5 PBM State Regulation Trends Employers Must Know for 2024

1) A focus on transparency

Policymakers at both state and federal levels are focusing on potential issues in the supply chain that may contribute to inflated drug prices, with particular emphasis on rebates.

In states like New Mexico, Indiana, New Jersey, Wyoming, Florida, and Arkansas, new bills require PBMs and insurers to transfer or give back to the insurance plan the rebate dollars they receive from drug manufacturers. This approach is intended to reduce member cost share and requires remaining rebate dollars to be channeled toward lowering premiums.

For policymakers, the hope is that heightened transparency will provide a clearer understanding of prescription drug costs.

2) Sweeping changes in Florida

Florida has become a major hotspot for legal changes within the PBM landscape, with the state’s Prescription Drug Reform Act being one of the most significant bills passed in 2023. This substantial, nearly 50-page bill was passed unanimously and introduced a wave of new requirements, reshaping how PBMs operate in the Sunshine State.

One standout change is saying goodbye to spread pricing. Under the bill, PBMs are now required to use a pass-through pricing model. The law also nixes some restrictions on what pharmacy members may utilize to fill prescriptions.

Effective January 1, 2024, the legislation mandates the use of rebates to offset cost sharing and premiums, with PBMs responsible for passing through the rebate and plans for reducing individual plan members’ expenses. Florida’s sweeping reforms target all plans domiciled in the state, but not all PBMs agree on the scope of the new law.  

3) Increased focus on existing PBM regulation efforts

Several states, including Colorado, New York, and Texas, focused on copay accumulators. Copay accumulators prevent manufacturer copay cards or coupons from being counted towards a member’s out-of-pocket cost limit. If these programs are restricted, every payment a member makes – whether directly or indirectly through a card or coupon – will contribute to their out-of-pocket maximum.

Other states like North Dakota, South Carolina, and Wyoming have enacted anti-steering bills, aiming to prevent PBMs from guiding plan members to use their owned or affiliated pharmacies. Each state customizes its anti-steering laws, and some have made exceptions for specialty drugs with unique distribution needs and higher costs.

4) Physicians in Arkansas may get a golden ticket for PAs

This year, Arkansas implemented HB1271, introducing a concept called “gold carding” for both insured and self-funded plans in the state. If a healthcare provider consistently maintains a high approval rating on prior authorizations over a specific period, they receive a special status known as a gold card, ensuring the prescriptions associated with this provider receive automatic approval.

It’s worth noting that gold carding regulations already exist in states like Texas and West Virginia, but they primarily apply to the insured market. Additionally, Michigan has a similar law already in effect.

The automation introduced by gold carding comes with a trade-off. While it may enhance efficiency, it also eliminates the perspective of clinical experts who understand the FDA-approved uses of medications as well as the unique goals and nuances of individual health plans. Consider consulting with experts to navigate the implications of these evolving regulations on your employee benefit programs.

5) Potential new rules for both ERISA and non-ERISA plans in New York

In 2022, New York passed a comprehensive PBM bill, and in 2023, the state’s Department of Financial Services (DFS) proposed rules that could significantly impact employers. The rules sought to ban spread pricing, steering practices, and introduce National Average Drug Acquisition Cost (NADAC) pricing with a dispensing fee exceeding $10 per prescription.

Notably, these regulations aimed to extend their reach to self-funded ERISA plans which are typically exempt from state laws, potentially imposing some of the most stringent PBM regulations in the country. Following resistance from various interest groups, the DFS withdrew the proposed rules, but the potential for future regulatory action keeps New York in the spotlight.

As employers chart their course through the shifting seas of PBM regulations, the winds of change bring both challenges and opportunities. Stay informed, seek expert guidance, and adapt your pharmacy benefit strategies to ensure smooth sailing into the regulatory landscape of 2024 and beyond.

Disclaimer: Interpretation of laws will vary by PBM, state, and a variety of factors beyond the scope of this post. Nothing herein should be construed, or relied upon, as legal advice. Each plan sponsor is responsible for determining the legal requirements applicable to its group health plan. Each plan sponsor should consult with its legal counsel regarding applicable legal requirements.  

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