PBMs Face State Capital Scrutiny, Too


By John Coster, RPh., Ph.D.

Over the past 12 months, requiring some transparency from pharmacy benefit managers (PBMs) is a concept that has gone from an afterthought to an accepted part of health care reform legislation in Washington. The House and Senate both voted for PBM disclosure amendments to their respective reform bills. A House subcommittee chairman, U.S. Rep. Stephen Lynch, just introduced new legislation to apply transparency requirements to PBMs operating in the federal employees’ health plan. And the Federal Trade Commission is actively investigating the alleged anti-consumer, anti-competitive practices resulting from combination of the largest PBM (Caremark) with a huge, national retail pharmacy chain (CVS).

And for good reason. Some of these billion-dollar middlemen, hired by health plans to administer drug benefit claims, have experienced a fivefold increase in profits over the past decade, while doing little to improve health outcomes as drug costs continue to rise. In recent years, they’ve paid out $371 million to settle state lawsuits alleging fraud of health plans and patients. You can read more about PBM tactics in an article NCPA recently wrote for The Hill.com.

While NCPA has long advocated sensible regulation and disclosure requirements for PBMs, there are obviously much larger forces at work here. Public and private payers are increasingly insisting on transparency from PBMs. Consumer, labor and Medicare beneficiary advocates also embrace the need for these common sense changes to improve health care and lower costs.

A move toward PBM reform is also evidenced in 12 state legislatures, where new legislation was recently either introduced or carried over from 2009. Politically speaking, these states range from Republican red to Democratic blue. NCPA will continue to monitor these bills. If your pharmacy’s in one of these states, contact your state legislator and urge their support of these proposals.

Alaska – State Senator Kim Elton introduced SB 38. The sponsor’s statement reads, in part:

“Pharmacy benefit managers increase profits by accepting incentives from drug manufacturers that are not shared with health plan sponsors, such as the State of Alaska. SB 38 would prohibit pharmacy benefit managers from intervening in the delivery or transmission of prescriptions. … In addition to lawsuits against pharmacy benefit managers, sixteen states as well as the District of Columbia have enacted laws that regulate the business practices of pharmacy benefit managers. Other states have led the way with legislation regulating the business practices of pharmacy benefit managers and it is time for the Alaska Legislature to do the same.”

Georgia – On Jan. 14, 2010, State Senator Lee Hawkins introduced S.B. 310, legislation “to provide for the regulation and licensure of pharmacy benefits managers by the Commissioner of Insurance.” Co-sponsors include Senate President Pro Tempore Tommie Williams and State Senator and pharmacist Earl “Buddy” Carter.

Iowa – Senator Jack Hatch introduced SF 2071: “a pharmacy benefits manager shall disclose to the covered entity all financial terms and arrangements for remuneration of any kind that apply between the pharmacy benefits manager and any prescription drug manufacturer or labeler.” Hatch serves as chairman of the Health and Human Services Appropriations Subcommittee.

Massachusetts – State Senator Mark Montigny authored S.B. 316, “An Act to Protect Against Unfair Prescription Drug Practices.”

“It is the intent of the legislature to ensure transparency in contracts and in prescription drug pricing, fair dealing between pharmacy benefit managers and their clients, and protection of consumers, including health plans and insurers by regulating the trade practices of pharmacy benefit managers in the commonwealth,” the bill states.

His proposal would require PBMs to register with the state, assume a fiduciary duty to clients, and grant clients confidential access to information about PBM side deals. For example, a PBM client would have to be notified when PBMs switch patients to a pricier drug, the cost differential and what profit the transaction creates for the PBM. The bill would also give clients greater authority to audit PBMs. Enforcing the statute would fall to the state attorney general.

Michigan – H.B. 5772 was introduced on January 27, 2010 to require PBMs to disclose any ownership interest or affiliation with “any insurance company responsible for providing benefits directly or through reinsurance to any plan for which the PBM provides services.” Co-sponsors include Health Policy committee members Representatives Liss and Ball. Representative Lesia Liss is also the Speaker’s representative to Human Services and Welfare Committee of the National Conference of State Legislatures.

Mississippi – State Senator Bobby Howell, RPh, owner of Kilmichael Drugs, introduced House Bill 270 on Jan. 4, 2010. It would require PBMs to “regularly inform the entities for which they administer the prescription drug/device portion of a pharmacy benefit management plan or health insurance plan of the amount and source of any rebates received from the manufacturers of drugs/devices covered under the plan.”

Missouri – On January 19, 2010, State Representative Bryan Stevenson and 10 co-sponsors introduced H.B. 1700. Under this bill, PBMs would have to report to clients (plan sponsors) the amount they reimburse pharmacies for drugs dispensed and what the plan is charged for that drug. Similar to the Massachusetts bill, it would also require PBMs to disclose to clients details of drug switches and relevant financial incentives for the PBM. Co-sponsoring state representatives include health care committee members Jeanne Kirkton, Bob Nance, David Sater, Rob Schaaf, and Ray Weter.

New Jersey – Two bills of note in the Garden State, both introduced on January 12, 2010.

Assembly bill #679 was offered by Assemblywoman Linda Greenstein and three others. The Commissioner of Banking Insurance would be charged with regulating PBMs, which would face a wide range of requirements to confidentially disclose information about their business practices.

State Senate Pro Temp Nia Gill authored Senate bill #162, which is similar to the Assembly bill. The Chair of the Health, Human Services and Senior Citizens Committee, Loretta Weinberg, is a co-sponsor.

New York – AB 5448 declares “no health plan or PBM shall, by contract, written policy or procedure or any other agreement or course of conduct, offer or furnish payment or any other incentive to a health care provider to comply with a prescription drug switch as defined in this article.” SB 2836 is a companion bill. Co-sponsors include members of the Committee on Health: Representatives Aileen Gunther (a registered nurse), Rhoda Jacobs and Nettie Mayersohn are all. Representative Jacobs also serves as Assistant Speaker of the House, and Representative Harvey Weisenberg is the Assistant Speaker Pro Tempore of the Assembly.

Oklahoma – H.B. 3116 declares a PBM “shall disclose to the covered entity all financial terms and arrangements for remuneration of any kind.” The bill’s co-sponsor is Representative Wes Hilliard, who serves as Deputy Democratic Floor Leader and is as Member of the Oklahoma Healthcare Workforce Center Governing Board.

Pennsylvania – SB 596 sets standards for PBM audits of pharmacies. Co-sponsors include Minority Caucus Secretary Senator Vincent Hughes and Minority Whip Senator Michael O’Pake.

HB 882 also regulates the auditing practices of PBMs. Co-sponsors include Majority Caucus Secretary Representative Jennifer Mann and Republican Caucus Secretary Representative Jerry Stern. Several co-sponsors are also members of the Health & Human Services Committee including Majority Chair Representative Frank Louis Oliver, Minority Chair Representative Matthew Baker, Representative Eddie Day Pashinski, Representative Mark Cohen, Representative Kathy Manderino, Representative Barbara McIlvaine Smith, Representative Kerry Benninghoff, and Representative Katharine Watson.

Virginia – Delegate Lee Ware introduced H.B. 198 on January 13, 2010 to give health plans more audit rights in dealing with PBMs.

1 Response to “PBMs Face State Capital Scrutiny, Too”


  1. 1 Jim Fields February 1, 2010 at 4:48 pm

    The maximum profit that a PBM should make per Rx is 95 cents.


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