would provide clarity to both plan sponsors and pharmacies on how MAC pricing is established by the PBM. A MAC list refers to an arbitrarily generated list of generic drugs for which the PBM has set a maximum price they will reimburse the pharmacy for the generic medication, regardless of the actual cost and without regard to the price at which pharmacies may purchase the generic drug.